Pulp and Paper Perspective 4th Quarter 2016

Containerboard prices up for first time since 2013

By Jesse Marzoukcontainerboard

Containerboard prices increased $40 per ton for linerboard and corrugated medium in the fourth quarter of 2016, marking the first price increase since the second quarter of 2013.  Linerboard prices increased from $615 to $655 per ton, while corrugated medium prices rose from $500 to $540 per ton. For linerboard, prices reached a cyclical high postGreat Recession, while prices for corrugated medium regained some ground after declining $70 per ton since the beginning of 2015. 

The price increase was made possible by a combination of steady demand for boxes, evidenced by a 1.5% increase in box shipments in 2016, as well as tightening supply for containerboard. Although demand for consumer nondurables has been weak, box demand from customers such as Amazon and other online retailers has provided a boost to converters. On the supply side, producers have brought inventory levels down over the last year. Inventory levels of containerboard at box plants and mills sat at 3.5 weeks’ supply at monthend November 2016, down from 4.6 weeks’ supply at monthend January 2016.  Some producers ordered downtime to align supply and demand, partially contributing to the decline. 

Over the last decade, the North American containerboard industry has undergone significant consolidation. The top five producers control more than 75% of capacity in the U.S. This allows manufacturers to curtail production when necessary and raise prices when conditions merit. In addition to targeted curtailments, the industry was significantly affected by Hurricane Matthew, which caused an estimated loss of 70,000 tons of production, as seven to eight mills on the Atlantic Coast were unable to run for nearly one week in the aftermath of the storm. 

j_marzouk

 Jesse Marzouk is a vice president and forestry products specialist. He has appraised numerous U.S. and Canadian pulp, paper, and lumberrelated 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.