Containerboard Industry Perspective 3rd Quarter 2012

First price increase in 2+ years

By Jesse Marzouk

Containerboard Perspectives Graph Q3 2012After more than two years of flat prices in North America, containerboard producers were able to pass through their proposed $50 price increase on both linerboard and corrugated medium in September.

The proposed hike was in question, as some of the market fundamentals were less than robust. Some of the fundamentals that argued against a hike included:

  • Flat year-over-year demand in the U.S. for boxes;
  • Demand for containerboard in emerging markets, including those in Asia, had been weaker than otherwise anticipated;
  • The strength of the U.S. dollar has dampened export demand for containerboard abroad; and
  • Declining recycled fiber prices had been a huge benefit to producers, reducing the need for producers to raise prices on recycled containerboard.

Producers were able to shake off these concerns as the recently consolidated industry, which has led to more disciplined producers, and historically low inventory levels of containerboard allowed producers to pass through the full price increase more easily than most had anticipated.

Heading into Q4, box manufacturers will attempt to increase prices in order to recover the cost increases from the containerboard hike. If unable to do so, it is likely that some box plants will be forced to close or containerboard prices will be forced lower in order for box producers to maintain positive margins across the industry.

Jesse MarzoukJesse Marzouk is a vice president and forestry products specialist. He has appraised numerous U.S. and Canadian pulp, paper, and lumber-related companies involved in manufacturing and distribution. Jesse received his MBA in finance from Kellogg School of Management at Northwestern University, and has a degree in finance and accounting from Indiana University.