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Containerboard suppliers adjust prices in Brazil in September, expect higher demand in fourth quarter

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Containerboard suppliers adjust prices in Brazil in September, expect higher demand in fourth quarter

October 01, 2013 - 05:47

SAO PAULO, Oct. 1, 2013 (PPI Latin America) -Most Brazilian containerboard suppliers - including Klabin, Rigesa, Orsa International Paper, Tedesco, Sengés, Fernandez, Inpa and others - adjusted prices for both virgin based and recycled papers in September, market sources said, and some are still finishing implementing increases in October.

According to PPI Latin America's Price Watch, prices for kraftliner rose by 2.8% from August to September hitting Real 1,650-1,700/tonne [FOB mill], which is also 7.4% higher than a year ago. White top liner (WTL) prices were adjusted by around 0.5% and are now at Real 1,890-1,950/tonne or 2% higher than September 2012. As for recycled papers, testliner increased 1.5% in September to Real 1,360-1,430/tonne and is also 9% more expensive than in the same month of last year while fluting rose 4.2% over August to Real 1,220-1,280/tonne, a 24.4% surge over a year ago.

"We adjusted prices in September, especially for those customers paying outdated values, and we'll have some further price adjustments in October. In some cases, we divided the increase into two steps," a paper supplier said. A kraftliner producer commented that he also implemented a price increase in September, but not to all customers. "As corrugated board demand is not so strong, there is no big pressure for volume," the contact said.

At the end of August, Orsa International Paper sent a letter to its customers informing them of a Real 70/tonne price increase on kraftliner and a Real 100/tonne adjustment on recycled containerboard effective Sept. 1. The company explained that the price hike was necessary due to higher labor, raw material and services costs. Orsa mentioned a 50% increase in recovered paper prices as well as higher costs for imported input due to the currency exchange rate and increasing logistics costs.

"Our fluting increased by around 5% in September over August and some suppliers are signaling new adjustments for October, but nothing has been confirmed yet," a paper buyer stated. "As for fluting and testliner, the high prices for recovered paper and the lack of virgin fiber in the market have been putting pressure on costs and thus prices are going up. With the startup of new paper machines - both virgin based and recycled - the situation is going to worsen.. There won't be enough recovered paper and virgin fiber in the Brazilian market," a supplier stated.

Another seller mentioned that he maintained prices for fluting and recycled testliner stable in September, but may adjust levels in October if recovered paper prices continue rising. "We are raising our fluting prices by 2% in October and may have a further increase in November depending on the recovered paper situation. Our recovered paper price didn't increase in September, but the price is already very high and the quality is very poor, so with the same amount of recovered paper we make less paper, which turns our costs higher," another producer said.

(To view a larger image,click here.)

Demand expected to improve.According to the Brazilian pulp and paper assn (Bracelpa), the country's packaging paper apparent consumption increased 1% to 3.2 million tonnes in January-August 2013 over the same period of 2012. Production rose 1.9% to 3.5 million tonnes, domestic sales grew 2.9% to 1.19 million tonnes and exports climbed 10.2% to 398,000 tonnes.

In August, though, the Brazilian packaging paper apparent consumption decreased 2.7% to 404,000 tonnes over August 2012 while production dropped 0.7% to 444,000 tonnes and domestic sales declined 2.6% to 149,000 tonnes. Exports increased from 38,000 tonnes to 47,000 tonnes in the period.

But containerboard suppliers believe demand will improve in the fourth quarter driven by yearend purchases. "September was similar to August in terms of paper sales. In October we believe sales will be a little bit better as it is usually a good month for box sales too," a paper supplier said. "Demand in September was heated and October should be another tight month," another contact said. According to a paper seller, all producers' mills are "running at full and the sales volumes are very good, even though are not as high as expected."

On the corrugated board side, market sources believe September volumes will be similar to August results. "The market has demand and as September is a shorter month it gives the impression that it is better, but actually it should repeat August," a contact said, adding that corrugated board sales are likely to grow by 2.5% this year compared to 2012.

Another contact mentioned that the market started September very strong, but then lost power in the second half of the month: "September has less working days than August, which ends up affecting the month's shipments. I believe volumes in September will be slightly lower than August." According to a box maker, "demand declined by around 10% in September over August".

The latest data released by the Brazilian corrugated board assn (ABPO) show a 3.2% increase in corrugated board shipments in August over July to 291,496 tonnes. The volume, though, is 3.2% lower than August 2012. As for January-August 2013, the ABPO data show a 2.8% increase in corrugated board volumes over a year ago to 2.23 million tonnes.

Kraft papers.PPI Latin America sources reported stable prices and firm demand for kraft papers in September. "Price adjustments may happen only in 2014," a contact said.

The market is now alert to the new sack kraft capacity that should enter the market in October-November. According to sources, Klabin's new 80,000 tonnes/yr sack kraft machine at the Correia Pinto mill, in Santa Catarina state, will have some tests done in the middle of October and start producing paper at the end of the month or the beginning of November.

Iguaçu's new 80,000 tonnes/yr kraft paper machine and converting lines at the Piraí do Sul mill, in Paraná state, are also expected to start operating in October.

The companies, though, didn't give an official startup date.

By Renata Mercante, Editor, PPI Latin America,rmercante@risi.com