Demand for corrugated boxes in Brazil remained strong in October 2024, according to all sources contacted by Fastmarkets this month. This continuous positive momentum has affected negotiations in the country that were expected to last until the end of the year.
According to market participants, a combination of a stable macroeconomic environment for domestic demand, with a low unemployment rate and a more controlled inflation rate, has brought consumers’ appetites back. At the same time, the depreciation of the Brazilian Real against the US dollar has been supporting agriculture exports that must be packed.
“We also see the market much more balanced this year in terms of supply and demand,” a market source said, “after a big destocking move throughout 2023. Since the beginning of 2024, demand has come back and has been increasing month after month, with an expectation that corrugated box shipments will increase by 5% this year.”
Preliminary data from the Brazilian paper packaging association, Empapel, showed corrugated board shipments in Brazil totaled 353,766 tonnes in September. This is an increase of 2.6% compared to a year earlier and market sources expected another positive figure in October.
“I did not see demand coming down in October, and sales for November are looking good as well,” a second market source said.
A third market participant was also very positive, saying: “My paper machine is full until the end of the year. We are sold out for the fourth quarter.”
Empapel reported that September levels were the second highest in corrugated for the month of September, since the data was first tracked in 2005. The latest figure followed the peak logged in September 2020, which was when the Covid-19 pandemic caused a broad-based surge in corrugated box demand.
With positive demand, containerboard suppliers continue to push for higher prices. These moves started with recycled paper producers but were also reaching the virgin paper market, with a 10% price rise set by the two largest producers, Smurfit WestRock and Klabin.
Fastmarkets has learned from multiple sources that Smurfit WestRock set a price increase for October which it began to apply, while Klabin initially raised prices for narrower widths this month but decided to also impose a price rise for November including all containerboard grades.
“We are not used to seeing price increases for November, when usually the high season is over,” a fourth market source said, “but this year has been different. Demand is allowing the move.”
Fastmarkets’ price survey noted higher prices for recycled grades traded in October. The medium price stood at 3,300-3,800 Reais ($577-667) per tonne, up by 24.6% in an annual comparison.
According to trade sources, prices for old corrugated containers (OCC) were at high levels of 1,050-1,100 Reais per tonne, up by 90% year on year, supporting the negotiations for higher prices.
Negotiations for kraftliner also started to show higher levels when the increases reach the market, at 4,500-4,900 Reais per tonne in October, still 3.1% lower than a year earlier.
Sack kraft prices were 4,900-5,300 Reais per tonne, up by 2% year on year, and at least one trade source said that price increases for this grade were imminent.
Despite the startup of new recycled-grade capacity in Brazil, with a new paper machine from Guapi in September, market sources said that volumes from the equipment were still low and did not affect the current dynamics.
In this scenario, a fifth market source said that it was not impossible for Klabin to rethink its plans to keep its recycled paper operation of Paulínia idle, which has been in that condition since 2022. “There is no official move on that yet, but it is no longer impossible,” the same source added.
What could also boost the Brazilian market is a more active international trade environment, with global demand for virgin containerboard improving and prices recovering.
Brazilian kraftliner exports increased this year by 16% up to September, reaching roughly 322,000 tonnes. Argentina is the main export market, holding 28% of this demand, but volumes of 91,000 tonnes were still down by 3% compared with 2023.
The second-largest market for Brazilian exports is Italy, with sales booming by 53% year on year to 30,000 tonnes.
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