Domestic linerboard pricing holds in North America

A severe nine-month downturn in US box shipments appeared to settle in its tracks at least in the first half of this month

Contacts were told of the best per-day demand of the year so far in the first two weeks of April. One large company official reported a near double-digit rise, when compared with March average shipments. A contact with a one-plant converting company in the East told of his best demand since before Covid-19.

Others told of April being at least an OK shipment month but also noted that mills were, as one linerboard supplier said, expected to take about one million tons of downtime in the second quarter, owing to the lower demand condition overall, and ongoing uncertainty about the US economy and consumers. The one million tons equals about a 12% decline.

All said, prices held for a second straight month on linerboard in the North American domestic open market. This occurred as US export unbleached kraft linerboard prices continued to plummet even more deeply to key global markets in South/Central America, China, and southern Europe. Mexico, the No. 1 destination for US kraft linerboard exports, also was reported to have OK demand yet Mexican corrugators were said to have high containerboard stocks.

At-the-US-mill pricing for the export kraft linerboard was as much as $200/ton less for offshore and Mexican customers than for domestic buyers of linerboard in the US and Canada. Freight on the export market varied, but was back down in almost all markets and in line with estimated US mill transport cost, according to Fastmarkets’ Pulp & Paper Week research. Domestic unbleached kraft linerboard was at about $730-750/ton before leaving the mill and export kraft linerboard ranged from $500 to $650/ton at the mill before delivery.

“Our customers woke up,” one large integrated company contact said of US box business in the first half of April. “We got better in March,” another contact at a mid-sized integrated containerboard company said. “We have seen signs of good (or better demand), which is good. Will that continue?”

The contact added that the company has taken slow-back downtime since November. “It is not decreasing,” one integrated containerboard company official said, of April box shipments at his company. “It’s healthier and not as bad (as it was in first quarter 2023).

Box demand is currently stable, but will it last?

A contact at a large national boxmaker was conservative when asked if the pickup was real and sustaining. “It’s hard to say on pace in terms of what’s going on,” the contact told Fastmarkets, noting steady to good demand in the Midwest and East, and “choppier” box demand market in the West. He added: “Orders are pretty stable.”

Others spoke similarly, that they were unsure if the shipment activity in the first half of April would continue into May. They also were unclear if this small pickup was because destocking was ended or if end-users were now starting to buy based on real or as one contact called it “natural” demand again. “We’ll see next month,” the contact with one of the large integrates said.

At the same time, market players watched the startup of four machines with added recycled containerboard capacity in the US and Canada. They did this with concern that the additional capacity would end up pressuring linerboard prices, which fell by $70-80/ton from November 2022 through February 2023.

Biron paper mill activity has started

Domtar started up a machine in Kingsport, TN, in mid-January, Atlantic Packaging started one in February, and Cascades was to start one up in Ashland, VA, on either Apr. 20, Apr. 21, or Apr. 28, contacts told Fastmarkets. A fourth machine was started up, by Nine Dragons Paper (ND) at its Biron mill in Wisconsin. Several contacts claimed late this week that the ND machine was running and they expected tons into the market in the next week or two. It was unclear if those tons to market would be recycled containerboard or unbleached kraft paper or both.

As of this week, contacts did not report any pricing battles for business with the new tonnage producers. One contact worried that two of the four startups, Domtar and ND Paper, will buy their way into the corrugated converting market at lower-than-market prices. Cascades and Atlantic are integrated producers, Domtar and ND are not.

“Increased demand is not there,” one contact with an integrated company said, “and I don’t see it picking up enough (in the short term) to keep up with ND Paper and Domtar (startup) capacity.”

Contacts also claimed that mills with positions on the open market with independent customers would be unwilling to lose that business to the new capacity – especially in a market as of today where demand dropped severely and still appears timid or unclear on a potential comeback.

Once you let someone in [to take linerboard share from you], it’s going to be really difficult to get them out.

Domestic linerboard prices hold again

Buyers and sellers said domestic linerboard prices mostly held in North America. There were some reports of lower discounted linerboard pricing but most said their levels were unchanged for open market business, Fastmarkets learned. There also was talk about lower priced corrugating medium deals still occurring in the marketplace.

Domestic corrugated boxes were being made and shipped to customers in North America in two days, and linerboard mills were said now to be taking two to three weeks to fill orders. The two-to-three-week order-to-delivery period was up from a one-week timeframe in first quarter.

“The first quarter of this year was a low point. We won’t go back there,” a contact with a national boxmaker company said.

US box shipments dropped dramatically in the second half of 2022 – and were down in the first quarter this year as well, contacts told Pulp & Paper Week. After a 5.7% US box shipment increase in 2020 and 2021, shipments dropped by two-thirds of that gain last year.

Illustrating the big dropdown, November/December US actual box shipments crashed down by 9.6% compared with November/December 2021 shipments, according to Fiber Box Association statistics. The 2022 total for the two months was 61.9 billion ft2, vs 68.5 billion ft2 in 2021’s last two months. US actual box shipments in December 2022 were at their lowest individual month total, 30.1 billion ft2, since February 2019’s 29.7 billion ft2.

In second-quarter 2022, US containerboard mills operated at 94.8% of capacity; in the fourth quarter, the mills operated at 80.9%, a dramatic low.

For now, box demand “looks more solid in April than in February or March,” a US market contact said. “Is it the seasonal uptick?”

“I think people are quietly optimistic. They don’t want to jinx anything. They’re keeping pretty-tight lipped,” one boxmaker in the East said early this week.

This article was first published in PPI Pulp & Paper Week, the industry’s most trusted pulp and paper market news and prices for North America. Speak to our team to find out more and subscribe to our newsletters.

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