Brazil pine oleoresin supply to fall further in 2024
Brazilian pine oleoresin supply is expected to decline in 2024 as producers continue to grapple with tight margins and lower selling prices. The price weakness has forced many smaller tappers to abandon the market.
Brazilian Pinus elliottii pine oleoresin prices fell to 2,900-3,100 reals ($595-636) at the forest in mid-November, down from R6,300-6,500/t during the same month last year. Prices have been on a steady decline since November 2022, with values of gum rosin, a key product obtained from pine oleoresin, softening this year amid weaker downstream activity.
"Many smaller producers have left the industry," a Sao Paulo state pine oleoresin producer said. The exodus is largely because of poor tapping economics. Producers and buyers in Sao Paulo state, Brazil's largest producing region, estimate current production costs at the forest at between R2,400/t and R3,000/t. Lower prices and higher tapping costs have squeezed producer margins and weighed on business sentiment, according to market participants.
In southern Brazil, another key producing region, pine oleoresin supply fell in August-October as lower selling prices discouraged workers to collect the product, according to one producer. A pine oleoresin buyer said he can only acquire only 15pc of the product he needs because of the reduced availability.
With selling prices sometimes below production costs throughout this year, many smaller pine oleoresin suppliers have ended forest lease agreements. Forest owners lease areas for a share of the producer's selling price, which can reach up to 40pc of their revenues. In Sao Paulo state, a producer ended a lease agreement for one of several areas considered unproductive in the current market, a source said.
Official data on the number of pine oleoresin producers in Brazil is lacking. But buyers and producers estimate pine oleoresin supply in the 2023-24 tapping season could drop by 20-30pc. Producers obtaining less than 2.5-3 kg/yr of pine oleoresin per tree are expected to struggle the most. "Areas collecting 2.5 kg/yr per tree will stop," the chief executive of a pine chemicals company said.
Pine oleoresin is processed into gum rosin, and data from Argus' Global Trade Tracker (GTT) show Brazilian gum rosin (BGR) exports have also fallen. BGR exports have been declining since 2020 and are now close to levels seen in 2016. They fell from a peak of 97,425t in 2020 to 74,516t in 2022. Gum rosin processors in Brazil are the biggest consumers of pine oleoresin.
Brazilian Pinus elliottii pine oleoresin prices have picked up slightly since early November levels on the back of seasonally lower supply and higher bids. But the uptick has not changed the fundamentals for pine tapping as selling prices remain close to production costs, with many still sharing a portion of their revenues with forest owners.
Even if pine oleoresin prices increase, allowing for higher margins, it would take time for the producers which left the market to reactivate the forests and increase availability to the market. Reactivating a forest takes about six months as tappers need to prepare the extraction of the raw material months in advance, according to a source. Six-year old forest areas, which could be ready for tapping this year, will likely not add new volumes to the market as forest owners are delaying operations because of the current selling prices, another source added.
Higher pine oleoresin prices in recent weeks led to higher-priced gum rosin offers from Brazilian sellers into southern Europe. But one Brazilian supplier said there is no guarantee that pine oleoresin prices will continue increasing as European gum rosin buyers may push back for discounts amid soft downstream demand, which would again pressure prices and margins for pine oleoresin producers in Brazil.
Related news posts
Innova declares FM on Triunfo complex SM, PS
Innova declares FM on Triunfo complex SM, PS
Houston, 7 May (Argus) — Brazil-based styrenics producer Videolar-Innova (Innova) declared force majeure (FM) on operations at its Triunfo, Brazil, complex on 6 May following floods that impeded logistics in and around the state of Rio Grande do Sul. The floods starting on 1 May led to a temporary preventative shutdown of the complex on 3 May, the company said in a letter to customers. Blocked roads and highways prevented feedstock from reachign the site. The company continues to monitor the situation to determine when a safe restart can commence. The letter did not detail allocation specifications to customers. The complex includes a 199,000 metric-tonne (t) ethylbenzene-based styrene monomer (SM) unit, according to Argus data. Market sources said prompt styrene purchases from the region surfaced near the $1,350/t-level for small volumes this week, but counterparty confirmation was unavailable by market close. Spot styrene discussions last surfaced at $1,250-1,350/t on Monday. Innova owns and operates two derivative polystyrene production units in Manaus, Brazil. The Triunfo petrochemical site also produces general-purpose polystyrene, high-impact polystyrene and expandable polystyrene, according to the company website. By Nicole Johnson and Jake Caldwell Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Floods halt firms' operations in Brazil's south
Floods halt firms' operations in Brazil's south
Sao Paulo, 6 May (Argus) — Several Brazilian companies have suspended operations in the southern state of Rio Grande do Sul because of heavy rainfall that has caused severe floods and infrastructure damage. Flooding from the record rains has left at least 83 dead with 111 people missing, according to the state government. More than 23,000 people have been forced from of their homes amid widespread damage, including washed out bridges and roads across several cities. The dam of the 100MW 14 de Julho hydroelectric plant, on the Antas River, ruptured last week under the heavy rains . Power generation company Companhia Energetica Rio das Antas, which runs the plant, implemented an emergency evacuation plan on 1 May. Brazilian steelmaker Gerdau that it suspended its operations in two mills at the state until it can ensure "people's protection and safety." The company did not disclose the produced volume of steel at those two mills. Logistics company Rumo partially interrupted operations and said that "damages to assets are still being properly measured". Petrochemical giant Braskem shut down its facilities at the Triunfo petrochemical complex as a preventive measure because of "extreme weather events" in the state, it said on 3 May. The company added there was no expected date to resume activities there. Braskem operates eight industrial units in Rio Grande do Sul that make 5mn metric tonnes/yr of basic petrochemicals, polyethylene and polypropylene, according to its website. By Carolina Pulice Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Canadian rail workers vote to launch strike: Correction
Canadian rail workers vote to launch strike: Correction
Corrects movement of grain loadings from a year earlier in final paragraph. Washington, 2 May (Argus) — Workers at the two major Canadian railroads could go on strike as soon as 22 May now that members of the Teamsters Canada Rail Conference (TCRC) have authorized a strike, potentially causing widespread disruption to shipments of commodities such as crude, coal and grain. A strike could disrupt rail traffic not only in Canada but also in the US and Mexico because trains would not be able to leave, nor could shipments enter into Canada. This labor action could be far more impactful than recent strikes because it would affect Canadian National (CN) and Canadian Pacific Kansas City (CPKC) at the same time. Union members at Canadian railroads have gone on strike individually in the past, which has left one of the two carriers to continue operating and handle some of their competitor's freight. But TCRC members completed a vote yesterday about whether to initiate a strike action at each carrier. The union represents about 9,300 workers employed at the two railroads. Roughly 98pc of union members that participated voted in favor of a strike beginning as early as 22 May, the union said. The union said talks are at an impasse. "After six months of negotiations with both companies, we are no closer to reaching a settlement than when we first began, TCRC president Paul Boucher said. Boucher warned that "a simultaneous work stoppage at both CN and CPKC would disrupt supply chains on a scale Canada has likely never experienced." He added that the union does not want to provoke a rail crisis and wants to avoid a work stoppage. The union has argued that the railroads' proposals would harm safety practices. It has also sought an improved work-life balance. But CN and CPKC said the union continues to reject their proposals. CPKC "is committed to negotiating in good faith and responding to our employees' desire for higher pay and improved work-life balance, while respecting the best interests of all our railroaders, their families, our customers, and the North American economy." CN said it wants a contract that addresses the work life balance and productivity, benefiting the company and employees. But even when CN "proposed a solution that would not touch duty-rest rules, the union has rejected it," the railroad said. Canadian commodity volume has fallen this year with only rail shipments of chemicals, petroleum and petroleum products, and non-metallic minerals rising, Association of American Railroads (AAR) data show. Volume data includes cars loaded in the US by Canadian carriers. Coal traffic dropped by 11pc during the 17 weeks ended on 27 April compared with a year earlier, AAR data show. Loadings of motor vehicles and parts have fallen by 5.2pc. CN and CPKC grain loadings fell by 4.3pc from a year earlier, while shipment of farm products and food fell by 9.3pc. By Abby Caplan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US southbound barge demand falls off earlier than usual
US southbound barge demand falls off earlier than usual
Houston, 1 May (Argus) — Southbound barge rates in the US have fallen on unseasonably low demand because of increased competition in the international grain market. Rates for voyages down river have deteriorated to "unsustainable" levels, said American Commercial Barge Line. Southbound rates declined in April to an average tariff of 284pc across all rivers this April, according to the US Department of Agriculture (USDA), which is below breakeven levels for many barge carriers. Rates typically do not fall below a 300pc tariff until May or June. Southbound freight values for May are expected to hold steady or move lower, said sources this week. Southbound activity has increased recently because of the low rates, but not enough to push prices up. The US has already sold 84pc of its forecast corn exports and 89pc of forecast soybean exports with only five months left until the end of the corn and soybean marketing year, according to the USDA. US corn and soybean prices have come down since the beginning of the year in order to stay competitive with other origins. The USDA lowered its forecast for US soybean exports by 545,000t in its April report as soybeans from Brazil and Argentina were more competitively priced. US farmers are holding onto more of their harvest from last year because of low crop prices, curbing exports. Prompt CBOT corn futures averaged $435/bushel in April, down 34pc from April 2023. Weak southbound demand could last until fall when the US enters harvest season and exports ramp up southbound barge demand. Major agriculture-producing countries such as Argentina and Brazil are expected to export their grain harvest before the US. Brazil has finished planting corn on time . unlike last year. The US may face less competition from Brazil in the fall as a result. Carriers are tying up barges earlier than usual to avoid losses on southbound barge voyages. Carriers that have already parked their barges will take their time re-entering the market unless tariffs become profitable again. The carriers who remain on the river will gain more southbound market share and possibly more northbound spot interest. By Meghan Yoyotte and Eduardo Gonzalez Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more