November 29, 2016
Around the middle of each month, the American Forest & Paper Association (AF&PA) and the Fibre Box Association (FBA) release containerboard production, corrugated shipment, corrugator consumption of containerboard, and containerboard inventory statistics for the previous month. Monthly reports containing this data are available to the public by subscription. In addition, AICC members receive Scoring Boxes, a monthly analysis of containerboard and corrugated market conditions published by Richard Storat and Associates, which provides analysis of this data.
The topmost chart on this page combines this data and provides a visual road map of containerboard flows between the mills that produce the containerboard and the corrugated converting plants that manufacture corrugated products.
At the left of the chart, mill data is shown. Total U.S. containerboard capacities are taken from the AF&PA’s annual survey of all containerboard mills and include allowances for scheduled maintenance. The unmade containerboard is the difference between containerboard production and capacity and represents the mills’ reserve capacity that could have been produced in the given month. This difference includes all reasons for not producing the mills’ full capacity, including unscheduled maintence and lack of orders. The operating rate—the national production divided by national capacity—is a useful guide to market conditions. Operating rates of 95 percent or more accompanied by normal or low inventory levels are indicative of healthy demand.
The brown center of the flow chart identifies the various uses of containerboard and the sources of containerboard besides that from U.S. mills. Some containerboard production may go into an increase of inventory at mills or mill warehouses.
A substantial fraction of production is made for export markets. The July data shown above indicate that 14 percent of containerboard production was made for export markets, a typical share. Unbleached kraft linerboard accounts for some 90 percent of this amount.
In addition to U.S. mill production, corrugated converters use some imported containerboard, usually 4 percent or less of corrugator consumption. The lion’s share of this amount comes from Canada.
Corrugators can also draw from their inventories of containerboard for feedstock. In July, that amounted to an unusually small 9,000 tons. Combined mill and box plant inventories are affected by seasonal demand, so it is useful to compare a given month’s inventory change to prior changes in the same month. For example, July’s inventory rise of 50,000 tons was lower than any of the prior six-year July changes, and fell well below the five- and 10-year averages for July. That suggests that mills provided supply that matched well the demand for corrugated that month.
Theoretically, if corrugators were the only users of containerboard, then mill containerboard production adjusted for inventory changes and international trade flows would equal the amount of containerboard converted by corrugators in a given month. Because containerboard is used to make other products not requiring use of a corrugator and for other reasons, Other Uses is the imputed amount of containerboard left over after corrugator consumption is satisfied. Last year, it amounted to 5 percent of all containerboard produced in the United States, or just under 150,000 tons per month, on average. Actual uses, such as the manufacture of slip sheets used to separate tiers of goods on pallets and other packaging supplies, account for most of that amount. However, the volatility of this number from month to month also suggests that other factors are influential. In addition to possible reporting inconsistencies, two other factors can cause monthly variances.
Containerboard that has left the mill or mill warehouse but has not yet been recorded as received by box plants is called “in-transit” inventory. It is not reported as inventory by either the mills or box plants. The volatility arises when there is an increase or decrease in the amount of containerboard in transit. Another factor is that all containerboard made by the mills for export may not be exported in the same reporting period or may, in fact, be diverted in the marketplace from its original overseas destination to domestic use. That situation would also show up as a surge or depletion in Other Uses.
Some industry observers believe that when the level of Other Uses is unusually high, it probably means that there is additional containerboard somewhere in the pipeline, which will show up as additional stocks at box plants in a future month. The chart above shows monthly levels of Unidentified Uses for the past three years. The month-to-month variability is clearly depicted. For instance, this July’s amount was noticeably higher than the norm, exceeding the average level of the past four Julys by 46 percent.
Corrugator consumption is one measure of demand for corrugated products, but since corrugated products are usually sold by area, not weight, the corrugated industry reports shipments in units of square feet. For example, in July, the corrugator consumption of 2.466 million short tons was reported as 29.829 billion square feet by FBA.
One important operating difference between corrugator plants and containerboard mills is in how continuously they run. Mills run around the clock seven days per week, except for scheduled outages or infrequent breakdowns. Box plants, on the other hand, typically do not operate on weekends or holidays, unless demand is unusually strong. Box plants, thus, usually have between 19 and 23 shipping days per month. On the basis of shipping days alone, an additional shipping day could account for some 5 percent of monthly output. To address that potential problem, box shipments are also reported at an average weekly shipment rate, which provides a consistent basis for comparing output with previous periods, even if the earlier month had a different number of shipping days.
This guide to understanding the statistics of the containerboard and corrugated industry should help orient those new to the industry and also serve as a refresher for industry veterans.
Dick Storat is president of Richard Storat & Associates. He can be reached at 610-282-6033 or storatre@aol.com.
