Market Update – The North American Containerboard Industry in 2018
Market Insights from Royal Containers Vice-President, Bill Routledge:
RISI’s Pulp & Paper Week report in their January 19th issue:
“expectations that North American containerboard producers will try for a March or April price hike remains high, with industry production and operating rates finishing last year on a strong note.”
Box demand has remained strong to begin January causing some to expect a price increase announcement during January.
A mill increase is going to be largely dependent how the two largest players, International Paper and West Rock, feel their chances of being successful in raising box prices. The major integrated company thinking has been changing recently where a price increase now requires the ability to raise box prices; not just increase mill prices.
North American Containerboard mills raised prices $50 / ton [7.6%] in April 2017, following a $50 /ton [6.5%] in October 2016. “If a North American containerboard mill price increase were announced with the next few weeks, it would be tied to either the supply/demand fundamentals or non-fibre cost inflation.” Chinese OCC prices dropped by $30 a ton this week, but most analysts expect Chinese imported OCC prices to increase substantially over the next few months.
The robust US economy and the growing e-commerce retail industry boosted domestic box demand by 3.6% in the past year. These factors combined with the strong demand for global linerboard export orders resulted in containerboard mills output increasing by 3.6% in December from the previous year – which is the biggest jump since 2010. Mills ran at 98.9% capacity in December in what has been typically a low output month. Year-end holiday e-commerce shopping had a major impact on the demand for corrugated products.
A recent Pulp & Paper Week survey of 25 Independent box makers last November reported 87% of the respondents expect to see containerboard prices to increase during 2018. Most expect the price increase to occur by June 2018. Many independent box makers don’t support a containerboard mill price increase this year regardless of the supply/demand conditions. Others realize a price increase is inevitable, even if not justified because of two companies controlling over 60% of the North American containerboard market.
