Brazil’s paperboard industry cuts output amid import surge and Trump tariffs

Paperboard companies in Brazil are reducing production and halting expansion projects in response to oversupply in the domestic market and uncertainty in foreign trade. The national industry says it faces growing pressure due to rising imports—mainly from China and Europe—and fears the situation could worsen with the tariffs imposed by U.S. President Donald Trump.

This type of paper is widely used in packaging for various products such as medicines and food, as well as for graphic applications, among others.

From January to May, Papirus, one of the country’s four largest paperboard producers, halted production for the equivalent of 36 days. Amando Varella, co-CEO and commercial and marketing director of the company, said the move reduced profitability, leading to the suspension of the purchase of a new machine that would have increased production from 100,000 to 250,000 tonnes.

“The entry of cheap imports reduces profitability. In our case, the drop in prices reduced EBITDA by 32% from January to May,” said Varella. EBITDA measures earnings before interest, taxes, depreciation, and amortization. According to Papirus, the 150,000 tonnes that would have been added to production capacity are equivalent to the volume of imported paperboard expected to be imported in 2025.

According to data from Brazil’s Foreign Trade Secretariat (Secex), imports of three types of paperboard (by NCM classification) totaled 98,000 tonnes in the first half of the year. Between 2020 and May 2025, the share of imported products in the Brazilian market reached 780,000 tonnes—the equivalent of an entire year’s worth of domestic industry sales.

Foreign paper has been entering the country for some time, but the pace has intensified in recent years, especially after the pandemic. While China significantly expanded its production capacity and now faces an oversupply, Europe has seen falling demand since the beginning of the Russia-Ukraine war.

“With global logistics restored post-pandemic, paper flows resumed, and both Europe and China began shipping products to South America, especially to Brazil,” said Varella.

Meanwhile, in June 2023, Klabin launched its Paper Machine 28 (MP28) in Ortigueira, Paraná. With a capacity to produce 460,000 tonnes per year of various paper types—including white and brown paperboard and kraftliner—the unit also added to the domestic supply.

Given this scenario, the main paperboard producers in the country met with the Brazilian Tree Industry (Ibá) association to request that the federal government raise the import tariff from 12.4% to 25% for three product types. The government, however, increased the tariff to only 16.5% for two of the categories. The measure is valid through October.

“We observed misclassification of goods, as the descriptions are vague. Moreover, import prices in 2024 were even lower than in 2023,” said Varella.

During Klabin’s second-quarter earnings call, CEO Cristiano Teixeira stated that there has been an “invasion” of Chinese products in the market, but noted that most of them are the “folding” type (used for folding boxes) and of lower quality than what the company produces. According to Teixeira, 80% of Klabin’s paperboard is destined for high-value products, such as liquid packaging board, with only 20% being “folding.”

He added that the paperboard market “has been suffering from lower volumes,” but Klabin is “compensating” for the decline by increasing kraftliner output, taking advantage of MP28’s flexibility. Public data suggests the machine will produce 402,000 tonnes this year. The breakdown between paperboard and kraftliner is not disclosed.

Adding to the pressure is the Trump administration’s sweeping tariff hike, which imposed new trade restrictions and disrupted international trade flows. The measure has raised red flags at Ibema, another major Brazilian paperboard producer.

In 2024, Ibema opened an office in Miami, aiming to expand its consumer base across the United States, Canada, Mexico, Central America, and the Caribbean. “Now, we have to wait and see where things go. The tariff placed a lot of pressure on our operations and hurt our competitiveness,” said Ibema CFO William Bauer.

With the current tariff set to expire soon and the international market in turmoil, Ibá submitted a new proposal to the federal government, this time requesting a 35% import tax and the inclusion of a third NCM classification.

“We’re asking for a significant increase [in the tariff], but the final call on the magnitude rests with the government,” said Ambassador José Carlos da Fonseca, executive president of Empapel and director of international relations at Ibá.

According to Fonseca, mid-sized companies are already considering production cuts and collective vacation measures in response to the situation. “They’ve been harmed by imports from countries that, amid the global turmoil, redirected their goods to our market,” he said.

For now, discussions are ongoing to assess the sector’s challenges, with no decision expected from the executive branch yet, he added.

Source: Valor Econômico

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