Containerboard Industry Perspective
4th Quarter 2013
Containerboard pricing holds
By Jesse Marzouk
Containerboard prices
largely held in
the fourth
quarter of
2013, even
with additional
capacity coming online over
the last six
month as
some of the
major producers, including International Paper and RockTenn,
took market related downtime at
some of their facilities rather
than lower prices and margins
across the entire industry. In
November, containerboard mills
operated at only 91% of capacity, which brought down the year-to-date level to 95%. As recently as August, the 2013 operating rate was 97%. The larger producers in the industry are
now better able to match supply
and demand as the industry has
become more consolidated, with
the top five containerboard producers controlling 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 18 months. 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. These include newsprint
conversions from SP Fiber
Technologies and Atlantic Packaging, and an announcement
from Kapstone 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 discipline of producers to pull back
on production as conversions
and new machines start up
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.