The containerboard price increase attempt “dance” has again begun in earnest. It started earlier this year when all of the integrated producers announced that they would increase their containerboard prices by $50 per ton, effective anywhere between March 1 and March 10. Now that these dates have passed, are independent box converters paying more for their raw materials?

A phone survey of independents throughout the country last week reveals that most are being invoiced $50 per ton more than they were last month, although none of them have paid it yet. Many of them have contracts tied to trade publications. If these publications report the higher price in their price charts this month, the price increase will be considered a done deal. If not, it will be “wait until next month.”

“This is the normal staging or posturing time,” says an independent box-making executive on the West Coast. “Some sheet feeders are charging higher prices. But if [the trade publications] don’t move, I won’t pay the increase [this month].

“The integrateds have done an amazing job of matching supply with demand. But current box demand won’t hold any [containerboard] price increase. I don’t think it is going to go. If it happens it would be a travesty. There are no numbers to support this.”

Review the Numbers—So, what do the current numbers say? As the latest Fibre Box Association (FBA) numbers reveal (see chart on this page), last month’s shipments of corrugated products rose 1.1 percent on an actual basis, which is a bit encouraging in light of the economic bad news slapping U.S. citizens in the face every day. But the more significant number is average week shipments, which factor in shipping days. Last month there were 21 shipping days, one more than in Feb. 2007. So, shipments on an average week basis were down 3.7 percent last month.

Year to date average week shipments are down 2.2 percent. These aren’t the type of numbers that indicate a robust box-making climate that would easily support board price increases.

“The decline is disappointing, given an easy Feb. 2007 comparison,” states Mark Wilde, paper industry analyst, Deutsche Bank, New York City. “At 2.48 million tons, combined mill and box plant inventories remain relatively lean, but are up substantially from the recent low of 2.19 million tons reached last October.”

Turning to the most recent containerboard export numbers from the American Forest & Paper Association, February experienced a 3 percent increase to 344,000 tons, the highest export level since March 2007’s 345,000-ton level, according to Chip Dillon, paper industry analyst for Citi, New York City.

Containerboard mill operating rates fell 1.1 percent from January’s level but still stand at 97.1 percent. Integrated producers have to be very thankful for this strong export activity. If they don’t cut back current operating levels when this demand inevitably slows down, the U.S. will be awash in rolls of linerboard and medium.

It can’t be easy to be a containerboard salesman nowadays. No independent box maker is struggling to buy linerboard and medium right now. One independent box maker in the Northeast was told by one of his suppliers that it would put extra rolls on the rails before March 1, so that his company could beat the impending price increase. The offer was turned down immediately.

“These guys are embarrassed,” he says. “They’re good soldiers, doing what they were told.”

“Nobody is going to pay more this month,” says another Northeast independent box maker. “Earlier this month I had [containerboard] salespeople visit me back-to-back and tell me it’s not going to happen in March. They’re looking to April. Then the second tier guys would follow.”

Not Taken Too Seriously—Three companies, International Paper, Smurfit-Stone Container Corp., and Pratt Industries, have made box price increases, effective late this month or early next. But the aforementioned executive believes no one is taking these announcements too seriously. If anything, there’s a lot of downward pressure on box prices, he adds, a sentiment echoed by many of his peers.

Independent box makers from New Jersey to Texas to California report box prices are being slashed.

“Competition is brutal on box prices,” states an executive in Texas.

“In all my years in the business I have never seen a box price environment this bad,” states an independent box maker in the South Central. “Two of our biggest accounts took our business out to bid. We will retain it, but at lower margins.”

“Integrateds are chopping our legs off [fighting for box business],” states an independent in California.

With an all-out battle for boxes, you would have to assume that business isn’t good for independent and integrated box makers. And you would be right. Evidence from independents backs up those weak February box shipment numbers. They have seen business slow down in February. And this year’s first quarter is down from the same period last year, they add. A few are doing okay, thanks in part to the businesses they serve (the food and beverage industry doesn’t take the hit other industries take in tough economic times).

The latest Institute for Supply Management PMI number confirms these tough economic times. Last month it hit 48.3, a decrease of 2.4 points compared to January’s 50.7. A reading above 50 indicates that the manufacturing economy is expanding.

With all of these signs, you can’t help but wonder not if a containerboard price increase will be implemented this or next month but this spring or even this summer. No matter what the trade publications decide to report, the current economic and business activity evidence can only lead to a resounding no.OBM

Callout: Independent box makers from New Jersey to Texas to California report box prices are being slashed.