Containerboard (CONT’D FROM PAGE 5)
to convert a machine that had formerly made printing pa- per. Powers said the result will be an additional 600,000 tons of annual containerboard entering a 45-million-ton North American market. “Other companies are making similar changes into the containerboard space because it’s growing, and the products that they’re currently mak- ing are not.” These companies apparently see substantial potential in the containerboard market, given the significant time and money required for the conversion process. “You don’t just flip a switch and add containerboard capacity,” said Josephson. “A company needs to either build a new mill or convert an existing paper machine, and that pro- cess typically takes a couple of years.” Given that a lot can happen with the economy in the two years between conversion idea and execution, sup- ply and demand mismatches are certainly possible. The current state of affairs offers a case in point. “The addi- tional capacity the market will be receiving is the result of projects announced years ago when demand was far stronger,” said Josephson. “Containerboard inventories at the end of the second quarter of this year were about 20 percent above historical averages, and inventories in June were the highest in any June since 2000.” Other nations are seeing the same increase in capacity as more paper and packaging companies enter the con- tainerboard space. “The problem is that supply tends to in-
A hike in production is a key force expected to exert downward pressure on containerboard prices. “Roughly 2.7 million tons of addi- tional North American container- board capacity will hit the market over the next year and a half,” said Josephson. “That equates to about seven percent of last year’s US production—a substantial increase at a time when supply is already abundant—even excessive.” Greater Supply Where’s all that new capacity coming from? It’s not just a case of new companies looking to climb aboard the box bandwagon. Veteran players are also upping their game. Adam Josephson
“There are a number of conver- sions underway from paper ma- chines that had been making other grades with significant demand de- clines over the last 15 years,” said Tedd Powers, director of strategy, consulting, and analytics at Fisher International, a pulp and paper in- dustry research firm. He cites the
Tedd Powers
example of Domtar Mill in Kingsport, Tennessee. The com- pany has decided to invest a significant amount of money
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