Variation across the board

Pricing trends for paper and board products in Latin America have been mixed in recent months. Changes in supply and demand have pushed prices down in Chile while in other large markets, such as Brazil and Mexico, PPIs are still trending upward and not losing momentum, meaning there is plenty of room for actual prices assessed by Fastmarkets to increase.

Overall, paper product prices in Latin America continued to increase in August, reflecting the higher cost inflation across the pulp and paper supply chains and higher export and import parities given the general weakening of local currencies versus the US dollar, as we have expected since the start of the year.

We anticipate prices will continue climbing in the coming months, affecting all buyers across the value chain. Local producer price indices in Latin America, either assessing production costs for pulp & paper producers or costs of pulp & paper products as raw materials for manufacturers, are also increasing, reflecting the general rise in prices across the supply chain.

However, looking at the current market supply and demand balance and the trends in the overall industrial PPI indices, it is unclear whether there is a prevailing price trend in Latin America at the moment, and the wave of price increases may be cooling off sooner than we expected.

Pulp and paper production indices in the region varied, reflecting the unstable momentum.

Economic outlook

Activity picks up amid higher industrial production, boosted by currency devaluation

Latin American countries are facing a policy trade-off between controlling inflation and stimulating economic growth.

While inflation remains elevated, interest rate cuts could trigger capital outflows and currency depreciation, reigniting inflationary pressures but boosting activity, just as in July. Policymakers must carefully time their policy adjustments to maintain stability and growth.

Higher global interest rates have increased the debt servicing burden for Latin American governments, reducing the fiscal opportunities to support economic activity, which can be done, although in a limited way, via monetary policy and interest rate controls. Reducing fiscal imbalances in a politically charged context is a crucial challenge facing the region.

Overall, economic activity in Latin America was stronger in July in the markets analyzed by
Fastmarkets, with industrial production increasing in those markets, boosted by low interest rates and the devaluation of local currencies versus the US dollar in the last three to four months. The continued currency depreciation in Latin America resulted from the ongoing interest-rate cuts policy promoted by the major markets to boost activity while inflation seemed controlled.

However, this may soon change, as it has in Brazil, for instance, where the Brazilian Central Bank increased interest rates in September as inflation expectations seem to be increasing amid the stronger economic activity, higher than market expectations.

The recent cut in interest rates by the US Federal Reserve should put an end to Latin American currency devaluation in 2024, as the gap between the US premium bond and Latin America’s is reducing, favoring a capital inflow to Latin American economies, thus reducing exchange rates a little bit in the short term.

Interested in accessing the full monitor, including forecasts for each commodity? You can get a free sample of the Fastmarkets Latin America Paper Products Monitor report here or by filling in the form above. Fastmarkets provide a range of market intelligence, including short-term forecasts, price data and market coverage to keep you one step ahead of the market. Speak to our team and find out more today.

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Use this guide to explore how the EUDR affects your production processes, supply chain management and market positioning.

Navigating the new regulations will present challenges for players across the globe. Here we’ve answered your questions about the EUDR, addressing specific concerns and the potential operational impacts of the new rules.

Scroll down to keep reading the frequently asked questions about the EUDR, and fill in the form below to read Fastmarkets director, Europe packaging and graphic papers Alejandro Mata Lopez’s forecast on the impact of the regulation on production costs, competitiveness and the overall market.

1. What is the European Union Deforestation Regulation (EUDR) and what are its main objectives?

The EUDR requires companies trading in wood and products derived from wood to conduct extensive diligence on their value chains to ensure their products are not a result of deforestation, forest degradation or breaches of local environmental and social laws.

From the deadline (December 30, 2024 under the original proposal, or December 30, 2025 if the postponement goes ahead), EU companies will need to guarantee their wood products did not result from deforestation that occurred after December 31, 2020.

The main objective of the regulation is to reduce the EU’s impact on global deforestation and ensure that all products consumed within the EU do not contribute to the destruction of vital forest ecosystems, reducing overall greenhouse gas emissions and biodiversity loss. While the EUDR is a European legislation, the rules are aimed at promoting sustainable production and consumption patterns globally.

2. How does the EUDR affect international trade in forest products and the global market as a whole?

The rules apply to European wood, pulp and paper companies and will also impact all EU imports and exports.

Pulp is the European paper and board industry’s largest import, totaling over 6 million tonnes of pulp in 2023, mainly from Brazil, North America and Chile. Graphics, boxboard and containerboard were the next largest imports over that period, respectively.

Within the EU, companies that buy market pulp will be some of the most affected by this new regulation as this is the principal product imported from overseas to Europe.

However, integrated companies that produce their own pulp will also experience a significant impact, as complying with the rules will result in additional costs due to the expenses of tracing the origins of wood and pulp back to their source.

Overall, the new regulation could have a significant impact on the competitiveness of the European paper packaging industry, reducing external demand for European products due to the higher costs associated with complying with the rules.

3. How is the EUDR likely to affect the market?

The new rules could increase demand for recycled fibers. As a result, the increase in recycled pulp demand could drive up paper-for-recycling (PfR) prices. OCC prices have already been rising significantly over the last year — the average OCC PIX is 62% higher than a year ago — and the new possible demand for recycled fibers in the region could push prices up further.

The switch would also require various innovations around the industry, as some paper grades cannot transition from using virgin to recycled fibers due to their specific characteristics. For example, certain cartonboard papers used for food packaging cannot be produced with recycled materials.

4. How does the EUDR influence supply chain management for forest products manufacturers and procurement officers?

Under the regulation, manufacturers will be required to implement more robust traceability processes to ensure that their products do not contribute to deforestation. This involves a significant increase in documentation and verification processes throughout the supply chain, from raw material sourcing to the final product.

Manufacturers may need to adapt their sourcing strategies, prioritizing suppliers who can provide verified deforestation-free materials quickly and efficiently.

Similarly, procurement officers will need to establish protocols to ensure that sourced materials do not contribute to deforestation. This involves implementing comprehensive risk assessments and verification processes to confirm the origin and sustainability of the forest products.

5. How can manufacturers maintain competitive positioning while adhering to EUDR standards?

Investing in sustainable practices will be crucial. Integrating environmentally responsible methods, such as sourcing certified raw materials, optimizing resource use and minimizing waste will allow manufacturers to align with global sustainability trends, boosting their sustainability credentials and attracting consumers who prioritize environmental stewardship.

Manufacturers will also need to use technology to assess the transparency and traceability across their supply chains. Alongside facilitating compliance to EUDR standards, new technologies can improve operational efficiency and data accuracy.

6. How might the EUDR affect the cost structure and pricing strategies of forest products?

Compliance with the EUDR will require increased investment in sustainable sourcing and advanced technologies to provide transparency to their supply chain.

These changes can lead to higher operational costs, which could lead to changing pricing strategies, either passing on the additional costs to consumers or adjusting product lines to focus on items that can command higher prices due to their sustainable attributes.

This could, in turn, reduce the competitiveness of the European paper packaging industry worldwide. Higher cost fibers and additional operational costs could affect overseas prices of European paper for packaging exports, making them more expensive and reducing external demand for European products.

Reduced competitiveness could strongly impact European companies’ revenues, as Europe is a net exporter of paper packaging grades. This could be particularly problematic for the cartonboard and sack kraft industries as net exports represent 28% and 42% of their total production respectively.

Companies will face increased operational expenses, regulatory scrutiny and the threat of fines for non-compliance, which could reach a minimum of 4% of the annual turnover, confiscation of goods and even a temporary ban from participating in EU procurement or tenders.

Interested in learning about the impact the EUDR will have on the market over the long term? Access Fastmarkets director, Europe packaging and graphic papers Alejandro Mata Lopez’s forecast examining the challenges the regulation will pose to the European pulp and paper industries here.

The post Six frequently asked questions about the EUDR appeared first on Fastmarkets.

Economic insights

This month’s baseline containerboard price forecast continues to show prices remaining flat over the rest of 2024. The increase in prices in February and June was enough for upward pressure on kraftliner prices to depart, and near-term impacts on operating rates and OCC costs from the US port strike will likely be negative, even if they prove short-lived.

We anticipate that corrugated box shipments will recover further in the second half of 2024 and 2025, though there is some risk to this outlook if the US manufacturing sector and labor markets do not stabilize. Additionally, structural changes play just as large a role as cyclical factors in the demand outlook — and carry just as much risk.

September proved to be an eventful month for boxboard prices. Coated recycled board (CRB) prices increased, the first price movement in 12 months and the first increase in 27 months. We have been forecasting an increase in this market given the rising production costs for recycled producers and the tightening operating rates.

A bit more surprising was the drop witnessed in coated unbleached kraft (CUK) prices, the first price change in 15 months. This market had been operating at less-than-optimal levels, but given the recent price increase announcements, it was surprising to see prices decline.

Prices for solid bleached sulfate (SBS) and uncoated recycled board (URB) remained flat. This month’s baseline price forecast calls for prices of all substrates to be flat through the end of the year, although there are some risks present in this forecast, particularly with the recent strike at eastern US ports.

Macroeconomic factors

Even though the US economy remains in expansion mode, we continue to focus on budgetary pressures faced by US consumers. Real food and beverage spending, whether at restaurants or on groceries, remains below trend, indicating that consumers have responded to inflation by pulling back on more expensive categories in this area and nonessential items.

Additionally, spending on services, such as recreation, travel and personal care, has also fallen below trend in another display of slower discretionary spending. Cooling labor markets may keep wage growth subdued, so budgetary relief will have to be driven more by price stability and interest rate cuts.

Goods prices, especially when excluding food, have been a source of price relief for consumers in 2024, which has helped support relatively healthy growth for total retail sales despite what we view as subdued food spending. The main sources of inflation’s stickiness in 2024 have been services and shelter costs.

Food manufacturing, a far more important sector for packaging markets, continues to struggle to regain its long-term growth trend.

Typically, processed food output increases at a pace of 1% per year, so the decline and stagnation of 2023-24 is well below its long-term expansion path.

The ISM Manufacturing PMI® was flat in August at 47.2, still clearly in contraction territory. More positively, the new orders and production components improved in September, with the survey also reporting a reduction in manufacturer’s inventories and prices.

Corrugated box and containerboard

The release of third-quarter statistics from the FBA and American Forest & Paper Association (AF&PA) will occur in late October, providing an update on the extent to which box shipments can expand on the recovery that began in the second quarter or, as in the first quarter of 2024, fall back into weakness.

The baseline forecast continues to project that box shipments will improve. In 2022, the ratio of box shipments to the weighted economic index dropped sharply, first returning to pre-2020 levels and then sinking to 10% below its long-term performance in early 2023 when excluding e-commerce.

With e-commerce included, demand for box shipments relative to economic activity sank even lower.

The more severe erosion in the relationship between e-commerce and box usage is not at all surprising given the extent to which e-commerce retailers have emphasized non-corrugated fulfillment methods such as mailers or in-store pickup. However, it is extremely notable that a smaller, but still very substantial, deterioration from the preexisting long-term trend has occurred across many demand segments and persisted for so long.

Interested in accessing the full report, including an outlook on the market for the rest of the year and more data visualizations? Sign up to access a free sample of the Fastmarkets Paper Packaging Monitor.

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Slow summer

From a demand perspective, paper and board markets in China remained relatively subdued in July and August, reflecting the sluggishness of the Chinese economy. The Chinese consumer market continued to be relatively soft as confidence remained poor and government policies focused more on the supply side of the economy.

Most PMIs remained weak in August, many holding below 50. Year-over-year growth in goods exports was solid in July, but some of the strength in year-over year comparisons reflected the low export levels in 2023.

We expect that the troubled property market, a lack of income growth and low consumer confidence will hold back Chinese economic growth over the next several months. Exports and manufacturing have been the primary source of economic growth recently and are likely to remain so in the coming months.

Newsprint

Third-quarter newsprint prices in India posted minor increases from the second quarter, up an average of $5 per tonne for both 42-gsm and 45-gsm grades (PPI Asia, September 6, 2024).

Canadian and Russian suppliers were the most active in the market, and their prices fell more in the middle to low end of the range. Canadian shipments were subject to delays and higher freight costs, while Russian suppliers were not because the sanctions force them to use different shippers that were not impacted by the flurry of activity in China that drove the jump in freight rates.

Asian suppliers had very few sales; their prices were at the high end of the range, and soaring freight rates limited the interest in transactions for both buyers and sellers.

To read the forecast for newsprint prices, you can access a free sample of the report here.

Printing & writing paper

In China, woodfree paper markets were sluggish, and prices fell in July and August due to oversupply and declining pulp prices. The coated woodfree paper market was mostly steady in July with unchanged prices.

Some major producers, such as Shandong Chenming Paper, Hainan Jinhai Paper and UPM Paper, took 4-10 days of downtime in July, removing around 40,000 tonnes of capacity, which moderated the oversupply issue and allowed prices to remain stable even as demand was still weak and costs were reduced.

Then, in the middle of July, major suppliers announced a price increase of RMB 100 per tonne to begin August 1. But this increase failed, and prices in August ultimately declined RMB 50-100 per tonne. August is the traditional slow season, and there were few orders for coated woodfree paper from downstream buyers. Additionally, producers did not take downtime, which worsened the oversupply.

Declining pulp prices also affected market confidence in paper prices. Uncoated woodfree paper markets were more competitive, and prices edged down much more in July and August, especially for mid- and low-end products.

Containerboard

Chinese recycled containerboard prices decreased several times across China except East China in July for a total loss of RMB 20-150 per tonne. In East China, prices were largely stable as they had not moved up in the previous months like they had in other regions.

At the beginning of August, mills initiated hikes to deal with falling profits, but customer acceptance was not high, and prices started to weaken in mid-August and even fell in some regions due to weak demand and ample supply.

Seasonal factors as well as concerns over the state of economy dampened purchases. At the same time, there was plenty of supply because of rising availability from new capacity. This led producers to offer price discounts to win sales. In August, prices were relatively chaotic, rising and falling, but ultimately the national average price showed a slight drop.

The price declines were mainly concentrated in South China, with little change in East China and a slight increase in North China; the steadiness in East China likely resulted because prices there had dropped more than in other regions in April and May.

Interested in accessing the full monitor, including forecasts for each commodity? You can get a free sample of the Fastmarkets Asian pulp and paper monitor report here or by filling in the form above. Fastmarkets provide a range of market intelligence, including short-term forecasts, price data and market coverage to keep you one step ahead of the market. Speak to our team and find out more today.

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While the sector continues to recover from the retrenchment in 2023, new opportunities and challenges are emerging, from evolving market dynamics to the impacts of trade and labor disruptions. 

Our first pallet pricing newsletter includes:

• Insights into the headwinds impacting pallet trading prices, including the Federal Reserve rate cut and a pick up for specialty pallets
• Crucial context into the rate of pallet production in recent years and how the volatility in the market has impacted prices
• A new pallet supply measure which tracks pallets flowing in and out of the US market via containerized trade
• Our short-term forecast for the market

Interested in early access to our prices and analysis? Sign up to the pallet prices newsletter to be the first to receive them.

Pallet trading prices

Recent trends held this month as the bulk of unmodified or unenhanced GMA pallets in the Seattle market traded in an $11.00-13.00 per pallet range with premium GMA pallets trading in the $15.00-17.00 range. Market participants continued to report that these ranges have remained in place for months.  

Producers reported persistently underwhelming production of new softwood GMA A-grade 48×40 pallets with ample availability for prompt delivery. Some sources reported a slight uptick in agricultural sector purchasing and some specialty manufacturers noted a pickup following the rate cut decision. However, the new GMA pallet sector continues to lag. Most producers report that they do not expect a significant change this calendar year.  

In most key delivered markets, mills continued to struggle against ample availability of $5.00-7.00 “good to average” condition used pallets. Market participants reported that used pallet inventories were diminishing, but estimates of these inventories were wide ranging. 

As Fastmarkets expands its coverage of the pallet market, we invite feedback on specific pallet-related items for future reports. Contact ian.templeton@fastmarkets.com with comments or to contribute future pricing information.

A volatile market

Pallet production has been a highly volatile market over the last decade, but it is showing signs of life after retrenchment in 2023.

According to FRED data, the production index for pallets rose 18% from March 2020 to its highest point in December 2021 before steadily falling again once the pallet market became saturated. However, more recently, the production index has risen by 10% from July 2023 to July 2024.

That said, it should be noted that the methodology for this index does not differentiate between new and recycled pallets. Market indicators including industrial hardwood and low-grade softwood lumber demand point to the conclusion that most of this increase in pallet production has been on the recycled side of the market rather than the new side. 

The recent weakness in new pallet production means that the stock of existing pallets in use and on the market will degrade in quality on average. The condition of pallet cores will deteriorate and more pallets reach the end of their useful life. Pallet recycling activity will wane and the currently low prices will creep up. Eventually, prices will increase enough for new pallet production to climb again to meet market demand. 

Prices continue to ease

The US Bureau of Labor Statistics (BLS) reported that the pallet producer price index (PPI) rose 60% from March 2020 to April 2022.  

The fall from the highs of April 2022 has been far slower compared to the rapid price spike seen during the pandemic, with this downturn being more prolonged than many smaller pallet manufacturers have been able to weather as this has greatly diminished margins. Indeed, many closures have been reported due to low pallet prices and high wages becoming unsustainable. This reduced supply capacity will in turn create volatility in the medium term. 

However, we envisage that the manufacturers able to weather the perfect storm of a supply glut, low prices and high wages stand to gain significant market share. While the industry has been torrid lately, the largest players with reliable networks and economies of scale have seen sizeable growth. For example, PalletOne, the USA’s largest pallet manufacturer, reported a 10% increase in unit sales in Q2 compared to the year before, whereas industrial production in the pallet industry rose 6% during the same period. 

Pallet producers have also contended with higher labor costs than other manufacturing sectors. According to the BLS, wages in the pallet industry grew by 30% from March 2020 to September 2023 whilst overall manufacturing earnings grew by 18% over the same period.

Wages in the pallet industry have plateaued since then but continue to be a pressure point, with the National Wooden Pallet and Container Association (NWPCA) producing a report where 74% of manufacturers identified attracting and retaining a quality workforce as their top challenge. 

Grade lumber price trends lead low-grade ones 

Framing lumber has long been a leading indicator for the low-grade lumber used to manufacture pallets, with a correlation of 0.97 between 2019 and 2024.

This partly explains the pricing volatility we saw during the pandemic, with the framing lumber used for residential construction soaring once the housing market picked up at the end of 2020 and people started looking for more space outside of big cities, buttressed by more disposable income and suppressed interest rates.  

As a result of the way framing lumber is made in sawmills, low-grade lumber will always be produced as a by-product and thus explains their correlation. The low-grade lumber composite price peaked at $1018/MBF in March 2021 due to the high value of framing lumber during the same period, seeing the same subsequent fall and rise before the more gradual easing seen since the end of 2022.

As our forecast shows, we expect the price of both framing lumber and low-grade lumber to steadily increase into 2025. 

US housing starts set to bounce back

As low-grade lumber is closely related to framing lumber, housing starts are a key statistic for the pallet market and are closely watched as a harbinger.

Since the Fed began raising rates, the housing market has remained subdued. Home prices have remained elevated and those who locked in low mortgage rates at the start of the pandemic have had little incentive to buy.  

July 2024 had the lowest housing starts since June 2020, partly due to low demand but also as a result of poor weather conditions seen across the country such as record-breaking heat across much of the West and Hurricane Beryl in the South, the two regions that account for the vast majority of new home construction.

August 2024 saw a strong rebound in response to the low housing starts seen the previous month, and we expect this rebound to continue heading into 2025 as the low mortgage rates from the pandemic begin to expire and with the Federal Reserve beginning their rate-cutting in September 2024. 

Trade as a key metric

Despite being a smaller section of the overall pallet supply, the net inflow of pallets rose from 0.9 million in March 2020 to 8.7 million in July 2022, exacerbating the oversupply of pallets in the US and further driving down the price of pallets.

They’ve begun to surge again in 2024 as imports have risen while exports have remained relatively constant and this will likely continue to be the case for the remainder of 2024 due to the busy imports period in the lead up to Christmas, and as logistics managers tried to rush goods in before the potential dockworkers’ strike on October 1.

While the exact length and severity of the strike is tough to predict, if it does come to pass it could lead to a surge in pallet prices in some regions as they rush to fill the gap in the pallet pool that the strike would cause.  

At the time of writing, the International Longshoremen’s Association (ILA), which represents 45,000 dock workers at three dozen U.S. ports from Maine to Texas and handles almost half of the nation’s ocean trade, was still in a deadlock with the US Maritime Alliance (USMX). The dispute stems from the USMX’s insistence that ports begin to automate which would lead to some job losses, as well as reports that the ILA are proposing a 77% pay increase over the next 6 years of their contracts.  Repercussions have already begun to be felt at ports on the West Coast, with the West’s dockworkers having already settled their contracts the year before and thus will pick up some of the trade volume from the East Coast. 

Concerns of a bottleneck on the West Coast have grown as supply chain managers begin to reroute their goods to ports on the West Coast. California’s two largest ports, Los Angeles and Long Beach, saw their combined inbound container volume surge 47% in July from the same month last year and rise another 3% from July to August, with Long Beach reporting its best month on record for imports. However, given that ILA ports make up 43% of US imports, according to Freightos, West Coast ports won’t be able to handle all the additional goods being redirected. 

As Fastmarkets expands its coverage of the pallet market, we invite feedback on our analysis and insights. Contact antonio.gallotta@fastmarkets.com with comments.

Another consideration is how the White House might respond to a strike. The White House has so far ignored pleas from scores of trade groups to intervene, but this may change once the strikes get closer due to the effect this would have on the economy.  

Looking further ahead to how the election could affect the pallet supply, we envisage that if a Trump presidency occurs we can expect a surge in imports between November and January in anticipation of the tariffs he has said he’ll impose, potentially causing more price volatility for pallets as closures for sawmills begin to mount.

Interested in more insights into the pallet market and the factors influencing it? Sign up to the newsletter to be the first to see our prices and access our insights and analysis. We provide a range of market intelligence, including short-term forecasts, price data and market coverage to keep you one step ahead of the market. Speak to our team and find out more today.

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Alejandro’s presentation includes the following data vizualisations:

• Global paper and board supply and demand trends in 2023
• How global oversupply is concentrated in Asian markets
• The outlook for containerboard, boxboard, graphics and kraft paper growth
• How machine learning is reducing containerboard and boxboard consumption
• And more.

To download Alejandro’s presentation slides, fill in the form here.

The global paper and packaging industry is not used to oversupply. Historically, the market has grown annually between 2.5-3.5% per year and, when new capacity comes online, it usually takes a few years to be fully absorbed by the market. But that dynamic changed in 2020, with investment in capacity coinciding with a fall in demand, reaching the point where we faced a global trend of low operating rates and widespread oversupply.

While there are plenty of challenges, our overall outlook is cautiously optimistic. The outlook is not without risk, but growth is there if you look for it.

1 – Demand slowdown:  An overinvestment in capacity led to a global packaging oversupply trend

Key points:

40 million tonnes of overinvestment in capacity – almost 11% above historical operating rates – is the key behind the slowdown in growth in the global paper packaging industry. Global paper and board figures in 2023 stood at 409.7 million tonnes, a 3.1% drop from 2022. 

The global pandemic pushed up demand in 2021 and early 2022, causing bloated inventories driven by overproduction and a widespread destocking scenario through 2023.

Boxboard is carrying the most oversupply (13%) compared to its capacity, due to the availability of cheaper alternatives. While containerboard accounts for 65% of all oversupply in the market, at 188.2 tonnes it represents almost half the 2023 global packaging paper segment.

We forecast lower-than-expected packaging paper demand levels in 2025. This can partly be explained by changing consumer behavior habits, such as ordering online more, eating out less and preferring cheaper, more sustainable options.

“We have seen global oversupply trends, particularly in Europe and Asia, driven by overinvestment in capacity and pandemic-induced demand shifts. Demand weakness in Asia and Europe will keep markets in oversupply until 2027 at least.”

Alejandro Mata Lopez, Fastmarkets

2 – Reduction in production: the impact on various segments of the global packaging market in 2023

Key points:

Boxboard was the most impacted segment and faced more destocking than others. Much boxboard end-use is in premium packaging products such as consumer electronics, cosmetics, perfumes and jewelry. All those areas did very poorly in 2023, due to consumer behavior not rebounding to its 2021 levels.

The huge pandemic-driven containerboard surge in 2021 led to the widespread destocking of 2023. The wrapping paper segment has performed better due to the more durable kraft’s exposure to the construction industry and government spending.

We have seen more businesses plan for fiber-based packaging to replace plastic packaging solutions, but has the demand been strong enough to justify it? Many companies overcommitted to capacity for plastic substitution solutions that has yet to materialize at expected levels.

The outlook for boxboard is not all bad though, with demand set to increase as plastic substitution becomes the norm and awareness of the sustainability of fiber-based packaging rises. These trends, alongside improving living standards in new markets and accelerating interest in convenient packaging, will boost demand and provide further opportunities in the market.

“When inflation started rising, many consumers started buying cheaper alternatives to the products they usually bought. Those products use plastic packaging rather than fiber-based packaging, which contributed to the increase in firms destocking their boxboard supplies.”

 Alejandro Mata Lopez, Fastmarkets

3 – Regional differences: there have been differing challenges for packaging in Europe, Asia and North America

Key points:

The industry faces low operating rates across the world, especially in Europe and Asia. Market dynamics since 2020 led to companies in all areas bringing capacity up due to Covid uncertainties – although this was offset in North America by closures – while at the same time demand simply wasn’t there.

Almost 70% of the 40 million tonnes of overcapacity is in Asia, which accounts for around half of the global market. Demand weakness in Asia and Europe together with significant increases in capacity will keep markets in oversupply.

We forecast Asia will continue to grow twice as fast as Europe and North America. Much will depend on demand in China, which is a strong driver for consumption and exports from Europe, North America and now Latin America.

With deforestation regulations on the way in Europe, sustainable packaging could be more expensive for European paper packaging firms compared to those in North America unless they find a way to adapt.

“Only 28% of the global packaging paper industry in the 1990s was in Asia, but it now accounts for around 50% of the total. North America has been more cautious in capacity expansion compared to Europe and Asia. European companies will need to adapt to a new wave of regulatory changes and rising costs to remain competitive.”

Alejandro Mata Lopez, Fastmarkets

 4 – Machine learning solutions continue to gather pace

Key points:

Machine learning and algorithms helps optimize packaging sizes in e-commerce, which reduces the amount of containerboard and boxboard consumption. Over the past five years, these algorithms have reduced the use of corrugated boxes by more than 35%.

Underperforming graphic paper producers are converting their plants to produce packaging paper grades to optimize their capital machinery investments, including funding machine learning.  

While the industry is already very advanced in its automation, there is potential for further progress in the automation of paper-making processes, with machines up to eight meters wide being coded automatically.

“Companies are using artificial intelligence and machine learning to tailor packaging size better, which reduces excess packaging and waste. The outlook predicts more automation in the next 5-10 years, powered by algorithms and robots. We may see companies converting into more niche markets like specialty paper grades or industrial packaging.”

Alejandro Mata Lopez, Fastmarkets

5 – Increased opportunities for new markets despite global economic uncertainty

Key points:

Global mergers and acquisitions (M&A) such as Smurfit Kappa and WestRock, and International Paper and DS Smith could lessen choice for paper buyers. But with only around 10% of the global market between these four players, it hardly makes for an oligopoly.

Packaging papers are very much driven by demographics. In Europe, plateauing population numbers have coincided with deceleration in growth.

However, containerboard net exports from Europe (excluding Russia) to the Middle East and Asia now make up about 50% of all European exports.

Much of Asia is still catching up with the rest of the world and by mid-2025 we will be back at the normal growth pattern for Asian markets. In China however we are seeing slow population growth which could stem the pace of its growth.

“Improving living standards in new markets will increase the per capita consumption of packaging paper. Growth in mature markets can range from 1-2%, while growth in emerging markets can reach 3-4% per year.”

Alejandro Mata Lopez, Fastmarkets

The overall global packaging outlook: cautiously optimistic that normal growth patterns will return

Key points:

In 2025 and beyond, we expect a return to historically consistent levels of 3-3.5% annual growth for corrugated and 2.5 to 3% growth for boxboard.

This trajectory may take a while as we still have a lot of global economic headwinds, and risk factors such as energy prices, inflation and global instability.

“Challenges remain but there are opportunities. We expect average growth in capacity in the industry will slow down, which will allow for a gradual recovery in operating rates in the next five years and beyond.”

Ajelandro first presented these findings at the Fastmarkets Forest Products Europe Conference. Access his presentation slides here.

The post Five key factors shaping the global outlook for paper packaging appeared first on Fastmarkets.

Looking forward, unknowns still exist that could drive additional volatility in the coming months, such as the potential return of La Niña, which can substantially impact yields in the southern growing regions of South America.

The war in Ukraine has reshaped trade flows in Eastern Europe, with overland routes becoming favored over the more dangerous Black Sea transit immediately after the conflict began. However, this shift led to political pressure from farmers in neighboring countries, as competitively priced Ukrainian grain and oilseed shipments flooded domestic markets in other Eastern European nations. Later on, thanks to its Humanitarian corridor, Ukraine increased its exports through deep-water ports, bringing them back to pre-war levels at points during the year. These changes in export channels have contributed to some of the highest levels of market volatility ever seen in the agricultural and energy sphere.

While the market has largely priced in the risk of the conflict, a shortfall in European wheat and barley production this summer will likely change the relationship between corn, wheat, and barley prices in Eastern Europe and the rest of the European market, supporting E.U. basis levels, even as potential record U.S. corn production weighs on futures prices.  

Corn prices – Trade flow relationship

Market volatility driven by the Ukrainian conflict has largely subsided as traders and analysts better understand the impact of the war, which has been ongoing since February 2022. As a result, the main driver of market prices towards the end of 2024 will be the supply of corn coming to Europe, Middle East and Africa (EMEA).

The main supply to this region is grown in Europe and the Black Sea, with Africa and the Middle East being a net-importer of corn. Europe is both a large producer and consumer of corn, conventionally being a market consumer of Black Sea corn. However, due to the climate within Europe and the Black Sea, a range of different grains are grown, meaning that the pricing of corn within the EMEA region is very supply-driven. For example, if the market price of corn is too high, processors throughout the supply chain will switch commodities based on price when it comes to animal feed and biofuels.

Europe and the Black Sea collectively account for 52 percent of global barley production, 50 percent of oat production and 29 percent of global wheat production. However, these regions account for only 8 percent of global corn production.

Ukraine corn production

Ukraine’s corn production is marginally lower in the last few years. Ukraine’s corn area has fallen because of the obvious impact of the increased risk due to the conflict. In addition, the main corn-growing areas are in the northern and central regions of the country, making it harder to export from the ports in the south (Odessa, Danube River). Also, the rising cost of crop inputs, like fuel and fertilizer, and a depressed internal corn price reduced Ukrainian corn farmers’ margins in 2023-24, which led to a switch to soybean plantings.

With corn having a smaller market share over other grains in Europe and the Black Sea, to some extent, its demand from nations in Africa and the Middle East is mainly driven by 1) Europe’s total corn production and 2) global corn prices. Both functions will determine the relative premium or discount of corn prices to other grains. In the EMEA region, corn’s relative discount must be significant enough to gain demand over wheat and barley.

View chart 2 in our data report

There is a notable demand for both wheat and corn in the EMEA region. However, the relatively larger production of wheat and barley in the region provides wheat and barley significant logistical advantages, making it difficult for corn to grow market share unless the supply of the competing crops falters.  

For example, in the 2019-20 marketing year, on average, nearby Chicago wheat futures were over 1.3 times more expensive than nearby Chicago corn futures. From this, import demand for corn year-on-year increased in Algeria (+ 17 percent), Egypt (+ 11 percent), Morocco (+37 percent) and Saudi Arabia (+23 percent).

In turn, in 2022-23, the ratio dropped to 1:1 as Chinese demand was strong. Russia had invaded Ukraine, so the output was lower. This was further exacerbated as European farmers experienced a drought, which significantly reduced corn production on the continent by nearly 30 percent year-on-year. This reduced corn demand in this region and notably changed this pricing dynamic.

Corn production outlook in Europe, Ukraine and Russia

Corn crops in primary EMEA growing regions are close to maturity, allowing farmers to begin harvest. Although most of the crop has now passed its silking phase (when it is most susceptible to drought), further downgrade adjustments can still be made to production numbers.

During this growing cycle, Eastern Europe has experienced a significant amount of drought, with notable downward yield revisions in Bulgaria, Hungary and Romania. This drought has also been experienced around the Black Sea region, with daily temperatures reaching 35°C (95°F) in core Ukrainian corn regions throughout July, which has impacted the crop.

Fastmarkets predicts European and Black Sea production will be the smallest since 2022-23 due to the recent droughts.

View our data report

Corn prices outlook

Understanding the relative supplies of feed grains is critical to understanding the trade flows into the EMEA region, which consumes 20 percent of the world’s corn supply, 74 percent of world’s barley supply and 44 percent of the world’s wheat supply. Despite the robust demand in the region and problems with production in Eastern Europe, near-record U.S. corn supplies have pressured flat prices over the last several months. The decrease in the relative level of production in Eastern Europe, should lift corn basis levels, but competitively priced alternatives will likely limit upside price movements in EMEA basis levels.

These downward revisions to the corn crops in Europe and the Black Sea have largely been priced into the market already. The outlook for the global corn market in the short to medium term is forecast to remain flat or even bearish depending on USDA’s corn crop estimates and growing conditions as the crops enter the final stages of development for the 2024-25 marketing year.

The potential for record yields and production in the US will be a key input to determining how low corn prices might decline post-harvest. For producers, the outlook does not improve, with many analysts expecting record production in Argentina and Brazil during the Northern Hemisphere winter.  

Market volatility and price fluctuations in the corn market create major challenges, compounded by the difficulty of predicting future supply trends and the lack of access to real-time data. Our advanced forecasting models use market-driven price data and predictive analytics to deliver accurate trend forecasts, enabling you to lock in futures contracts at the best prices and maximize profit margins.

Speak with us today to learn how our solutions can help you stay ahead of the market and enhance your profitability.

The post Corn market outlook, supply and cost management challenges appeared first on Fastmarkets.

Negative sentiment brought about by falling US hot-rolled coil prices and consternation regarding the ongoing United Autoworkers union strike is outweighing any benefits from decent raw materials demand and a healthy export market ahead of October’s ferrous scrap trade, Fastmarkets understands.

The Trend Indicator has once more retreated into bearish territory, with a reading of 45.6 for October compared with 61.3 in September. This month’s indicator is at its lowest since it was 39.4 in July. The Outlook’s prediction model allows for an average month-on-month price decrease of 3.1%.

A majority of respondents to this month’s survey – 43.14% – anticipate that scrap prices will be lower in October, while 37.25% of those surveyed expect prices to trend sideways. Just over half of those surveyed – 52.94% – attribute their expectation for lower prices to decreased demand for scrap. Scrap inventories will remain unchanged, according to 50.98% of survey participants.

More bullish 3-6 month outlook for steel scrap

There are marginally bullish market prognoses for the onset of 2024, with 54.90% of respondents believing that prices will be higher three months after the October trade. A whopping 74% feel that scrap prices will be higher for the second half of 2024 than current levels.

Prime scrap grades are expected to outperform other grades over the course of the next three months, according to 44.90% of respondents, with 38.78% believing that cut grades will perform best. Only 14.28% feel shredded scrap will have the strongest performance. This assessment comes after cuts and shred trended sideways in September, while prime grades were subject to cuts of up to $50 per gross ton.

Pre-trade chatter points to potential price declines, particularly for prime grades, in October amid a slew of flat-rolled mill outages then. Shredded scrap prices also could fall.

Export volumes to the US biggest customer, Turkey, have been extremely healthy in September despite negligible price movements over the period. Steel mills there have bought a reported 12 cargoes of obsolete grades; this would normally tighten the domestic market, but it may not be sufficient to outweigh negative factors at home.

Confidence in market direction continues to erode, with overall trend consensus dropping to 56% for October from 59% in September and 63% in August.

Make sense of the US steel scrap market and track the critical indicators impacting steel scrap price movements in our latest outlook.

The post US Scrap Trends Outlook: October appeared first on Fastmarkets.

A resurgence in deep-sea ferrous scrap exports in August and the gradual abatement of the summer doldrums, along with tight supply, are giving rise to growing bullish sentiment for the September US ferrous trade.

The Trend Indicator continues to escalate into increasingly bullish territory, at 61.3 in September versus 52.2 in August. The Trend Indicator was a significantly more bearish 39.4 in July. The Outlook’s prediction model allows for an average month-on-month price increase of 6.7%. Learn more.

Just over half of survey respondents – 52.83% – expect prices to rise month on month in the upcoming trade, with a majority – 35.85% – attributing this potential increase to lower scrap supply. Among respondents, 30.19% believe that scrap will trade sideways in September.

Over half of participants are taking a similarly bullish forward view of the US ferrous scrap market, with 59.62% and 59.40% saying that prices will continue to move higher over the next three and six months respectively.

Exactly 50% of participants believe that cut scrap grades will be the best performing over the next three months, while 38.46% gave the nod to prime grades.

Pre-trade chatter alludes to potential September increases of $10-20 per gross ton for cut scrap, specifically heavy melt and plate and structural, amid tight flows of material and a resurgence in export activity. Learn more.

New direction for steel prime scrap grades

Opinions have changed regarding the direction prime scrap grades will take.  Some now suggest that prices may be pushed lower while mills look to increase the spread between busheling and hot-rolled coil, with prices for the latter having moved progressively lower.  A slew of HRC mill maintenance outages is exacerbating the situation.

The market is eyeing the mills’ negotiations with the United Auto Workers, the outcomes of which are slated for mid-September; halted vehicle stamping could increase mills’ reliance on shredded material in HRC production amid reduced prime generation.

Confidence in market direction has dipped, with overall trend consensus for September dropping to 59% from 63% in August and 60% in July.

Make sense of the US steel scrap market and track the critical indicators impacting steel scrap price movements in our latest outlook.

The post US Scrap Trends Outlook: September appeared first on Fastmarkets.

Steel scrap prices will walk the line between tight supply and low demand to potentially sideways pricing in August’s monthly trade, with lackluster fundamentals failing to pick prices up from what many view as the market bottom.

The Trend Indicator has tipped into very moderate bullish territory with a reading of 52.2 for the month versus a significantly more bearish 39.4 posting in July. The Outlook’s prediction model allows for an average month-on-month price increase of 2%.

Half of those surveyed expect steel scrap prices to remain unchanged in August, with an equal majority of participants –31.58% – attributing this expectation to unchanged market fundamentals and lower supply, respectively. A lesser 22.81% of respondents pointed to lower demand as the driving factor behind next month’s price move.

Cuts scrap grades to rise in August

Cut scrap grades are trailing slightly behind the touted top performer primes (47.34%), with 36.84% of participants believing they will be the best-performing grades in August. Heavy melting scrap in particular, has been in the crosshairs for an increase of as much as $20 per gross ton next month in some markets, with sources suggesting that prices for that grade cannot go any lower.

This is despite progressively lower export deals made to Turkey over the course of July; a tally of seven spot sales have been concluded at a $27-per-tonne decrease over the course of the month for an 80:20 mix of No1 and No2 heavy melting scrap.

Shredded scrap is once again less desirable than its cut and prime counterparts despite reports that shredders in certain parts of the US have been forced to raise scale prices to increase inflows into yards amid exceptionally tight supply of the grade.

Spot activity for hot-rolled coil remains muted, limiting upside for primes and shred despite weak flows. Overall trend consensus remains little changed, up to 63% in August from 60% in July. Learn more.

Make sense of the US steel scrap market and track the critical indicators impacting steel scrap price movements in our latest outlook.

The post US Scrap Trends Outlook: August appeared first on Fastmarkets.