Linerboard price hike isn’t sticking, yet

Weak demand is depressing liner and box buys

by Tom Stundza -- Purchasing, 7/23/2008 11:01:00 AM

Despite trade press reports that containerboard producers are pushing $55/ton price hikes on linerboard and corrugating medium, most buyers report paying little more, on average, in July than they did in June. And they express doubt that August prices-paid will be higher either.

The monthly average price paid for 42-lb linerboard in the Midwest/East Coast market is $560, up from $550, but not the $605 wanted by producing mills. In fact, most of the buyers reporting prices paid this month (78%) were at the $550 level. On the West Coast, little of the increase stuck in July as the buyers report paying $580 and not the $620 sought by producers. Corrugating medium prices paid averaged $540/ton and not the $585 sought by mills. 

Producers earlier tried to raise containerboard prices by $50/ton in early March, but the increase fizzled in the face of strong resistance from independent box converters, sluggish box demand, and a high level of economic uncertainty.

Subscription newsletter PPI Pulp & Paper Week says containerboard producers this month “were pushing through the announced $55/ton price increase on linerboard and corrugating medium with a surprising lack of resistance despite sluggish box demand and continuing economic uncertainty in the U.S.” Not so, the large-tonnage OEM buyers tell Purchasing.com, since they aren’t purchasing linerboard or medium this summer because of reduced need for corrugated boxes. Also, these buyers are fighting 12% price hikes proposed for July by some box makers. Most of the actual buys reported at higher prices were from smaller-sized purchasing groups or box makers seeking to fill inventory holes.

According to the Fibre Box Association, corrugated box shipments dropped 3.5% in June to 32.198 billion feet, bringing the six-month decline to 2.2%. Even PPI Pulp & Paper Week tells its readers that market contacts have described box demand in such terms as “slow,” “sluggish,” “weak,” “dead” and “not so bad, ” depending on the region.