Brazil's pulp, paper industry to increase demand for US caustic soda: Plástico Brasil

As Brazil solidifies its position as the leading destination for US caustic soda exports, significant inaugurations and expansions in the pulp and paper sector are expected to further drive this trend.

This was discussed at Plastico Brasil, the largest event for the plastics industry in Latin America, held in Sao Paulo March 24-28.

Growing caustic soda downstream sector

Caustic soda market participants closely watch the global corrugated packaging and absorbent pulp markets to gauge demand. The pulp and paper industry is the largest single sector for caustic soda, representing nearly 10% of global consumption, according to Platts data.

In Central and South America, pulp and paper is the second-largest application of caustic soda, at 26%, following alumina. The market is projected to experience the highest growth rate from 2022 to 2027, at 8.2% per year, and become the largest application.

Brazil has a comparative advantage in the pulp and paper industry thanks to its abundant natural resources, including extensive plantations of fast-growing eucalyptus and pine.

Brazil-based Klabin inaugurated its latest industrial unit in Piracicaba, São Paulo, March 27. In operation since April 2024, the factory, built for Real 1.56 billion ($271 million), has a production capacity of 240,000 mt/year of corrugated cardboard.

The Piracicaba II Unit is the largest corrugated cardboard packaging factory in the Americas, according to the company. The project aims to enhance Klabin's integration model for converting paper into packaging.

Furthermore, Brazil-based Suzano, the world's largest producer of pulp, began operations in July 2024 at the largest single cellulose production line in the world, known as Projeto Cerrado, in Ribas do Rio Pardo, Mato Grosso do Sul.

The facility has a production capacity of 2.55 million mt/year and represented a total investment of Real 22.2 billion ($3.85 billion).

Fueling demand for US caustic soda

Brazil is the largest export market for US caustic soda, having taken 50% of US exports in 2024. This reflects a yearly growth of 12% in volume and a 1.7 percentage point increase in the export share. In January 2025, Brazil's share rose to over 60% of US exports.

Platts, part of S&P Global Commodity Insights, last assessed spot export caustic soda at $460/dmt FOB USG March 25, flat on the week. Market feedback suggested stable to slightly higher pricing in the coming weeks due to short supply resulting from reduced capacity utilization linked to the weak chlorine side of the chlor-alkali equation, further exacerbated by Westlake's force majeure on caustic supply.

Sources said Brazil-based pulp and paper manufacturers primarily rely on US caustic soda because US suppliers can meet high volume demands with competitive pricing.

The Brazilian sector's projected growth is especially significant given the upcoming capacity expansions by companies like OxyVinyls and Olin and excess capacity in the US.

"The increasing US capacity doesn't really worry us," a caustic soda supplier in Brazil said during Plástico Brasil. "Part of the market is already theirs, and we don't want to compete on pricing or volume in those markets."

Another supplier echoed this sentiment, adding that the pulp and paper sector is not a primary focus due to its requirement for high contracted volumes and lower pricing.

However, the second supplier mentioned remaining attentive to spot deal opportunities with better values to serve the sector, which typically arise during tight supply conditions like those currently seen.