Wes Gentles / SR VP Paper / RTi

Corrugated Box Market

Domestic linerboard and medium held steady in June after Oct. ’22 to May ’23 declines of $90 per T on Kraft Linerboard, $110 per T on Recycled Linerboard, and $150 per T on Semi-Chem Medium.  Corrugated shipments are down 8.5% YOY in Q1 ’23, with only slightly better results expected when Q2 ’23 numbers are finalized.  Many producers are reporting a slight uptick of orders in June ’23 over May ’23 and 1% – 2% YOY in June ’23 vs June ‘22 when the severe demand decline commenced.  Hope is that July will be the turning point for 2023, and while not getting back to 2021 and early 2022 volume there will be improvement into summer vacation, back-to-school and holiday season, and historical volume drivers.

Containerboard capacity declined in 2022 (0.6%) following 11 years of continued expansion that reached 42.3MM T in 2021.  Additional capacity coming online in 2023 has been slowed as mills take additional downtime (multiple), more mills having been either temporarily (PCA – Wallula, WA) or permanently closed (WR – Charleston, SC – 230,000 T – KLB; Cascades – Niagara Falls, NY – 90,000 T – Recycled Medium) and new mill startups delayed or volume curtailed at start up (Cascades – Richmond, VA).  Mill operating rates in Q1 ’23 at 85.7% vs 94.0% in Q1 ’22.

Corrugated pricing continues to decline but this has been slowed as converters claim other costs (labor, energy, recycled fiber) offsetting paper declines.

OCC pricing is beginning to rise as limited supply from softbox market impacts growing demand driven by new startups – PCA – Jackson, AL; Domtar – Kingsport, TN; ND Paper – Biron, WI; Atlantic Packaging – Whitby, ON; Cascades – Ashland, VA

 

Market Outlook

RTi expects that even as producers work to reduce supply to more closely match declining demand that the paper market index will decline another $20 to $40/ton through the balance of 2023.  Corrugated converters, both integrated and non-integrated, continue to compete for volume, willing to reduce pricing to secure long-term volume agreements in an oversupplied market.

 

Folding Boxboard Market

 

The boxboard market has experienced a slight “lull,” with US boxboard production down 5.4% YOY in Q1 ’23 and down 1.8% vs Q4 ’22.  Boxboard mill operating rates at 87.8% in Q1 ’23 greatly reduced from 93.9% in Q1 ’22.  Backlogs are down to six or seven weeks for most grades.  In spite of this “lull,” large integrated boxboard producers continue to experience high sales and high profitability resulting from continued high pricing across all substrates.  Limited boxboard supply and expanding migration from resin-based packaging to fiber-based packaging will continue to support high pricing across all boxboard substrates until either additional supply becomes available or imported boxboard is embraced on a larger scale.

Capacity has been taken out of the market in 2023 with the closure of the GPI Tama, IA (82,000 T – CRB) and WR North Charleston, SC (120,000 T – UNK).

Customers will continue to experience reduced issues with carton availability and see shorter lead times but will not gain significant pricing leverage unless willing to enter into long-term contracts that will provide producers with volume security when new volumes come online in 2025 and 2026.  The threat of FBB coming in from S. America and Asia (3.4MM T added in 2023, and 3.5MM T added in 2024) may not significantly impact US pricing as the majority of FBB from Asia staying in Asia or going to Eastern Europe, the Middle East, Latin America or Africa.

Market Outlook

RTI believes that reduced demand, imported FBB pricing and the threat of coming supply will keep box board pricing flat for 2023 and possibly into 2024.  In addition, the improved quality of CRB in the US and from imports will put pressure on SBS producers as end users look to lower-priced CRB in place of SBS where possible.

Bag Market

Bag paper pricing stayed steady in Q2 ’23 after modest declines in Q1 ’23.  The increased market transition from plastic to paper bags and limited manufacturing capacity will limit domestic pricing leverage.  Imported bags from Asia are available.  However, imported pricing has proven to be in line with domestic pricing.  Increased domestic manufacturing capacity will be required to support market growth and sustainability movement to fiber-based.

 

Pulp

 

Pulp pricing has continued to decline in Q2 2023 with ongoing weak demand and high inventory levels.  Until demand increases to match supply or capacity is taken out of the market, pricing will remain depressed.  Multiple mills have either taken extended downtime or closed as producers look to match supply to demand.  The soft global market for pulp has contributed to a decline in pricing, where it used to be an outlet when domestic demand declined.

 

The prices and market information presented herein are strictly the opinion of RTi and are based on knowledge collected within the industry and on assessments by RTi staff.

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