Non-integrated boxboard suppliers set new price hikes in Brazil

Boxboard producers are raising prices to tackle costs and protect margins

Brazilian non-integrated boxboard producers are slating new price hikes to tackle costs and improve margins in the last quarter of 2022, Fastmarkets has learned during its price pool in September. This is the second round of price raises set by producers this year, sustaining a two-year rally in domestic boxboard prices.

Fastmarkets has learned that Ibema, Papirus, MD and Bonet have separately informed clients of price increases varying from 10-13% for all grades, including recycled and white premium grades.

Pressure from virgin pulp prices mounted up for non-integrated producers and continue to impact costs, combined with surging energy and chemicals prices.

Market participants confirmed that Brazilian boxboard suppliers are still working with purchase quotas, meaning that supply is limited and many buyers cannot increase volumes when requested.

“The boxboard market is still correcting from the demand shock noted last year. The entire supply pipeline was empty, and with surging demand in 2021, we saw prices moving up with limited supply. We believe that demand is regular now, but there is still some fear of lack of supply now that we are in the high season for purchases, which is forcing some buyers to keep requesting higher volumes,” a source said.

Another contact added that the Brazilian market faced some supply issues in 2022, which increased the feeling of tight supply even though demand came back to normal levels. More than two sources commented about difficulties faced by a supplier in the second quarter due to a transition in the billing process, and now at least one producer is offering lower volumes due to unknown issues after a planned stoppage.

Real supply issue, or just an overreaction?

A buy-side contact, however, is not happy with the quotas and the new price increases that have been announced. “I believe there is an overreaction on prices with a new increase this year. Demand in September was not that good; October should be better due to seasonality, but I believe that suppliers are keeping the quotas so we have the feeling that there is no paper.”

A market participant had a different opinion: “We will only have relief in supply when Klabin starts up its new paper machine next year. Structural demand is increasing, we have clients all the time changing from plastic to paper, so there is a demand growth that will continue, and the fact is that Brazil did not see any important supply addition in recent years.”

Brazilian boxboard prices stabilized in August and September after price hikes were implemented up to July, sources told Fastmarkets. The 100% recycled duplex was traded for 6,000-6,400 Reais($1,128-1,203) per tonne, up 6% year on year, while the recycled duplex was at 6,500-6,900 Reais per tonne, 12.6% higher in the annual comparison.

Virgin duplex was unchanged at 6,800-7,500 Reais per tonne (+16.3% YoY), triplex at 7,700-8,300 Reais per tonne (+19.4%) and solid kraft board at 7,800-8,200 Reais per tonne (+11.9%).

The raw material for recycled boxboard was also stable, with uncoated boxboard recovered paper negotiated for 1,100-1,150 Reais per tonne, down 27.4% in the annual comparison.

Brazilian boxboard production and export dropping, despite higher demand

The Brazilian Tree Industry Association’s (Ibá) latest statistics show that Brazilian boxboard production dropped 8.5% this year to 421,000 tonnes, despite higher demand reported by market participants. Domestic sales in the period were also down 1.9% to 356,000 tonnes, while exports slumped 33% to 65,000 tonnes.

Boxboard imports continued to be limited in the period, totaling 48,000 tonnes in the seven-month period, but are 11.6% higher year on year. Sources report that they still don’t see a large volume of imported boxboard reaching the market.

“We see that coated woodfree imports from Asia are arriving at higher volumes now, but in boxboard that is not happening yet. Boxboard customers usually take longer to approve a change on the paper supplier; we will need imported boxboard to arrive at constant and higher volumes to see that changing,” a source concluded.

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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