MethodologyContact usSupportLogin
Brazilian and other Latin American buyers of bleached eucalyptus kraft (BEK) pulp were able to capitalize on lower prices in August; and sources said that the Brazilian currency depreciating had not hurt prices, indicating that buyers that paid record prices in the past year could see margins improving.
BEK purchases in the region are based on the European PIX of the previous month; in July, the index settled at its lowest level since February 2021.
“I was able to increase my virgin fiber ratio in production, and I intend to keep doing so while prices are at these levels. Demand in Brazil has also improved, so if we don’t see tissue prices eroding in the retails, we will have a very good period of results,” a source said.
Another contact said that buyers had been looking for tonnages more actively since August. And some were already looking to build their inventories in September, that source continued, noting that with price hikes announced globally, there are signs that prices could start to climb from October.
This is the moment to buy if you have cash, as even the slight Brazilian currency depreciation did not harm prices.
“In September, we already know the European PIX that will be valid; prices in Reais are even lower; and those who have a more stable financial situation can even think of adding some inventories,” the second source said.
According to Fastmarkets’ price survey, prices for BEK in Brazil dropped 38.2% year on year. Meanwhile, in other Latin American countries, the price was down by 33.3% from a year ago. In Brazilian currency terms, BEK prices were 45% lower than a year ago.
“We cannot deny that August was a good month, and September will be, too. But we have a cautious optimism now as we see price hikes announced for all the globe, including Europe. With the Brazilian currency also depreciating, we can see a price bump approaching,” a third market participant said.
A fourth source stated that some buyers had hopes that the European PIX could even reach $780 per tonne in September, but this possibility now seems unlikely.
“We have the impression that BEK prices could have reached their floor, but we will have to wait and see if other markets like the US and Europe will accept the price rises,” that source said.
Several Latin American BEK suppliers have set price increases for September, with a $20-per-tonne price increase announced for clients in Asia and a $50-per-tonne increase for clients in North America and Europe.
In Europe, suppliers hope to reach a price level of $850 per tonne this month, Fastmarkets has learned.
“Data show that Chinese demand is coming better than earlier anticipated, with pulp inventories at ports around 2 million tonnes, which represents a balanced situation. We have to take into consideration that paper production increased a lot in China during the last years, so this is a good level of inventory there,” a fifth contact said.
As previously reported by Fastmarkets, Latin American suppliers are diverting volumes from Europe to Asia, in order to address sluggish demand in that continent and to try to stop the price erosion.
“The price gap between Europe and China got unbearable, as it became cheaper to buy pulp in Europe than in the Asian country, while costs to trade in Europe are much higher. Of course, all this tonnage moving to China can pressure prices there as well looking ahead, but up to this point we don’t see a problem. The key question is whether European demand will start to trend up after the summer or continue very weak,” the fifth source continued.
According to a sixth contact, after four months of good sales, there are more signs that the downside cycle is coming to an end for BEK prices.
“I think everyone had a more challenging scenario planned than what we are getting now. It is very early to say if prices will recover a bit or just stay in a plateau, but sales in August were indeed very good,” that source said.
This article was taken from PPI Latin America, our newsletter for pulp, paper and packaging market news and prices for Latin America. Speak to our team to learn more about our news and market analysis, prices, forecast and more.