Mexican containerboard prices drop again amid uncertainty with no sign of demand resuming

Prices for domestic containerboard in Mexico dropped by 300 pesos per tonne in January, with demand still weak and inventories full, sources reported

This latest development marks the third consecutive drop in domestic prices since demand in the country started to weaken during the last quarter of 2022.

Domestic linerboard is trading at 13,800-14,800 per tonne and medium at 12,800-13,800 per tonne; those prices are down by 1.4% and 1.5% respectively compared with a year ago.

Pricing for imported unbleached kraft linerboard from the United States also dropped by $20 per tonne to $720-750 per tonne; that price has fallen by $50 per tonne since October.

“January is still a festive month in Mexico, so we started with a very slow demand. I still don’t note any moves to replenish inventories, even though the pace of purchases has been low for many weeks,” a contact said.

Market dependent on US economy

A second source pointed to uncertainties affecting the Mexican market, indicating that much depends on the US economy.

“The entire world is on hold now, waiting for a possible recession. Mexico has shown a positive industrial GDP growth in 2022, but corrugated boxes demand didn’t follow that entirely, which is weird. We see no pressure for purchases, and the market is very slow now,” the second source said.

A market participant said that Mexican suppliers have been trying to hold prices as much as they can, with several mills stopping production since December to balance inventories.

“Even with that there is a lack of requests and quotes; I already see medium traded around 12,500 pesos,” that source said.

Several contacts, however, stated that producers have been working with limited discounts ranging around 3% at most this month.

“In my view, prices dropped only a little in December and are stabilizing in January. Let’s see if demand will react in February,” another source said, adding that domestic prices for old corrugated containers (OCC) were also holding steady.

As Fastmarkets reported on January 10, mills in Mexico continued to face a lack of demand for OCC at the start of the year. But prices for the domestic raw material were stable compared with December at 2,500-3,000 pesos per tonne, down 41.5% compared with a year ago.

“Many box mills stopped for a few days to re-balance inventories while recovery paper collection rates in the retail sector also dropped because consumption in the country is not strong. These two factors combined helped to trim domestic OCC supply, so prices in January — despite still being pressured — remained stable,” a source said at the time.

Containerboard and kraftliner Imports are down  

According to the latest data from the country’s national statistics institute (INEGI), Mexican containerboard imports in January-October 2022 totaled 958,274 tonnes, down by 6.50% year on year. Kraftliner imports dropped by 11.02% in the annual comparison to 721,515 tonnes, while imports of recycled containerboard rose by 10.66% year on year to reach 236,759 tonnes.

As Fastmarkets’ PPI Pulp & Paper Week reported on Friday January 20, the market environment for containerboard has remained one in which boxmakers in Mexico are oversupplied with linerboard while demand for their boxes has tapered off for nearly half a year.

Meanwhile, US kraft linerboard mills were said to be more than ready to release more export tons. US containerboard inventory at mills and converting plants spiked at the end of September 2022; at the same time, US box shipments in the second half of 2022 are expected to be down by 4-5% compared with the second half of 2021.

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