Containerboard Industry Perspective
3rd Quarter 2013
PCA announces Boise acquisition
By Jesse Marzouk
Consolidation continues
in the containerboard market as Packaging Corp of
America announced the
acquisition of
Boise, Inc. in
September.
The acquisition, which received
preliminary antitrust approval
from the Department of Justice,
will create the fourth largest
containerboard producer in
North America with a market
share of approximately 9.5% It
also continues the industry
trend of consolidation that has
seen three other major purchases in the last few years
(International Paper purchased
Temple Inland, Rock-Tenn acquired Smurft Stone and KapStone bought Longview Fibre).
After the PCA/Boise acquisition,
the top five containerboard producers will control approximately 75% of capacity in North
America.
It is on the back of this industry consolidation that producers have been able to raise
prices by $100 per ton over the
last year. Even with demand in
North America for containerboard growing only about 1%
per year, producers have been
able to raise prices through
consolidation, which removed
undisciplined producers from
the market.
The recent price increases
have attracted mill conversions
from graphic paper, which continues to struggling with annual demand declines in North America. In fact, before the announcement of the acquisition,
Boise revealed plans to convert
a newsprint line at its DeRidder,
Louisiana mill to containerboard. While not inexpensive,
the conversion of graphic paper
machines to containerboard
likely will continue and put pressure on higher cost containerboard machines. Going forward, containerboard pricing
should remain strong with levels
largely determined by the number of new machines and machine conversions.
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.