Box prices rising

Containerboard and box prices will jump in July.

By Staff -- Modern Materials Handling, 7/3/2008

All eight major North American containerboard producers, representing about 76% of North American containerboard industry capacity, have announced a containerboard price hike of $55/ton effective July 1. Five producers have also announced box price increases of 11% to 12% ranging in dates from July 14 to August 1 (with the majority scheduled for July 14).

The key rationale for these announcements, and likely underlying factor for success, is the industry’s need to recover its escalating costs for energy, transportation, and chemicals, according to Longbow Research packaging and container analyst Joshua Zaret. According to his survey of North American corrugated container producers, 78% of the respondents felt that the containerboard price hike would go through within the next three months and subsequently be passed through to boxes and 55% believed it would go through in July and then be passed through to boxes.

“Prior to this round of announcements, there was a marked sentiment in our prior surveys that the next price hike would occur in the fall, based on the belief that the economy (and box demand) would be stronger at that time,” says Zaret. “That this initiative is sooner than end users expected, and is considered likely to be successful, reflects the industry’s imperative to restore margins.”

A higher proportion of respondents (52%) reported “weaker” box demand in June versus those reporting weaker demand in May (27%). While 50% saw June demand as typical, 47% saw it as weaker than usual. Weak box demand was the reason a March price initiative failed. What is different this time is the continuing surge in costs, which is negatively affecting margins. Consequently, the industry’s top players appear more motivated to present a united and disciplined stance.