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In October’s Latin American Paper Products Monitor, our economists looked at the trends behind major market movements in the region. Here we share a short excerpt of their analysis. The full report includes an overview of market movements in Brazil, Mexico, Argentina, Colombia, Chile and Ecuador, as well as insights into the pulp, paper packaging and containerboard markets. If you’d like to access the underlying data, or talk to our team of experts about their predictions for the remainder of 2024, contact us.
Pricing trends for paper and board products in Latin America have been mixed in recent months. Changes in supply and demand have pushed prices down in Chile while in other large markets, such as Brazil and Mexico, PPIs are still trending upward and not losing momentum, meaning there is plenty of room for actual prices assessed by Fastmarkets to increase.
Overall, paper product prices in Latin America continued to increase in August, reflecting the higher cost inflation across the pulp and paper supply chains and higher export and import parities given the general weakening of local currencies versus the US dollar, as we have expected since the start of the year.
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We anticipate prices will continue climbing in the coming months, affecting all buyers across the value chain. Local producer price indices in Latin America, either assessing production costs for pulp & paper producers or costs of pulp & paper products as raw materials for manufacturers, are also increasing, reflecting the general rise in prices across the supply chain.
However, looking at the current market supply and demand balance and the trends in the overall industrial PPI indices, it is unclear whether there is a prevailing price trend in Latin America at the moment, and the wave of price increases may be cooling off sooner than we expected.
Pulp and paper production indices in the region varied, reflecting the unstable momentum.
Activity picks up amid higher industrial production, boosted by currency devaluation
Latin American countries are facing a policy trade-off between controlling inflation and stimulating economic growth.
While inflation remains elevated, interest rate cuts could trigger capital outflows and currency depreciation, reigniting inflationary pressures but boosting activity, just as in July. Policymakers must carefully time their policy adjustments to maintain stability and growth.
Higher global interest rates have increased the debt servicing burden for Latin American governments, reducing the fiscal opportunities to support economic activity, which can be done, although in a limited way, via monetary policy and interest rate controls. Reducing fiscal imbalances in a politically charged context is a crucial challenge facing the region.
Overall, economic activity in Latin America was stronger in July in the markets analyzed byFastmarkets, with industrial production increasing in those markets, boosted by low interest rates and the devaluation of local currencies versus the US dollar in the last three to four months. The continued currency depreciation in Latin America resulted from the ongoing interest-rate cuts policy promoted by the major markets to boost activity while inflation seemed controlled.
However, this may soon change, as it has in Brazil, for instance, where the Brazilian Central Bank increased interest rates in September as inflation expectations seem to be increasing amid the stronger economic activity, higher than market expectations.
The recent cut in interest rates by the US Federal Reserve should put an end to Latin American currency devaluation in 2024, as the gap between the US premium bond and Latin America’s is reducing, favoring a capital inflow to Latin American economies, thus reducing exchange rates a little bit in the short term.
Interested in accessing the full monitor, including forecasts for each commodity? You can get a free sample of the Fastmarkets Latin America Paper Products Monitor report here or by filling in the form above. Fastmarkets provide a range of market intelligence, including short-term forecasts, price data and market coverage to keep you one step ahead of the market. Speak to our team and find out more today.