Containerboard Fundamentals Point to a "Snug Market"

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All major North American containerboard producers announced a third $60/ton price increase, effective in early August. Hikes in January and April have added $110/ton to domestic list prices. While industry fundamentals are very favorable, macro indicators (soft employment, easing in ISM index, etc.) are suggesting that hike No. 3 will be tougher-than expected, Wilde believes. Industry fundamentals point to a snug market, he continues—on-going recovery in box shipments (May +5.3% y/y), high operating rates (95%), and inventories at 30-year lows.

Permanent capacity reductions of ˜3 million tons since the fourth quarter of 2008 and spring maintenance downtime have further tightened the markets. Conditions are tight elsewhere. Brazil’s Klabin announced $70 - $110/metric ton in Latin America, EUR 50/metric ton in Europe, and $50/metric ton in Asia, Africa, and the Middle East, all for implementation in July. China appears to be the key weak spot in an otherwise strong global containerboard market, Wilde says.