Containerboard Industry Perspective
3rd Quarter 2012
First price increase in 2+ years
By Jesse Marzouk
After 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 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.