We expect prices for paper products in Latin America to increase in 2025, tracking higher costs and more robust demand than in 2024. The demand recovery in 2024 created opportunities to consume any remaining unsold inventories from the 2022-23 period, and new orders were placed throughout the year as demand increased.
From a cost perspective, cost inflation affected the pulp and paper supply chain during the first half of 2024 but waned somewhat in the third quarter before regaining strength in the fourth quarter due to rising fiber and energy costs across the region. The outlook for pulp and energy prices in 2025 indicates impending increases, which will affect the paper supply chain by raising costs.
Want to see the data behind this outlook? Access our data story to see the numbers behind our predictions.
Trade and tariffs
The trade scenario for 2025 and beyond is expected to be more volatile, but the market should not overlook the influence of global value chains on market organization and trade flows.
Our baseline scenario assumes no significant trade friction between the US and Latin America, even though some occasional tariffs may be implemented. The primary reason for this is that the US and Latin America both depend on the trade of goods, raw materials and energy with each other.
While unilateral trade tariffs might temporarily alter trade flows, they are unlikely to endure, as they contradict the optimal organization of value chains between the two, which currently prioritizes efficiency.
Mexico is by far the most important trade partner of the US in Latin America. The interdependence between the US and Mexico is so significant that every 5% change in US GDP results in a 4% change in Mexican GDP. Both countries benefit from this trade flow. US companies have been heavily investing in Mexico to relocate production from Asia (and even the US) to the northern border region of Mexico, due to the enormous tax advantages and cost competitiveness the area offers.
Unilateral tariffing on trade with Mexico would result in price increases for food, hygiene products and various basic goods, as well as more complex manufactured items like refrigerators, laptops and furniture, all leading to higher inflation rates in the US domestic market, which the government considers undesirable.
For now, our baseline scenario for prices and supply and demand in the paper products markets of Latin America assumes no significant, lasting trade frictions between the US and the region. The logic of global value chains is robust, and companies will always strive for optimal financial efficiency.
Food exports continued driving up containerboard demand in 2024
Food producers across Latin America are placing heavy orders for 2025, due to optimism about food exports out of the region during the year thanks to expectations for a currency devaluation and higher food prices.
With the exception of a few food products, including bananas (an important containerboard end-use sector in South and Central America), price inflation is also occurring globally, which should encourage Latin American exporters to keep shipping production offshore.
Producers and industrial price indices assessed by the local bureau of statistics (PPIs), which were showing a clear deceleration trend through October, have reversed and now indicate further (and stronger) price increases ahead in Brazil, Chile and even Mexico.
From a local perspective, increases across the paper supply chain should be stronger in markets that can choose between selling domestically or exporting, particularly Brazil and, to a lesser extent, Chile.
For buyers who want to track a similar price reference for markets where there is no local price coverage, Fastmarkets domestic prices in Brazil are a great proxy.
Brazilian competitiveness improved across Latin American P&W markets, despite secular demand decline
The Brazilian domestic market for paper and paper products is vast, with local buyers competing against exports to secure volumes.
This indicates that, in light of our forecast for rising international food and paper prices in US dollars, along with further devaluation of the Brazilian Real, domestic prices will likely rise. The same trend should apply to markets primarily supplied by Brazilian paper, such as Argentina, Colombia, Ecuador and Peru.
Over 60% of Brazilian paper exports go to destinations within Latin America, meaning that it is the demand recovery in those markets, driven by global prices and higher costs, that will catalyze price increases there and, ultimately, in the Brazilian domestic market.
We anticipate a similar trend in Chile, as the country is a major exporter of certain paper grades, such as boxboard, across Latin America. However, Chilean production exceeds domestic demand, resulting in much less competition from exports.
We expect a more moderate price increase for paper in Mexico in early 2025 compared with the rest of Latin America, as economic uncertainty regarding potential trade shifts between the country and the US is discouraging industrial orders, and buyers are adopting a hand-to-mouth purchasing strategy. Nevertheless, rising costs will continue to drive prices upward, and once demand materializes, prices are likely to increase at a faster rate.
China remains the second-largest boxboard exporter despite new trade tariffs in Mexico
Preliminary trade data analysis for 2024 shows that Latin America imported 1.28 million tonnes of various boxboard grades in 2024, slightly more than the 1.27 million tonnes received in 2023.
Because not all countries have reported trade data for 2024, final numbers for the year will be larger than those in 2023, reinforcing our analysis since early last year that demand strongly recovered in 2024 despite political and economic uncertainty in major markets, such as Mexico.
Even with the missing data for Mexico and Colombia for November and December and other smaller market gaps, Mexico led total imports in the region for the year, receiving about 40% or nearly 500,000 tonnes.
The country lacks virgin paper grades because it does not produce virgin fiber. Local recycled paper producers also face stiff competition from virgin-grade imports, which are often cheaper than local recycled production, primarily those from China.
During its impressive expansion of boxboard exports to Latin America, China focused heavily on the Mexican market, and since 2020, it has been steadily taking market share from US exporters.
Despite Mexico imposing new trade tariffs of 25-35% on imported boxboard from China in May, the share of Chinese exports to Latin America in 2024 remained largely unaffected.
Interested in learning more about this outlook? Access our data story to see the numbers behind our predictions.
