Packaging board and paper price reductions anticipated in the US market

US market participants are keeping a close watch on packaging board and paper demand and inventory levels amid expectations for lower prices

Reports continued streaming in this week about lower packaging board and paper prices in North America, especially on linerboard and corrugated sheets. There also was further reporting about lower coated recycled boxboard (CRB) pricing and claims from buyers who expected lower levels upcoming for unbleached kraft paper.

Fastmarkets’ PPI Pulp & Paper Week on Nov. 18 reported $20/ton, $30/ton, and $40/ton declines for main benchmark containerboard grades in the North America’s domestic open market. It was the first decline in domestic linerboard prices since the spring/summer of 2019. P&PW’s pricing survey results that were published on Nov. 18 found no changes in pricing for CRB and for unbleached kraft paper grades, compared with prices for those grades in October.

Corrugated sheets were claimed this week to be sold at discounts in the US East and US Midwest. Reports of lower sheet prices first emerged in October. An end-user also told of a major integrated “coming down …” slightly on corrugated boxes.

Other boxmakers and box buyers said they would be waiting until December to determine their linerboard and box price reductions, related to the $20/ton decline for unbleached 42-lb and 35-/36-lb High Performance linerboard, according to P&PW’s price survey last month. The open market pricing for 30-/31-lb recycled linerboard dropped $30/ton last month. These linerboard decreases occurred after a $220/ton run-up in linerboard prices in 2020 and 2021 when US box volume grew by almost 6% to a 27-year high in shipments.

Sheet plants calling

“Certainly, there are more calls (from corrugated sheeters) looking for orders who six months ago would not have been calling,” one boxmaker told P&PW this week.

A Chicago corrugated converter said that he expected a decline in his linerboard and sheet prices by mid-December. He explained that his paper suppliers had not jumped out to alert him to the November decrease as of this week. Still, he expects the decrease this month although he also added that producers “don’t want to reduce prices” because of “cost inflation”.

That said, Fastmarkets estimates that the cost to make recycled linerboard in the fourth quarter this year will be $100/ton less, on average, than the cost to make virgin unbleached kraft linerboard.

This stems from a plummet in old corrugated container (OCC) pricing at US mills. The national average price last month was down $125/ton at the FOB seller’s dock on a year-over-year basis. That helps lower the production cost for recycled linerboard as well as for unbleached kraft linerboard producers with high OCC furnish counts, contacts said. Fiber is 35-40% of the cost to make linerboard, with freight at about a 20% share and energy at 10-15%, according to a recent Fastmarkets estimate provided to P&PW.

IP and WestRock CEOs report stable demand

Top executives at International Paper (IP) and WestRock said this week that their demand position for boxes appeared stable when compared with their demand position at the end of the third quarter or at its lowest point during third quarter. Neither reported further deterioration in demand, when comparing demand now to their demand at the end of September.

IP, as an example, reported lower per-day year-over-year box shipments of 3.6% in second quarter and a year-over-year drop of 5.4% in the third quarter. IP is the largest containerboard producer in North America, based on capacity, according to Fastmarkets’ figures. WestRock is second largest.

So far in the fourth quarter, IP chairman and CEO Mark Sutton said the company’s containerboard and corrugated converting or so-called industrial packaging business demand had “stabilized at the lower level [established during] … the third quarter,” in a report at the Citi Basic Materials Conference on Nov. 30.

WestRock CEO David Sewell said at the same Citi conference that customer “inventory destocking still has to happen” or be completed in the box business. He expected it is “January or February (2023)” for when a more normal flow of orders will start back up. US industry box shipments in the third quarter declined 4.5% compared with third-quarter 2021 shipments. Sewell also used the term stable as did Sutton in describing corrugated demand for WestRock.

Sewell told of “softening” in discretionary spending overall and especially in appliances, and he noted “good” demand in food and beverage.

Also, on the conference trail, at the RBC Capital Markets Forest Products Conference on Dec. 1, Cascades CEO Mario Plourde told of a general “fourth quarter slowdown in demand” for corrugated at his company, the sixth largest in containerboard capacity in North America. Plourde also noted that the company’s shipments for food and e-commerce business were still “maintaining good demand.” He said box demand was off for industrial business.

Like Sutton and Sewell, a boxmaker in Chicagoland told P&PW of “steady” corrugated demand yet that demand pace was “nowhere near where it was last year or the year before.” He expected customers to continue reducing their end-product inventory, and to return to normal corrugated box ordering pace early in the New Year or potentially as late as the end of first quarter.

“I think it’s going to be tough in the first quarter,” the boxmaker added.

For CRB in consumer packaging the folding carton business, reports continued this week about an at least somewhat looser supply and demand, and pricing condition.

Fight over for cartons, buyer says

“It’s been a fight, fight, fight for folding cartons all summer,” one buyer explained.

“The backlogs all of a sudden went down in September and it all changed overnight so that we could more easily receive CRB cartons,” the contact said.

It’s almost like the supply chain chaos has vanished. Six months ago and last year, it wasn’t a matter of when you get cartons, it was if you could.

Downward pressure was almost mentioned for unbleached lightweight 30-lb unbleached kraft packaging paper, contacts told P&PW.

One converter on Nov. 17 told of “still seeing what mills are calling ‘spot buys’ but I think it’s just them trying to hold the price where they are at for as long as they can.”

“A lot are seeing their (packaging) demand decrease and I think as we close out the year and get in to first quarter next year when it generally becomes slow, the prices will continue to drop,” said the converter who buys kraft paper and containerboard.

“I think a lot of people are concerned about the economy and trying to keep as little inventory on their floor as possible,” said the converter contact. “In addition to that, anything they had on their floor previously was at a higher cost and with most markets conceding pricing, they need to move what will be the expensive inventory off their floor to take advantage of new pricing.”

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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