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During the Fastmarkets Forest Products Latin American Conference 2025, a comprehensive outlook on the region’s forest products industry was provided, highlighting its unique position amid global market oversupply, shifting geopolitical influences and a growing emphasis on sustainability.
While global markets grapple with challenges, Latin America is poised to leverage its natural resources and evolving policy landscape, particularly in carbon markets and sustainable pulp production, looking to create more integrated, efficient value chains.
Globally, boxboard and containerboard markets are facing significant oversupply due to sluggish demand growth and continued capacity investments, with Asia being a primary contributor to this imbalance. Global containerboard demand stagnated after a boom in 2020-21, and growth engines such as economic development and living standards are misfiring.
However, Latin America demonstrates considerable resilience. While boxboard operating rates are projected to drop in 2025 due to weak demand and exports, containerboard demand is expected to remain somewhat resilient. Brazil, a key player, has successfully absorbed new kraftliner capacity, with its operating rates reaching 94% in 2024, significantly higher than North America (92%) and Western Europe (87%). A fundamental advantage for Latin America’s kraftliner mills is their competitive cost position, with nearly all capacity falling into the first cost quartile globally.
The pulp market faces significant headwinds in 2025, characterized by rising producer inventories and accelerating market-related downtime across all grades. Despite this, a path to recovery is forming, with eucalyptus pulp identified as a key driver, with its new applications for bio-based alternatives. Policy decisions are profoundly influencing the market:
Chinese kraft pulp imports increased by nearly 7% through June, with bleached hardwood kraft (BHK) pulp imports specifically rising by 535,000 tonnes. BHK capacity expansion is expected to ease between 2025 and 2027, while bleached softwood kraft (BSK) capacity is at risk of closures.
Latin America finds itself as a strategic “chessboard” in the new influence war between the United States and China. The US has gradually lost ground in Latin American trade since 2000, while China’s economic influence has expanded, largely by increasing imports from the region.
Mexico and Central America are benefiting from nearshoring trends, driven by their proximity to the US, lower labor costs compared with China, trade agreements such as the United States-Mexico-Canada Agreement (USMCA) and substantial foreign direct investment (FDI) in manufacturing. Mexico, for instance, is the largest destination for US exports of kraftliner and recycled containerboard. However, Mexico’s recent imposition of 25-35% tariffs on imports, including boxboard, is expected to reshape trade flows.
South America plays a strategic role for China as a primary supplier of raw materials, with 80-90% of its exports to China being unprocessed commodities. China has made significant FDI and loans across South America, particularly in energy, infrastructure, mining and agriculture. Latin America holds globally significant reserves of strategic minerals (e.g., 60% of global lithium, 40% of global copper) and abundant green energy potential, and it is a net exporter of food.
Latin American packaging demand is correlated with essential goods sectors such as food, ensuring resilience, with food exports being a key driver, particularly in countries such as Brazil, Argentina, Colombia and Chile.
In the tissue sector, Latin America experienced the slowest demand growth in 2024 but anticipates a recovery. Among tissue demand drivers for the next years, we can highlight the away-from-home (AfH) segment, which is projected to grow by 3% annually, and rapid e-commerce adoption, making Latin America the second-fastest growing region for online sales in 2024. Increased local capacity is affecting market competitiveness, leading to rising Brazilian tissue exports.
This year, Fastmarkets’ conference also included discussions on carbon markets, following the Fastmarkets Latin American Carbon Forum. Latin America is recognized as a global leader in forest-based carbon credit issuances, having already issued over 281 million credits, with Peru, Brazil and Colombia leading the regional rankings. Approximately 80% of these issuances originate from Reducing Emissions from Deforestation and Forest Degradation (REDD+) initiatives. Crucially, Latin American-issued credits trade at a premium compared with those from other regions, reflecting a perception of higher quality.
Brazil exemplifies this trend, with the total area of active forest-based projects growing by 20% per year over the last decade. This growth has occurred without “crashing” the pulp and paper industry or posing an unmanageable threat to fiber availability. The region is expected to be a major hub for carbon projects, particularly Jurisdictional REDD+ (J-REDD+) and high-quality Afforestation, Reforestation and Revegetation (ARR) projects.
The demand for carbon credits is diversifying, with increasing roles for compliance markets, such as Brazil’s Greenhouse Gas Emissions Trading System (SBCE) and international frameworks such as the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). CORSIA alone is forecast to provide a substantial demand boost from airlines, with REDD+ projects potentially earning additional premiums for eligibility.
Furthermore, sustainability is being integrated into the core of Latin American pulp “mega-projects” such as Arauco Sucuriú. These projects prioritize clean energy, energy self-sufficiency, ecosystem protection, local community development and minimizing environmental impact through reduced emissions (e.g., 80% reduction in TRS emissions) and optimized water use, showcasing a symbiotic relationship between the forest products industry and carbon markets.
Interested in learning more? Fastmarkets provides price data, forecasting and analysis for key commodities in Latin America and across the globe. Book a free demo to find out more.