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Box Making Industry Will Stagnate in ‘08
December 15, 2007 Official Board MarketsAt least through 2008 containerboard mills will enjoy full capacity runs to feed Europe, says Fitch Ratings, Chicago. But the market for corrugated boxes will be at best stagnant.
For the paper industry as a whole, modestly better results in 2008 are expected but with few distinctions, it adds.
“In an otherwise unremarkable year, sporadic consolidations spurred by excess capacity and the benefits of systems integration will be compelling, if enterprise prices are cheap,” the company’s report states. “But financial metrics will be influenced more by constrained capital expenditures rather than by business combinations or earnings. Debt reduction and capital/liquidity preservation will motivate corporate strategies next year, as uncertainties still cloud our prognosis for an improving business picture, a view relying on cost efficient productivity and a cheap U.S. dollar rather than growth in fundamental product demand.”
On the containerboard front, Fitch notes that North American producers should benefit at the expense of their European counterparts. The weakness of the dollar will offer the opportunity to raise containerboard prices further, some of which will be jammed down and through North American converting operations. The restructuring of North American box plants by the integrated producers will continue into next year and should aid efforts to raise box prices.
Recycled board producers will face higher fiber costs, as China continues to suck recovered paper out of North America to feed its own increasing recycled capacity, the company states.
