Containerboard Industry Perspective
2nd Quarter 2013
KapStone buying Longview
By Jesse Marzouk
In the second
quarter, containerboard producers were able to
push through
their second $50
per ton price hike
in the last year.
Producers have
benefited from
the industry consolidation that
has occurred over the last few
years, eliminating certain undisciplined producers. Producers
were also bolstered by increasing recycled fiber prices as well
as spring maintenance that kept
inventory levels down.
Industry consolidation is
slated to continue as Kapstone
has agreed to purchase
Longview Fibre for more than
$1 billion. The purchase will
result in the five largest North
American firms controlling approximately 73% of North American containerboard capacity.
Only a few years ago, the
Longview mill could have been
bought for approximately 10
percent of its recent selling
price. The industry has truly
made a strong comeback in
recent years.
Looking ahead to the second half of 2013 and 2014, the
big question is whether the latest price hike can be maintained
with additional supply coming
on the market, in the form of
greenfield sites and machine
conversions. Newsprint machine conversions have already
occurred at SP Fiber Technologies and Atlantic Packaging. More recently, Boise announced
the conversion of a newsprint
machine to containerboard for
2014. Lastly, a greenfield site in
New York state operated by
Norampac is expected to begin
production over the next few
months. These capacity additions will add approximately 4%
to North American containerboard capacity.
It will be difficult to gauge
the impact of the additional capacity until late 2013 or early
2014 when the majority of the
new supply is running at consistent levels.
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.