Containerboard Industry Perspective 4th Quarter 2012

Box price hike implemented

By Jesse Marzouk

Containerboard Perspectives Graph Q4 2012In the fourth quarter, containerboard manufacturers worked on fully implementing the $50 per ton price hike on containerboard that took effect in September. This was the first national price hike on both linerboard and corrugated medium in more than two years. Producers were able to increase prices amid low levels of inventories, high operating rates, and industry consolidation that removed undisciplined producers.

Amid the recent price increase on containerboard, box manufacturers needed to increase prices to maintain already razor thin margins amid excess supply and demand for boxes that has remained flat. Although there was a significant amount of uncertainty about an 8-10% box price increase, it has gone through over the last several months as integrated producers (those that produce both containerboard and boxes) put their weight behind the increase.

Looking ahead to 2013, containerboard producers will look to maintain their prices amid a slow environment for box demand and companies converting commercial printing paper and newsprint to containerboard, where profitability is much higher than in printing and writing grades. Towards the end of 2012, SP Fiber Technologies continued its transition of some of its production from newsprint to other grades, including containerboard. Similarly, Atlantic Packaging in Canada announced the conversion of a newsprint machine to containerboard for early 2013. How successful these and other likely future conversions go will largely determine the price of containerboard in the medium term.

Jesse MarzoukJesse 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.