Linerboard, box prices holding as increases await; some decry the increase as ‘greedy’ and ill-timed

 A bit of a battle seemed to be brewing over a March containerboard price increase in North America, even as suppliers continued to report four- to six-week mill delivery dates and as further supply chain disruptions occurred this week.

Some national corrugated box buyers challenged this second increase in four months as “greedy,” and questionable with a “low” US containerboard mill operating rate of 93%, with the largest integrated producer planning extensive first-half 2021 mill machine maintenance shuts, and with overall January-February US box demand at a lower per-day pace than in the record-hot fourth quarter.

Others were upset by the potential piggybacking of box price increases. North American box prices increased by 6-8% from the November $50/ton containerboard increase, according to Fastmarkets RISI’s PPI Pulp & Paper Week’s survey. Contacts reported that the increase flew through and extends primarily from December through March. That meant the new $60/ton and $70/ton March containerboard price increase would likely raise box prices from April through to July/August/September. In 10 months, US box prices could increase by a total of 12% to 15%. International Paper (IP), the largest integrated North American containerboard and box manufacturer, announced a 12% increase on boxes and 14% on sheets, effective Mar. 8. There were unconfirmed reports late this week that Packaging Corp of America and Georgia-Pacific also were telling customers of a box price increase of roughly 10% starting next month.

These box prices increases occur after market contacts told P&PW that prices dropped from 3% to 5% in first-half 2020 before the historic demand run.

Three more multinational company packaging leaders this week told P&PW they failed to see proof for the second increase. One “felt” like the March increase was a “rushed move” before “new capacity comes and demand falls.” Another said the increase was “too soon” after the first. About 1.7 million tons of new capacity is in the process of starting up in the USA, and another about 1.6 million tons more is planned from March 2021 through mid-year 2023 in the US and Canada. The US produced 38.1 million tons of containerboard in 2020.

Both IP’s Selma Riverdale mill machine along with New-Indy Containerboard’s Catawba, SC, machine were said this week to now be making tons for the market, completing the 1.7 million tons of added capacity started since last year, one mill supplier said.

Mills this week continued to report being far behind on orders and frustrated by an array of supply disruptions. The domestic orders required the four to six weeks to be delivered; export unbleached kraft linerboard orders took two months. Export kraft linerboard prices increased for a fifth straight month, according to P&PW’s survey.

Arctic blast felt in market. Further, there were temporary shutdowns this week at converting plants and paper mills, and almost 500 Walmarts from an Arctic Blast that brought negative temperatures, wind chill, snow, and wind to the Central and Eastern USA, and caused blackouts for millions in Texas and in five other states (see related story, p. 4). Specific to the box business, Amazon, UPS, and FedEx reported weather-related slowdowns at some plants and in making package deliveries. One integrated contact named several large box plants as well as other smaller ones that took outages for what appeared to be a day or two. Trucking also slowed as companies took trucks and drivers off the road, for safety reasons.

“Raw materials are up (in cost). Energy is up. Transport is up. I’m not sure that equates to $70/ton exactly, but” the increase is going to be a “force feed. Paper is so tight right now,” said a supplier in the West on Feb. 17.

“There are no real options for customers,” said an executive with an integrated company at the end of this week. “Every order we make is going right to the corrugator. In January and February, both us and customers should be building inventory. [Restocking] is not happening. It’s not going to inventory.”

Another integrated executive told of having some orders with extended delivery dates for containerboard, and “everybody needs paper. We are dramatically over-sold. It goes hand-in-hand with the price increase. Even at higher prices (for March), they’re asking for more. We just can’t do it. We’re letting people down. … There’s a certain desperation out there. People need continuity. They know it will cost them.”

Still, a small box maker in the East said, three days into the storm blast: “I’m not waiting anymore at the dock for the truck (with the paper) to arrive (as he said he did three and four months ago). We’re not over-ordering anymore. There’s not over-demand like there was three to four months ago.”

“They could have gotten a $100/ton increase, no problem, in November,” the boxmaker continued. “Now, business has slowed from the peak … (and) I can’t see the increase lasting.”

“It’s not right,” said a small boxmaker in the Midwest. “It’s too soon to go out. Customers took the November increase because they knew it had been 2 1/2 years [since the last increase and as second-half demand last year shot through the roof]. Customers are now saying, ‘Why are they doing this?'”

“Don’t raise the prices because it’s harder to get paper,” said the contact.

The contact claimed the November increase covered higher operating costs, and the March increase is for margin and for integrated company shareholders.

“We’re trying to get through the first one, which was relatively easy. People needed boxes,” said a Chicago boxmaker, at mid-week. “You don’t just snap your fingers for an increase. We haven’t really thought about the next one. There’s a lot of plates spinning … a lot of disruptions. We’re trying to get linerboard and serve our customers.”

Two other integrated company producers told of just starting to make February orders early this week and another last week was also said to still be making January orders. A linerboard order from a regular customer early this week would not be delivered until April, at the soonest, a contact with a mid-sized integrated mill system said.

“Why are you raising prices when you are still billing at the old rate?” asked one Chicago-land boxmaker.

“They’re out of touch with their customers,” another boxmaker added.

Domestic linerboard prices hold. Domestic containerboard and corrugated box prices held this month in North America, industry contacts told P&PW.

Boxmakers, both integrateds and independents, mostly reported February actual shipments would increase roughly 5-10% compared with February 2020 shipments. Some told of flat volume year-over-year. They also said that per-day February shipments were slightly below their January per-day pace.

“Valentine’s Day is not Christmas. It’s not as good as fourth quarter,” one eastern boxmaker said, “but it’s much better historically for a February.”

“People are underwater on (lacking) inventory,” said a supplier. “We’re not going to see much change there. Mills have been short-sighted.”

Plus a third ransomware attack in three weeks recently affected some of the Schwarz Group’s Royal Group and Flutes’ business, contacts told P&PW.

One supplier said the slowdown to a “manual” mill operating process at both WestRock and Atlantic Packaging, which were cyber-attacked on Jan. 23 and Feb. 14-15, respectively, benefits producer efforts to raise containerboard prices next month. It was unclear if WestRock’s production was improving, various contacts told P&PW.

“They were running as efficiently as they could when the COVID hit in March, but no one knew what the COVID protocol would be like. It was like ‘shut down this shift until we clean and test,'” said one Midwest boxmaker, trying to explain the dynamics that caused a lack of containerboard supply in the North American market today even as additional capacity has been starting up.

“It all snowballed. Lead times, almost like overnight, it seemed, jumped out to 4-6 weeks. Plus some of our customers shut down because of COVID while other pieces of businesses just went up in a big way. Then, when the shut businesses restarted, demand was booming.”

Still, the boxmaker added that the March increase “will not be as easy as the last one.”

–by [email protected]