Papermakers cut production in face of rising imports

Brazilian manufacturers of paperboard, used in packaging for medicines, food and personal care and cleaning products, have felt the pressure of the almost 40% jump in imports in 2023. In recent months, a large part of the industry has called a halt to production or revised production targets due to more aggressive competition, in terms of volume and prices, from imported paperboard.

In the group of medium-sized companies that don’t have their own pulp, Papirus stopped the equivalent of 17 days of production. With a capacity of 115,000 tonnes, it will sell 96,000 tonnes in 2023. Other manufacturers of a similar size, such as MD Papéis, have done the same, say sources. “Today, monthly imports represent almost what two Brazilian companies can produce,” said Amando Varella, Papirus’ co-CEO and head of marketing and commerce.

For these non-integrated producers, competition with imports is even tougher, because pulp prices in Brazil are based on the European PIX index, which is higher than the Chinese index. These companies say that a large part of their pulp imports come from China, but there is also a growing volume from Europe and Chile.

Among the large, integrated companies, Suzano brought forward to December a maintenance stoppage that had been scheduled for the beginning of next year. From January to September, the company’s paperboard sales fell by 15%, to around 123,700 tonnes.

“The impact [of bringing forward the stoppage] is not material. But the industry will have to find a balance between domestic demand and exports,” said Fabio Almeida, the company’s head of paper and packaging.

The chart below shows shows Brazilian paperboard imports (hs code 4707; 4800; 4802; 4807; 4810) from Jan 2020 and Oct 2023. The data is from DataLiner.

Brazilian Paperboard Imports | Jan 2020 – Oct 2023 | TEU

Source: DataLiner (click here to request a demo)

The largest company in the sector, Klabin hasn’t stopped machines, but has used the recently opened MP 28 in Ortigueira (Paraná) to make kraftliner paper rather than cardboard, which will be its main production line. “We’ve just started up a 450,000 tonnes per year machine. We could be more aggressive in the domestic market, but it’s not attractive to compete here,” said José Soares, the company’s commercial director for papers.

In the year to September, Klabin’s sales, which have greater exposure to the food and beverage market and a more diversified cardboard portfolio, fell 3% to 507,000 tonnes, in line with accommodating demand.

From the lack of product seen at the height of the pandemic, the domestic cardboard market is now seeing an excess of supply. New factories in Asia and a slowdown in demand – an important customer of the segment, the pharmaceutical industry has not had a brilliant year in the country – have unbalanced the domestic market, where the installed capacity of this type of paper exceeds consumption, from 650,000 to 700,000 tonnes per year.

According to data from the Brazilian Tree Industry (Ibá), which brings together pulp and paper producers, cardboard imports jumped 39.7% between January and October, to 102,000 tonnes. In the same period, local production fell 7.2%, to 563,000 tonnes, and domestic sales fell 3.9%, to 498,000 tonnes. In October alone, foreign purchases grew by 62.5% year-on-year.

Prices apparently below those practiced in the market of origin have also caught the attention of the local industry. The reading, especially in the case of Asian paper, is that it doesn’t make economic sense for cardboard made from pulp that costs $650 per tonne to arrive in Brazil for only $750 per tonne, even with the normalization of freight rates.

Even so, it is not in the plans to take a dumping complaint to the federal government. In order to contain the advance of imports, a working group set up within Ibá is considering asking Brasilia to increase the import tax rate to 25%, as other sectors that have suffered from the advance of imports, such as the steel industry, have already done.

Source: Valor Econômico

Click here to read the original news report: https://valor.globo.com/empresas/noticia/2023/12/21/papeleiras-cortam-producao-diante-de-importacao-em-alta.ghtml

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