Price Increases (CONT’D FROM PAGE 1)
and Europe was expected, i.e., anticipated (and, thus, pre- sumably considered in the first or the first and second in- creases). Silvernail continued in his market and economic assessment suggesting that what's going on with inflation and affordability mutes the overall market. His conclusion, based on the analysis in his presenta- tion, was going into the second half of the year, the ex- pected pickup of about a point has been downgraded to effectively being flat in the second half of the year in North America and up modestly in Europe, in the second half of the year. Market Data Three increases in the same year are unusual, but not unprecedented. Three increases happened in 1994 and 2010. However, economic conditions were different, more severe and unpredictable, in both. In 1994, the financial sector faced notable turbulence. The Federal Reserve surprised markets by aggressively raising interest rates, which triggered a severe global bond market crash known as the “Great Bond Massacre.” 2010 was a period of linger- ing economic turmoil and a fragile, slow recovery follow- ing the Great Recession of 2007–2009. Notwithstanding these data points, neither of those “three increase years: were of the magnitude announced in the 2026 combination. All 3 suppliers continue to export 400K/tons/month at a price >/= $600/ton. Domestic consumption of board is av-
small group of producers having market dominance. Industry Overview PCA, Smurfit Westrock, International Paper comprise approximately 63 percent of the containerboard/liner- board supply market (Note: There is no knowledge at this time as to whether the producers of the remaining 37 per- cent will also increase price). PCA is 95 percent vertically integrated, which means they only sell five percent of their mill capacity on the open market. IP and Smurfit Westrock have major open market sales, but keep in mind that Independents only comprise about 10-12 percent of the marketplace. It is noteworthy that producers’ prices have risen in the past five years in down market. Announced increases are imposed on, and disproportionately impact, independent box makers. ‘Tight’ Supply? Various sources have reported that 10 percent of mill capacity has been removed from the market in the past year. However, half of the removed capacity was mills pro- ducing exclusively for export. Additionally, some mill out- ages are temporary due to natural causes, e.g., IP’s Louisi- ana mill suffered damage due to a natural disaster. IP’s Andrew Silvernail, on an earnings call last week, stated that the increase was a “supply story.” But when asked about demand the response suggested the modest increase in the second half of the year in the United States
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