Containerboard Industry Perspective
1st Quarter 2015
Paperboard prices steady
By Jesse Marzouk
Opposing forces are currently
at work in the containerboard
market, resulting in flat
prices for virgin containerboard
and slightly decreasing prices
for recycled containerboard.
Virgin containerboard prices
have held steady as little supply
has been added and producers
have selectively taken market
downtime when necessary to
maintain pricing. Prices for
recycled containerboard have
come under pressure, however,
and now sell for discounts of
$30 to $40 from virgin prices.
This is mainly due to new machines
and machine conversions
since 2013 creating more
supply. Another large new containerboard
start and more conversions
are planned for 2015.
Additionally, declines in pricing
over the last year for old corrugated
containers (OCC), which
is the primary feedstock for
recycled containerboard, have
allowed producers to maintain
margins even with lower prices
for recycled containerboard.
When analyzing the containerboard
market, an understanding
of the global market is essential.
Currently, approximately
13% of all containerboard
manufactured in the U.S. is
exported. In 2014, almost all of
the additional supply that entered
the market was absorbed
by growth in demand from export
markets. It remains to be
seen, however, how the
strength of the U.S. dollar and
the weakening of certain economies
will impact containerboard
prices. Large export markets
include Europe, Mexico, and
South America. As the euro
has weakened significantly
against the U.S. dollar since last
summer, containerboard prices
in euros have begun to rise.
The question now becomes
whether or not the rising prices
will cut into European demand
for containerboard. In other
large export markets, such as
Brazil, demand has declined
significantly as the economy
struggles under the weight of
low commodity prices.
In other paperboard markets,
Caraustar Industries’ acquisition
of Newark Group was finally given regulatory approval by the
Department of Justice (DOJ).
Unlike other large deals in the
forestry space over the last four
years, the DOJ did not require
divestiture of any assets of either
entity as a condition of its approval
of the acquistion. The two
largest firms in the uncoated
recycled board (URB) market,
Caraustar and Sonoco, now
control approximately two-thirds
of capacity in the U.S. With
demand holding relatively stable
for URB, it is expected that prices
will rise in the coming the
year as producers take advantage
of the new level of industry
concentration and pricing
power.
Jesse 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.