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Foreign Ownership of Domestic Containerboard

By AICC Staff

July 24, 2019

In April 2019, Palm in Germany announced a recovered-fiber containerboard mill producing linerboard grades in the 13#/MSF to 21#/MSF range. We here in North America are a long way off from following this leading example of rightweighting. While mill assets are one thing, converting is another, and the England-based company DS Smith is an excellent recent example of box design creativity that has served this organization in Europe and taken a foothold here in the U.S. We wrote about this in a recent BoxScore article titled “The European Invasion.” Actually, the British, specifically, were here in the early 1990s, when Lin Pac built a paper mill in Cowpens, S.C., and bought converting plants on the East Coast.

If you wish to review the domestic corrugated history over the last 50 years here, you will find a three-part series on this consolidation in the archives at www.aiccbox.org.

With a recent webinar by our network associate Fisher International, we thought it might be a good time to share the current trends of offshore investments in the U.S. space. While the big three domestic producers—International Paper, WestRock, and Georgia-Pacific—have overseas ownerships, it is the other global players that are coming here. Foreign ownership in pulp and paper has doubled in capacity and risen in entities from nine to 13 in the last 12 years. While the majority of this is in grades other than containerboard, we thought we would briefly mention all the countries that have interests here.

So, we have seen that companies from South Africa, India, Finland, Sweden, Germany, Indonesia, Japan, and Italy have invested in noncontainerboard products such as specialties, tissue, printing and writing, and market pulp; Mexico, Great Britain, Ireland, Australia, and China have positions in containerboard production. China, via Nine Dragons’ America Chung Nam operation, have been on the East and West Coasts since 1990, buying various grades of recovered papers for shipments into China. In the last two years, 15 mills have been acquired. One Chinese company has even announced a greenfield virgin kraft mill in Arkansas. While Southern pine fiber won’t be a concern, getting environmental permits will be a challenge. How much will be consumed here, and how much is likely to be exported?

Foreign ownership has large positions in tissue and printing and writing grades, but this is not the case in containerboard—less than 5% of the total 40 million tons per year. Without converting facilities and professional sales structures for these new entrants, we assume that the tonnage will be sold through brokers. North America remains a safe haven for others, as we are a sizable and mature market (second to China) and are stable, rather concentrated, easy to enter, and have high EBITDA (earnings before interest, tax, depreciation, and amortization) margins and a low-risk business environment. However, with every new occupant in a rather defined space, disruptions can occur, such as the tolerance for lower margins.

With continuing domestic mergers and acquisitions and somewhat of an ease of entry with repurposing existing newsprint and printing and writing mills to containerboard, this view of the U.S. as a safe haven for investments means both of these trends are likely to endure. The industry is on pause right now, as we have an overcapacity issue, dropping through the floor pricing on OCC and mixed waste, a tariff war with China, a slowdown in the global economy, overemployment, a rising awareness of rightweight packaging, and e-commerce and Amazon initiatives.

With the plastic industry under attack via the awareness of ocean dumping and its impact on marine life and our beaches, opportunities exist for paper substitutions. Municipalities and states are banning various plastic packing materials. Plastic straws, single-use bags, and food service containers are already transitioning. As a friend once said, the first piece of plastic produced is still with us! New biodegradable coatings and barriers for fiber-based products are being announced often. Fisher International expects either a domestic or foreign company to convert a facility to folding box board, or FBB, a replacement for the more expensive solid bleached sulfite.


PortraitRalph Young is the principal of Alternative Paper Solutions and is AICC’s technical advisor. Contact Ralph directly about technical that impact our industry at askralph@aiccbox.org.

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