Uncertain North American packaging producers hang on to box prices

Box price declines not yet reflective of linerboard and corrugated sheet price drops, said contacts

North American open market linerboard prices declined twice and by a total of $40/ton since November, and corrugated sheet prices dropped as well. Yet contacts claimed just before Christmas and this week that the box price declines were less than across-the-board so far and had not fully taken hold.

Boxmakers are “being a little stingy,” said one box seller in the West. “Sure, linerboard went down in price – but none of our other costs went down.”

Some customers said they were told to wait until late January related to the second of $20/ton linerboard decrease, for December. Others as of Jan. 5 were not receiving any lower box prices other than the first $20/ton decline in November.

“They’re trying to keep the most profit they can,” one box buyer in the East claimed.

Overall, contacts told Fastmarkets’ PPI Pulp & Paper Week of box price declines ranging from 3% to 5%. This was reported as end-user demand signals for corrugated boxes remained mixed this week.

Extensive mill downtime and slow restarts

Still, Packaging Corp of America (PCA) this week called back workers to likely restart on Jan. 9 its Jackson, AL, kraft linerboard and corrugating medium mill, according to a local media report in Alabama. The startup of the about 550,000 tons/yr Jackson mill follows about a seven-week shutdown of both Jackson machines.

PCA is influential in the North American market – as the third largest regional containerboard producer by capacity, with the first or second highest board-to-box internal integrated position, and in the last several years a corrugated box business portfolio that consistently outperformed overall industry shipment growth.

The Jackson shut started just as US linerboard prices began falling in the North American open market, according to P&PW’s pricing survey. The $20/ton domestic linerboard decrease in November was the first domestic price decline for the grade in three and a half years.

Some saw the PCA Jackson move as an indicator that demand could pick up in February/March after a fall-off that began last July and seemed to erupt in September. September US box shipments totaled about 32.7 billion ft2, far below 34.5 billion ft2 Septembers in 2021 and 2020, on average, according to Fibre Box Association (FBA) statistics. Overall third-quarter 2022 US actual box shipments declined by 4.5% year-over-year and boxmakers in the fourth quarter mostly told P&PW of a not much better demand condition than in the third quarter.

Some boxmakers told P&PW last month that they hoped for a mid-February demand pickup. Most others worried of a recession and high interest rates that might cause reduced consumer spending.

The news about PCA Jackson also came as market players told of extensive containerboard downtime, including during the Christmas through New Year’s Day holiday. There also were some reports this week of slower machine restarts after downtime.

If we’re in a recession, it’s going to get worse. How bad is this recession going to be?

Contacts in mid-December said they expected the Christmas-to-New-Year’s-Day downtime as a form of price protection by major producers. As of mid-December, some in the East reported box price decreases of 2.5% to 4%, after a $20/ton price decline on linerboard in November. In the last week, some buyers said prices were down the 3-5%.

Destocking and uncertainty replacing the demand surge of 2020-21

Box prices increased roughly 20% or more on average from four linerboard price increases from November 2020 through March 2022, contacts have previously told P&PW. The Covid-influenced demand surge of 2020 and 2021 was now replaced by customer destocking, and consumer and business uncertainty in the US.

After the two open market linerboard price declines in North America’s domestic marketplace in November and December 2022, another box seller in the West told of “us doing everything we can to hang on” to box price levels. He expected customers to push harder for lowering prices in January/February. He said customers in November/December focused on their holiday sales, first and foremost.

The box seller in the West called November a “horrible” month for his company’s box shipments, and said December was “better” than November on a per-day basis, and that January shipments and orders appeared to be “a little better” than December volume. He hoped for a mid-December into early January pickup for the Super Bowl on Feb. 12, citing high graphics’ corrugated displays. He also hoped for a box demand pickup in the runway to Easter Sunday on Apr. 9.

He noted a large candy company that for Halloween had fewer displays because it was unable to get enough product to the marketplace, due to supply chain delays in 2021. He expected an easier flow of boxes for Easter 2023 business, as box plant demand has softened and several contacts just after Christmas reported easier times finding truckers for runs in the Midwest.

One national boxmaker with plants spread across America told P&PW on Dec. 15 that his company was starting to see a turnaround from customers who had completed destocking and were readying to start ordering more consistently in first-quarter 2023.

Still, a small Chicago boxmaker told of an expected 15-20% decline in January in box shipments for his firm. The contact described box demand for the company’s niche market businesses as “very soft.”

“The business of our customers has slowed down a bit and (they have) high inventory,” the contact said on Dec. 20.

Based on a Fastmarkets’ P&PW estimate, US actual box shipments in 2022 were expected to decline by 2.5% to 3% compared with the 2021 actual total. If the decline is 2.7% to 2.9%, that would represent about half the two-year gain of 5.7% in US box shipment in 2020 and 2021. The 5.7% growth was a 27-yr high. Through three quarters of 2022, shipments were down by 2.4% compared with US shipments through the first three quarters of 2021.

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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