March 30, 2017
By the time these words get past my editor, into print, and into your hands, there may well be another containerboard price hike announced. Rumblings of such an occurrence have been heard since before the end of the year. OCC prices are on the rise, mill operating rates are hovering at around 97 percent, and box demand is brisk, driven by a very strong end-of-year performance. FBA reported on February 1 that shipments in December 2016 were up 5.9 percent on an average weekly basis. And, since the messy implementation of the previous increase in October/November, when few of these normal “drivers” suggested an increase was justified, the talk, talk, talk among our industry’s punditry says there’s likely to be another. Mark Wilde, in a commentary from the Bank of Montreal issued January 27, wrote, “Global containerboard markets have tightened dramatically over the past eight to 10 weeks, making a spring hike appear inevitable.” And it is not just in the containerboard grades, either; the boxboard market has seen similar increases announced of $60 per ton in uncoated recycled board (URB).
This time, though, the bigger story is becoming how our industry reports this pricing. Over the many years I have been around this industry, I have heard member after member wonder why we are beholden to one publication’s view of the world when it comes to the pricing of raw material. Like it or not, Pulp & Paper Week’s (PPW) monthly Price Watch has become the final arbiter of what happens in the boxmaker-customer relationship, and it just doesn’t sit well with the majority of independents I’ve talked to. They question the methodology, the sample size, and fundamental reasoning with regard to how they report list prices for 42# linerboard. The October/November increase, cited above, is a case in point, when in October PPW’s Price Watch “recognized” only $40 of the announced $50—hence the description of “messy,” cited earlier.
To the many members who’ve voiced their opinion, it does not seem logical in today’s containerboard landscape that a single price point of questionable origin can be the driver of a value-added product such as corrugated packaging. With the number of grades and quality differences available for whatever performance requirements the customer demands, how can a single price point have any relevance? It will be interesting to see how this evolves in the coming year, especially since RISI’s planned addition of a 100 percent recycled linerboard index is in the commentary phase as I write this. AICC members have weighed in heavily, to be sure, and this development is not being embraced as good for our industry.
What’s your opinion? Send an email to syoung@aiccbox.org.
Steve Young
President, AICC
