North American kraft paper prices unaffected by swing containerboard capacity and slower demand

Unbleached kraft bag and sack paper prices stay unchanged this month

Unbleached kraft paper prices were unchanged this month and there were no reports of swing containerboard capacity jumping into the bag and sack market in North America.

US containerboard mills took big downtime in the third quarter that slashed the US operating rate to 87.6% in third quarter, from 94.8% in second quarter this year. Still, swing containerboard capacity this month from containerboard machines went unnoticed as a market factor for unbleached kraft paper, according to buyers and sellers this week.

Instead, contacts reported slower demand but said the pace was enough to not cause further price decline.

30-lb unbleached bag paper off $20 in last 4 months

Lightweight 30-lb unbleached kraft paper for grocers declined twice in the last four months, by $20/ton in August and by $10/ton in October, based on Fastmarkets’ PPI Pulp & Paper Week’s pricing survey.

Other grades tracked by P&PW did not change in price since August, except for 50-lb unbleached high-strength extensible multiwall sack kraft paper, which increased $30/ton to $1,230-1,260/ton.

The 50-lb unbleached natural multiwall sack kraft paper, and 30-lb bleached kraft paper for fast-food and grocery uses were unchanged in price in the last four months in North America, according to P&PW’s survey.

Contacts told of reduced ordering in the last few months, as demand dropped, especially in September. Still, one producer told of being sold out this month and another told of needing to quickly send an order to a customer who had recently reduced orders too much.

More supply expected to come on

Market supply is expected to increase next year. Domtar, Cascades, and ND Paper are all starting up new capacity in recycled containerboard and they also will make some unbleached kraft paper.

It’s unclear how much unbleached kraft paper supply will be added for the North American market. It could be as much as 220,000 tons/yr, based on a P&PW estimate. The 220,000 tones would represent a 10% addition to unbleached kraft paper capacity in North America. How much and by when this new capacity starts up for unbleached kraft paper production is uncertain, contacts have said.

Backlogs have dropped significantly for unbleached kraft paper, from four to six months last year to about six weeks today for certain unbleached grades, one contact with a producer said.

European interest?

Several sources claimed that Mondi, which the contact said makes good-quality high-strength and high-performance extensible kraft paper grades, was especially interested in US orders.

There’s more availability (of tons in North America). The Europeans are looking at North America again for business.

Some suppliers believed that the high-performance 50-lb extensible grades, used chiefly for cement bags globally, might face downward price pressure soon.

Others pointed out good demand for bleached fast-food/grocery lightweight paper.

“People are ordering a little bit later than they did during the summer,” one recycled-content unbleached kraft paper producer contact said this week. “So we are doing OK, but it’s not as strong as it was in May, June, and July. … We haven’t had (downward price) pressure even though the (old corrugated container (OCC) price) has dropped significantly.”

Some producers suggested lower OCC prices, with FOB prices at $30-40/ton at the start of November in the US, would remain going forward even though about 2 million tons of additional recycled containerboard capacity is starting up next month through first-quarter 2023 as well as in the fall of 2023.

Some suggested that the OCC demand pickup from new recycled containerboard capacity would not be felt before mid-2023, noting reduced operating rates that are expected for containerboard in fourth-quarter 2022. The new recycled containerboard and unbleached kraft paper capacity is planned at mills in Longview, WA, Whitby, ON, Kingsport, TN, Ashland, VA, and at the Biron, WI, mill.

OCC drop helps some margins. One producer said the lower OCC pricing, with levels down about $100/ton in the last year on the domestic market, meant the unbleached kraft paper manufacturing company added three to five percentage points to its margin today.

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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