NA domestic liner prices narrowly increase $40, marking first rise in two years; box demand still mixed

In an unusual, awkward marketplace where demand was mixed, and one large producer this week even announced mill and sheet plant permanent closures, linerboard prices increased narrowly by $40/ton in North America’s open market, according to a survey of buyers and sellers by Fastmarkets’ PPI Pulp & Paper Week.

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Levels for 42-lb unbleached kraft linerboard (KLB), 35-/36-lb high performance linerboard, and 30-/31-lb recycled linerboard rose $40 to $860-870/ton, $870-880/ton, and $760-770/ton, respectively. Also, 23-/26-lb semichemical corrugating medium increased $60/ton to $750-760/ton. White top 42-lb linerboard price was unchanged for this month and was priced at $290/ton more than the 42-lb kraft linerboard.

Higher prices wide-ranging

Just a slight majority, 55%, reported higher prices. This group’s increases were wide-ranging, from as low as $20/ton to as high as $70/ton. A generally high percentage of producers and boxmakers reported increases, according to survey results. Typically, domestic North American open market linerboard prices increase with a 70% majority, based on P&PW’s survey of the last five years. And the amount of the actual increases vary by roughly $10/ton to $20/ton, rather than the $50/ton range.

This is the first linerboard price increase in the domestic market in two years. The last one was in March 2022, and was the final one of four consecutive totaling $220/ton over 17 months during the COVID demand surge. Linerboard prices then declined by $110/ton and $130/ton, including $20/ton in November last year.

“We’re seeing mixed signals in the market,” said a containerboard supplier who reported a small price increase on linerboard this month.

“We maintain that KLB is fairly snug,” the contact said. “There is more excess capacity on the recycled (containerboard) side simply because there are independent mills for recycled linerboard” not integrated into their own corrugated converting plants.

“The kraft mills are very bullish on the increase,” the contact continued, naming two of six large integrated producers in North America. “A few of the smaller players are less firm.”

With corrugated box demand this week still not proven to be consistently good, the increase occurred as producers told of eroding margins from high old corrugated container (OCC) prices and lower box prices than four or five months ago as well as a still dangerous inflationary cost environment.

A food packaging converter summed up simply that ”inflation is outstripping our ability to keep up with it,” even still as he said his business was proceeding steadily.

‘Cost-based’ increase

 “Cost-based increases don’t hold much water usually … but there’s been a bigger push for needing this because of the OCC,” said an integrated KLB producer who reported a partial, $35-40/ton price increase for open market customers.

“We feel this increase is justified,” a contact with 100% recycled containerboard capacity said.

Discussing a 214% and $62/ton increase in US domestic OCC prices over the last 13 months, the contact added that “at this point, this (OCC price rise) becomes untenable and we’re probably already there.”

It’s “just hard” to find OCC because of reduced generation plus the new demand pull from the startup of 2.4 million tons of 100% recycled containerboard capacity in 2023.

Rising OCC and possible consequences

Several mill company officials reported OCC to their mills at an extraordinarily high delivered price of $200/ton or almost as high as $200/ton today. This delivered price was twice or more than twice the FOB seller’s dock $91/ton national average level at the start of February, reported from P&PW’s price survey. Mill contacts told of premiums that exploded from mainly $10-20/ton over the last 30 years to $30-40/ton and as high as $60/ton in January. Further, transport cost from one mill company was cited at $55-60/ton last month, up from a mainly $40/ton transport average pre-pandemic.

This week, one contact with a large company clearly claimed his firm was serious about proposing another packaging – non-containerboard – grade price increase if OCC increased another $30/ton in coming months.

In addition, there was a claim that a major US recovered paper processor was looking for long-term deals for OCC at premiums even higher than today’s amounts.

An official with a major integrated containerboard and box producer said customers were being charged higher containerboard and box prices now on a “take it or leave it basis” – and the contact called out a “systemic” change in North America from the startup of the 2.4 million tons of recycled capacity. The contact noted the permanent shutdown of what amounts to about 1.35 million of kraft linerboard capacity, at the same time as the recycled capacity started up.

International Paper (IP) permanently shut its Orange, TX, two-machine KLB mill at yearend, and WestRock permanently shut mills in North Charleston, SC, and Tacoma, WA.

“I think there’s an OCC shift in the market dynamic,” the contact said. “You had a major change in the fiber makeup in the US. … There’s now lower generation of OCC and we’re short of (recycled) fiber at our (recycled) mills.”

P&PW estimates that the production of recycled linerboard, which was 24% of linerboard production last year, might jump up to an almost 30% share this year, if the five machines operate at high rates.

This week, contacts reported longer backlogs for linerboard orders, with one supplier reporting a normal order early this week would be delivered by around Mar. 25. Contacts said some mills with downtime restarted slowly. Another said the backlogs did not lengthen as much from increased box demand.

Cascades, the sixth largest containerboard producer by capacity in North America, announced the permanent shut of its idled 175,000 tons/yr semichemical corrugating medium machine in Trenton, ON. The company also said it would permanently shut two sheets plant in May in Ontario province and Connecticut.

The $40/ton linerboard increase represents about half the $70/ton increase announced by major integrated producers for the open market in North America, effective Jan. 1.

Various contacts claimed they would stand still for one increase, but maybe not two in today’s market condition. They spoke of uncertainty about the coming box demand after US actual box shipments plummeted by 5% in 2023, and concerns about not turning off and away customers with high box price increases.

This article was taken from PPI Pulp & Paper Week. Speak to our team to learn more about our news and market analysis, prices, forecast and more.