Slightly Weaker U.S. Box Shipments, Higher Inventories

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U.S. domestic box shipments took a small step backward in July, and inventories rose by more than the seasonally typical amount, according to Mark Wilde, senior analyst, Deutsche Bank. "However, we don’t think that the current numbers will do much to change the outlook for the August price hike initiative. With pricing still on the rise in Europe and most other offshore markets, the industry appears to still have enough tailwind to push the board increase through the market. We think the critical issue over the next couple of months will be the resolve of the industry to boost downstream corrugated packaging prices," Wilde added.

July containerboard and box numbers show that industry volumes took a small step backward in July, Wilde continues. Box shipment volumes fell 2.2% y/y. There was one fewer shipping day this year, and on an "average week" basis, shipments rose 2.4% y/y. "We think the ‘real’ number is a blend of the two, or roughly flat y/y. This is slightly better than we were expecting, as some of our contacts had been suggesting sluggish sales volumes in July. However, we note that this was the weakest y/y ‘blended’ comp since January and may indicate a downshifting in trajectory."

Combined mill and box plant inventories increased 161,000 tons m/m to 2.16million tons. Looking over the past 10 years, inventories have risen an average of 75,000 tons m/m in July, suggesting that 2010 had a negative variance of 86,000 tons. This follows a negative variance of 102,000 tons (and a m/m rise of 68,000 tons) in June. However, inventories at the start of June were at their lowest level in decades, and even after the inventory build of the last two months, the current level remains the lowest July level in over 20 yrs, Wilde explains.