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Brazil: market hit by confusion and uncertainty

A number of factors have combined to create confusion in the Brazilian market and uncertainties for the future, including: domestic price variations; a drop in the supply of recyclable materials; and verticalization of steel mills in the sector, working together with low-volume input suppliers and skipping a stage in the chain.

These factors resulted in a 46% increase in exports of recycled materials during the first quarter of 2023, with the main destinations being India and Bangladesh. However, this has not been sustained over more recent weeks as international prices have fallen asleep, creating an uncertain outlook.

Meanwhile, the recycling sector and INESFA have been concerned about an increase in tax evasion and the emergence of companies called “invoicers”, creating the famous tax carousel fraud which became well known in Europe in the 2000s. Other countries in South America such as Chile have the same problem with VAT fraud. 

Also importantly, there has been an increase in the consumption of primary inputs which is inconsistent with environmental, social and governance (ESG) as well as decarbonization policies. In the pulp and paper sector, recovered paper companies have high inventories and many difficulties in finding buyers owing to a lack of demand and to the increased consumption of virgin pulp. This begs the question as to what extent companies are using ESG in search of results and of prioritizing the financial angle. In other words, is all the environmental talk not being matched by the reality?

The decarbonization or oxygen export agenda cannot be used to control prices and prohibit or reduce free trade in recycled inputs.