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Containerboard Industry Whisper

Research Question: Will the containerboard price hikes hold and if so, will they be passed on to end users or absorbed by the box manufacturers?

Companies: International Paper (IP), Weyerhaeuser (WY), Domtar (UFS), Rock-Tenn (RKT), Packaging Corp of America (PKG), & others

 

Blueshift’s initial research on the containerboard industry indicates uncertainty as to whether expected price increases will stick for box manufacturers and their end users.

 

Observations

  1. Blueshift’s May containerboard report found that major producers were likely to attempt a price increase on containerboard for Q4 and that the anticipated price increase would not stick. In July, all domestic producers announced a $50/ton price increase on both linerboard and medium effective in August.  IP, RKT and others additionally announced price hikes on sheets and boxes for September 4. The influential publication Pulp & Paper Week [PPW] did not reflect a price change on August 18. IP, RKT and other key producers claim a price increase is inevitable this fall. Independent converter/box manufacturers say they will fight the containerboard hike if producers fail to follow through on sheet/box prices, setting the stage for a stare down.
  2. A containerboard industry consultant interviewed by Blueshift said demand, inventory levels and consumer confidence may not be strong enough to support a successful price hike. Independent converters and box makers have publicly decried the price hike and most oppose it. Producers are likely to wait out the market with provisions such as payment deadline extensions and rebates to counter possible price hikes.
  3. A Blueshift primary interview with a large independent corrugated box manufacturer confirmed that the proposed price hike slated to take effect August 1 or August 17 has failed, in part because PPW did not reflect higher prices. Many producers did not even push for their own price increases. IP and other integrated producers took the unusual step of announcing additional price hikes, including a 10% price increase on sheets and a minimum 8% price increase on boxes, both effective September 4. The source said if IP and others follow through on September 4, independents will accept the linerboard and medium price increases and pass it through to their customers. But if the integrated producers cave, the entire pricing effort would die, regardless of PPW.
To gain further insight into the containerboard industry, Blueshift will gather data and issue a market research report from sources in the following silos: large paper companies containerboard division, box and containerboard converters, buyers of medium & linerboard and boxes and industry specialists.