Boxboard prices hold in February as CRB, SBS price increases continue to roll out in ‘chaotic’ market

US boxboard prices held in place in February in a month of “chaos” with WestRock “paralyzed” by a ransomware attack on its IT systems since Jan. 23 that has limited its enforcement of price increases on coated recycled paperboard (CRB) since last month and solid bleached sulfate (SBS) effective this month, according to market contacts.
Added to that, Clearwater Paper this week said it idled its SBS mill in Arkansas due to severe winter weather in the region, while other suppliers and converters were also impacted in Texas and the Midwest.
Aside from those factors, boxboard buyers almost unanimously said they were not yet paying the $40/ton CRB increase or the $50/ton set on SBS this month, although they widely expected the increases to eventually take hold.
Producer contacts asserted the price increases in CRB and SBS folding carton were in place in full, with less enforced on SBS cupstock and food service grades.
Customers of WestRock said CRB rolls were mostly being delivered but that SBS and coated unbleached board (CUK) were more problematic. A more pressing issues was a lack of purchase orders and payment invoices, and validation and proof that prices were going higher at this time.
SBS supply is already challenged by WestRock’s reported shut of 200,000 tons of production at its Evadale, TX, mill and Clearwater’s downtime this week. WestRock, and Graphic Packaging at Texarkana, TX, also have projects to swing SBS production to a mix with CUK in coming months. One buyer source said WestRock had moved some of that SBS production in Evadale to its LaTuque mill in Quebec to service the East Coast.
Those swing projects were not enough to tighten SBS supply near-term with cupstock and food service buyers as well as in folding carton grades reporting prices were not higher in February.
Buyers seemed almost angry, annoyed or frustrated by multiple boxboard price increase attempts over the past year and said they were not welcoming a chance to pass along higher prices to their customers in such an uncertain time.
Producers are reacting strongly to COVID-19 related demand for food, beverage, and pharmaceutical packaging as well as escalating costs, and recent major investments at mills.
Price increase announcements are sweeping through the entire industry with moves done or pending on boxboard, for four consecutive months through March, and also on containerboard, newsprint, printing and specialty print papers, market pulp, recovered paper, lumber, energy, chemicals, inks, freight, and more, in addition to health care and wages for workers.
“Inflation is part of the discussion,” said a producer about speaking to customers.
“We have moved up everyone we can,” said another.
“They want product and are not concerned with a price increase,” he added about customers.
“There’s an atmosphere of higher prices,” said a converter. “The psychology takes hold.”
January was the second price hike announcement on CRB in four months and the third in a year, with a spring attempt not being recognized and a fall increase of $30/ton published in November. An uncoated recycled paperboard (URB) price hike set for March is also the third attempt in a year, with $30/ton published also in November.
CUK prices moved up $50/ton in December, and SBS is the first price hike attempt since prices last moved up in September 2018. SBS folding carton prices have declined by $50/ton since, while cupstock-food service prices have held.
CRB price push. Buyers of CRB reported continued strong demand and adding new customers, but said they are getting past a $40/ton price increase since January, at least for now.
“We are getting around it with some suppliers,” said one carton contact, who added they had built up some “safety stocks,” and were pulling supply from warehouses. Lead times were further out with “less room” to stock up going forward, he said.
“I will know later,” he said, this month.
“I haven’t seen any CRB increase at all,” said another buyer. “Give it time, maybe 30 days. No one has told me, ‘Your price is this.'”
Another buyer said he recently saw about half of the $30 published increase in October-November. He said WestRock has informed him they are raising prices but he complained about “limited information” when the cyber-attack problems will be resolved.
Producers said they are on allocation in CRB that has led to holding on to non-prime rolls such as trim rolls or different widths, moisture content, calipers, and other specifications.
One said during the Christmas and New Year’s period that customers continued to file and take in orders that they normally would not while they reduced end-of-year inventories.
“We are aggressively allocating,” said another supplier, adding the company was pulling some supply contracts.
“There is no incremental supply available,” he said. “A lot of trim has been internalized.”
“We haven’t seen it yet, but people expect it to happen,” said another carton plant buyer who said he does not buy much from WestRock. “It’s a question of the roll out.”
SBS tightness. With almost unprecedented cold weather in the US South, Clearwater said Feb. 17 that it was temporarily idling its Cypress Bend SBS and pulp mill in Arkansas due to “curtailment of natural gas deliveries to the mill as natural gas providers prioritize residential needs” (see related story, p. 4).
The mill is shown by Fastmarkets RISI with capacity of 312,000 tons/yr of SBS paper plate and folding carton as well as 57,000 tons/yr of southern bleached kraft (SBK) pulp. The mill accounts for about 42% of Clearwater’s SBS production that includes its 422,690 tons of output at Lewiston, ID. The company said it intends “to resume operations as soon as we are safely able to do so.”
One buyer said Clearwater asked him to cut some platestock orders, and noted home consumption of SBS food service was strong, but, prices had not yet moved.
“We are just trying to navigate around this storm,” he said. “Our plant (in Arkansas) is down, too.”
He added he understood that the WestRock and Graphic Packaging SBS mills in Evadale and Texarkana “are struggling.”
“It will end next week,” he said of the weather-related crisis. “It’s a short-term glitch.”
“My plant was down this week,” said a converter in the Midwest.
Two broker contacts said they believed the SBS price increases would be implemented in full, with some early rollout of higher prices.
“Folding carton demand is through the roof,” said one, “but not food service.”
He raised SBS prices already on his lowest price business.
“It’s happening,” said another broker. “It’s as strong a market as I have ever seen. But it will probably take two months. I am convinced most people will see $50/ton.”
“We have not even gotten a letter,” said a cupstock buyer. “And it’s not hard for us to pick up the phone.”
Another said even with some stern intentions by producers on the increase, one of his SBS suppliers “was backing off” from the increase and was confident “we won’t get it in full.”
“I don’t see it being implemented until April,” he added. “Definitely not this month.”
“Lead times are getting farther out, and I am reaching out to everyone I can,” said another SBS buyer.
“SBS and SUS (CUK) are flying off the shelves,” he added. “Even job lots (are) pushing increases.”
Another noted that SBS supply took an earlier hit with Georgia-Pacific’s (GP) shut of two machines in Arkansas in late 2019 that is now part of the tightness in the market, in addition to the reductions at Evadale and Texarkana. He said GP is now almost fully integrated with its Dixie food service business.
“Now we’re going to have to go shopping,” he said about supply.
He said he had increases “from everyone, but no enforcement.”
The hike was moved to Mar. 1, he said.
“We can’t swallow a full $50 increase,” he added, “but we can pay a little more. My largest supplier did not move a penny, they reduced their costs.”
“Let’s be honest, it’s a bit of a mess,” said another buyer about the rollout of the SBS price increase and WestRock’s online system problems.
URB increases set. A $50/ton price increase on URB is now set up for March, with producers saying some, if not all, the increase is already in effect due to extended backlogs.
In addition to the top two producers Sonoco and Greif, and fourth-largest supplier Ox Industries that are out for early March, contacts confirmed that third largest supplier WestRock has separately announced a $50/ton increase effective Mar. 15.
Producers cite higher recovered paper furnish and freight costs as well as tight supplies.
“We’re completely full,” said one producer. “I have to get approval for any exception to an increase, and I haven’t done one.”
He said in a recent orders for truck, only one in 10 showed up.
“We are selling 100% of our capacity,” he said. “I don’t have inventory for truck blips.”
“We are getting the hikes now,” said another, who said he split some of the $30 price increase gained in November. “But not now.”
Both sources said they were on allocation to all external customers.
“We are learning how to be oversold. There is tremendous unserved demand,” the producer source said.
Yet a buyer said he saw only half of the November $30/ton increase, and was replacing some URB demand with CRB from brokers. He added that the increases will take time due to his contractual price escalator clauses.
But now, he added, he can’t build inventory.
“We can feel the tightness in the market,” he said. “There is less trim available.”
WestRock impact. Boxboard market contacts also commented on the impacts of the ransomware attack on WestRock’s internal processing systems.
“It’s greater than what I thought,” said an SBS customer, though he said it would mean tighter supply as the price increases roll out.
“I am always looking for a crack in price increases, but I think the market is very solid,” he said.
The likely loss of SBS production will tighten the market, contacts agreed, in addition to WestRock shutting 200,000 tons at Evadale, Graphic Packaging’s swing to CUK at Texarkana, and Clearwater’s weather-related downtime.
One buyer told of receiving “normal freight” from WestRock.
Another buyer said the problem surrounded SBS and CUK, and less so for CRB.
“I had a discussion with them,” he said. “There are no CRB issues, SBS is having difficulties, and I am having trouble even tracking inventories such as looking for certain sizes.”
“They say, ‘You will get your orders,’ but when will I get the bill?”
“It’s a pretty big problem,” said another. “There is limited information, a PO [purchase order] problem, and they can’t get intermodal trucks. It’s a complete headache.”
“In CUK and SBS, we are working blind,” he said, adding he has gone to other suppliers.
“I know there are shortages,” said an SBS buyer, “but, fortunately, we’re not one of them.”
But he complained about processing rail deliveries with no bar codes.
“It takes five hours to process vs 2 ½ hours normally,” he said. “I’m sorry they were attacked.”
One producer said WestRock was asking for tons, but “we can’t do it.”
“There is no line of sight to resolve this,” said another producer. “We’re getting inquiries for tons.”
Said a buyer of the company’s manual issuing of purchase orders and other documents: “It’s like the 1970s.”
–by [email protected]tmarkets.com