Board Converting News, January 8, 2024

Converter Outlook: Part I (CONT’D FROM PAGE 1)

machines has been packaging grades. Consequently, ma- chines are being inaugurated without full integration. “We see that the majors have reduced containerboard production to balance the market, but the fallacy is that their volume is being replaced by new mill systems (almost all recycled) that are not aligned with the major producers. Can giving up market share really preserve pricing in the end? Hard to conceive when Europe is adding even more capacity, capacity it is unable to fully consume. Bigness is not a panacea as most majors can plainly see. Being an in- dependent these days is a little like being a kid in a candy store. You are on everyone’s ‘dance card.’ “The recent announcement of the WestRock/ Smurfit Kappa merger (to all outward appearances it really is an acquisition) is a case in point on the hazard being big. When is an enterprise too big to succeed? How unwieldy is a 500+ box plant and 61 mill system behemoth? “We run one plant, and it takes all hands-on deck to make that successful. It seems ego becomes more import- ant than performance. The truth is with bigness comes the inability to relate to clients on a micro level. In the end that is the real reason a business exists — to serve its clients. I find it hard to believe that a message of true customer commitment can be carried through a mega plant system like the one contemplated. I guess time will tell. “Finally, we are all part of an industry that has ultimately been very kind to us. There is a camaraderie and gener- CONTINUED ON PAGE 24

result will allow us the option of adding the needed volume for growth in our marketplace. We are now well positioned to enjoy any surge in business that might occur in 2024. “In assessing the general market, we see the major producers announcing a significant upward price adjust- ment for the first part of 2024. It is hard to conceive that a price increase would be on the table when most economic indicators are pointing to a slowdown in consumer spend- ing, and concomitantly, economic activity. “I can understand trying to stabilize the market after the two most recent decreases which have had a nega- tive impact on the results major containerboard producers report. Still, the market is the ultimate decision maker. The problem is, and remains, the way pricing is determined. What is behind the methodology of the pricing model RISI uses? The fact that it is opaque to the market should con- cern everyone. Is this really an acceptable benchmark for a $43 billion dollar industry? I don’t necessarily possess a plan B, but plan A obviously has many flaws. “Ryan Fox, at Bloomberg , is at least attempting to show a far truer picture of why and when pricing should change. Should all our costs be tied only to paper, or should oth- er real input cost factors be considered? I guess rocking the boat can come with uncertainty, and unknown con- sequences. Overcapacity should concern everyone. The default position for presently retrofitted containerboard


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22 January 8, 2024

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