Prices for domestic graphic paper products in Brazil were unchanged in February and March, while prices for imported goods dropped, driven by inventories and low demand, sources told Fastmarkets during the most recent market consultation, which closed on Thursday March 9.
Full stockyards and low demand
The market scenario is similar to what was seen in January, but conditions are even more challenging now, sources said. Stockyards are full, and Brazil has continued receiving large volumes of imports, especially from Asia.
“At the end of last year, everyone was in that rush to try to buy imported products at the lowest cost possible. Every month the prices increased. Manufacturers showed no mercy, and the market bought more than it should have, but demand did not continue to rise. Now everyone is overstocked, and inventories are high, but demand is down,” a source explained. “The industry has been making the same mistake for decades.”
The drop in demand both abroad and in Brazil ends up generating a war of uncertainties regarding prices, volumes, who to sell to and at what price.
A third source also pointed to challenging market conditions but said domestic producers were “waiting to see” what will happen with demand in the coming months before setting any official price reductions.
He noted, however, that the price increases announced for January 1 have come under pressure, saying: “The increase occurred and is now being retracted.”
That source said he was still waiting to have conversations with local producers about the possibility of price change announcements, indicating no further information was available about when — or by how much — domestic prices might move lower.
In February and March, the domestic price for coated woodfree (CWF) in reels remained at 6,500-6,800 Reais ($1,242-1,299) per tonne, and that for CWF in sheets held at 7,100-7,800 Reais ($1,356-1,490) per tonne. These prices are up by 30.4% and by 34.2% year on year respectively.
The uncoated woodfree (UWF) segment expects to receive a demand boost soon from the latest round of the government program for textbooks, Programa Nacional do Livro Didático (PNLD). There is no exact timeframe known for this, however; the new round of the program was expected to happen in the first months of 2023.
Fastmarkets’ price survey found Brazilian offset at 5,450-5,900 Reais ($1,041-1,127) per tonne in February and March, while cutsize held at 5,300-5,700 Reais ($1,013-1,089) per tonne. These prices are up by 15.2% and by 11.1% year on year respectively.
“Prices for Chinese offset goods are dropping. Some big Brazilian publishers have reopened quotations for the PNLD program with volumes over 30,000 tonnes,” a fourth source said, indicating this could raise Brazilian import volumes even higher in the coming months.
Increased import volumes may be impacted by freight rates
Unlike domestic goods, prices for all imported products in Brazil have already followed other Latin American prices lower, given large shipments of paper products, especially from Asia. Import volumes have increased as a result of more competitive paper prices abroad as well as lower freight costs.
“Freights at the beginning of the year were below $1,000 per tonne. But they say that after the end of the Chinese New Year, at the end of January, freight rates rose again,” a fifth source said.
“Freight rates are now stable but at lower levels than last year,” according to a sixth source, who noted that these rates could rise again in the future, which would balance the final price of imported products.
“There may even be an upward readjustment of freight to make rates a little more acceptable for the ship companies. They are claiming that they are going to cut ships — reduce availability — to try to raise the rate level, and this can tighten imports,” he said. Contacts estimated sustainable freight costs from Asia to Brazil at around $1,200-1,500 per tonne.
For Brazilian customers, imported CWF in sheets traded at $950-1,150 per tonne in February-March. This value is 19.2% below a year ago. “This product was the one that suffered the worst impact. Today, that product can be traded under $1,000 per tonne coming from Asia,” the third source said.
“In this segment of chemical pulp paper, such as offset and coated paper, the national industry needs to take pressure off the domestic market. If it does not export on a large scale, it will accelerate the drop in prices in the local market,” he added.
For imported lightweight coated (LWC), prices have fallen compared with previous survey to $950-1,100 per tonne, down by 6.8% year over year. Prices for imported newsprint dropped slightly to $700-770 per tonne, down 2% in the annual comparison.
Fastmarkets has learned from several sources that local printing and writing products producer BO Paper has started a scheduled downtime. This temporary suspension of operations is focused on the upkeep of operational systems and is scheduled to last 20 days.
This article was first published in PPI Latin America, the industry’s most trusted pulp and paper market news and prices in the region. Speak to our team to find out how to subscribe to our newsletters and access our prices.
