Across Latin America, the pulp and paper sector is experiencing fluctuations in demand, with a partial reflection of the recovery in the packaging market demand. The year 2024 saw an uptick in packaging demand compared to 2023, driven by major fruit exporters entering the market to secure volumes for export. This, along with robust domestic retail sales, has bolstered the consumption of boxboard grades.
July and August witnessed a resumption of OCC imports across Latin America, spurred by the increased demand. However, a slowdown is anticipated as converters and paper producers have largely secured the necessary volumes for exporting fruit crops in the latter half of the year.
The tissue market is showing signs of recovery from a sluggish 2023, with imports across the region on the rise. Fastmarkets reports a continuation of price increases into the third quarter, attributed to cost inflation across the supply chains and the impact of local currency depreciation against the US dollar.
Despite the current price trends, local industrial and producer price indices in Latin America are beginning to show a different picture. These indices, which assess production costs for pulp and paper producers or the costs of pulp and paper products as raw materials for manufacturers, have started to stabilize or even decline in some instances, like in Chile, due to high domestic inventories. This trend suggests a potential easing of price pressures ahead. Additionally, announcements of price reductions by major Brazilian pulp producers for the fourth quarter have influenced market sentiment, indicating a possible downward revision of paper price forecasts as supply chain cost inflation pressures appear to be easing.
In Brazil, economic performance has exceeded projections, influencing inflation and expectations. Retail sales in Brazil saw a 2.1% year-on-year increase in September, fueled by strong domestic market activity and slight improvements in credit conditions. Online betting in Brazil is anticipated to have a significant impact on retail revenue in 2024, potentially leading to increased defaults.
Industrial production in Brazil continued its upward trend in September, marking the fourth consecutive month of growth. This aligns with the positive economic indicators from the country's central bank. However, inflation rates are on the rise, driven by increases in housing and food prices, including a notable hike in electricity tariffs.
In Mexico, economic growth is lagging behind its potential amid uncertainties, notably influenced by the US elections. The Mexican economy's liquidity has been impacted by lower remittances in 2023 and early 2024, although recent currency depreciation has begun to reverse this trend, promising a boost in industrial activity and domestic inflation.
Argentina is facing economic challenges, with GDP declining as the government implements anti-inflation policies. Despite achieving a fiscal surplus through spending cuts and increased taxes, the country continues to battle high inflation rates.
Chile's economic activity has stabilized, with indicators in September showing no significant change from August. However, inflation has accelerated, driven by a weaker Chilean peso and positive economic performance.
Source: Fastmarkets