15 May 2023

Containerboard: Volumes are down but not out



By Jim Thompson

The trade press these days is full of news about containerboard operating rate declines, inventory adjustments and outright permanent mill closures.

From my long perspective, this is normal paper industry news.

Does anyone really think that in five years we will be using less containerboard than we are today?

I don't.

What we are seeing is the normal shedding of marginal players when business is soft. In the long run, this will make for a healthier industry.

Most companies with large fleets of varying ages run their most inefficient mills to cash and when the cash dries up, they shutter them. That is what is going on right now.

I saw it in 1980, 1992, 2000, 2008, and now. And I don't see anything now that makes this time different than the last four times.

Long term, we will continue to use more cellulose fiber based boxes and we will use them for more and different kinds of activities. The Covid-19 pandemic showed us that.

So, unless you are a short term player (and you shouldn't be in the pulp and paper industry), conditions are normal.

Remember what Uncle Jim says: "If you are using cellulose to convey ideas, the business is deader than a doornail. If you are using cellulose for it physical properties, the business is just fine." Physical properties include packaging, containers, tissue, toweling and insulation.

Note: Neither I or anyone on the Paperitalo staff own any individual pulp and paper stocks.

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