Containerboard prices drop in Mexico with cheaper OCC

There may be further room in the containerboard market for price cuts, but demand could help stabilize prices

Domestic prices for Mexican containerboard dropped by around 500 pesos per tonne in November, sources told Fastmarkets this month, supported by lower old corrugated containers (OCC) prices and higher inventories at paper mills.

Market participants shared mixed views on the price cuts. Some indicated that drops were limited to around 300 pesos per tonne due to continued high production costs, while others saw more significant decreases – reaching up to 800 pesos per tonne – taking place.

At least one source also said that some “really low” spot offers started to appear.

“I was hearing everyone talking about very limited drops, but suddenly I got an offer of around 12,500 pesos for linerboard – not medium – and that was quite shocking,” that source said.

Overall, contacts believe that there is room for further pressure in the market due to lower OCC prices and abundant supply from the United States, but sources noted that demand somehow picked up in November and could help to keep prices more stable looking forward.

“We saw in November a slightly better demand, with sales being delivered for the year-end holidays and our Black Friday, which is actually called ‘El Buen Fin’ and lasts for four days,” a contact said.

Of course there is no frenzy like we saw in the early stages of the pandemic, but demand was good and the agricultural season for exports started.

Another market participant agreed that November showed some limited improvement in sales, supported by higher demand for beer related to the soccer World Cup.

“This is a big event for Latin America that it reactivated demand not only in the domestic market but also for exports. Mexico is a large supplier of beer, a major user of boxes,” that source said.

Fastmarkets’ price survey detected that domestic linerboard traded for 14,300-15,300 pesos per tonne in November, still 2.1% higher than a year ago, while local medium was negotiated at 13,300-14,300 pesos per tonne, up 2.2% annually.

Prices for kraft linerboard from the United States also dropped by a further $10 per tonne and traded for $750-790 per tonne, down 1.3% year on year.

Another source stated that despite lower OCC costs now, other materials and inputs are still more expensive, and salaries also are getting higher.

“In January, Mexico will have a general cost increase with labor as we will see the minimum wage update, we believe that it will be around 10-12% higher. With the winter coming, we also expect gas prices to move up again, so there is limited room for price drops in my view,” that source said.

This article was first published in our PPI Latin America newsletter. Find out how you can access the latest market developments in the Latin American region directly from your inbox by speaking to our team.

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