January 27, 2017
For my articles this year, I intend to focus on that a new person to this segment of the packaging industry would find helpful. Corrugated packaging is very much a local and somewhat regional business. Yes, your company may have national partners through FirstPak connections, but generally you serve a limited marketplace.
You might be asked for—or preferably you can present to your current or prospective clients—a broader picture of the international aspects of containerboard and corrugated packaging. World economies and current trading conditions impact the availability of various grades and pricing. This past November, Steve Young and I attended and participated in the biennial International Containerboard Conference sponsored by RISI. Many major domestic containerboard manufacturing and corrugated companies participate in this event, as do brokers from around the world who know current market conditions. On this recent occasion, I was delighted to make new network contacts from the United Kingdom, Ireland, Brazil, Mexico, Russia, Germany, Italy, and Saudi Arabia. They are usually very interested in the independent market in North America and the amazing quality of U.S. containerboards.
We need to look to the sleeping giant in both the Asian and the Eastern and Western European producers.
The International Corrugated Case Association (ICCA) reports on corrugated shipments by country each quarter. It appears that they are able to capture corrugated production in about 50 countries/regions out of approximately 200 globally. Of course, some areas are estimates, as statistical gathering organizations are not available. China, according to ICCA, is by far the largest corrugated producer. They are also likely the largest containerboard producer. Much of our old corrugated containers (OCC) are exported to China, and then the corrugated cases with products are shipped back to the United States and to many other trading partners. Almost all of the containerboard—and therefore corrugated—is made from 100 percent recycled fiber, with the OCC being infused with old newspaper, sorted office waste, and other waste fibers.
The United States is a significant exporter of virgin, natural kraft linerboard. We have the strongest fiber in the world from our Southern forests, and it is greatly desired for the critical environmental conditions that fresh fruit and vegetable packaging has to endure. Currently, exports remain at record highs, reported at 25 percent of the present production of kraft linerboard. Exports of recycled linerboard are almost nonexistent, as other areas of the world are commonly self-sufficient in corrugated production.
We need to look to the sleeping giant in both the Asian and the Eastern and Western European producers. Russia has tremendous forest resources, but a terrible infrastructure and a central, government-controlled economy that is currently focused elsewhere. Brazil also has tremendous resources but a local economy that is struggling. Mexico is an awesome trading partner that consumes a significant portion of our containerboard exports.
Capacity expansions, greenfield builds, incremental creep, newsprint, publication machine conversions, and moving of machines from one location to another will keep us on the edge of trying to understand global supply and demand balances, and ultimately, local pricing. While security analysts focus on the change in tons, I benchmark the more definitive view of “What are the new grades being brought into the marketplace?” Are you ready to embrace the opportunity? Our average combined board grades are 42/33/42 and in Europe 20/19/20. Interesting?
Ralph Young is the principal of Alternative Paper Solutions and is AICC’s technical adviser. Contact Ralph directly about technical that impact the industry at askralph@aiccbox.org.
