In March, continental buyers of recycled containerboard made some unexpected headway in offsetting €10/tonne of the €20/tonne increase that took effect last Autumn. That increase was so small that there was virtually no attempt to recoup it via higher box and sheet board price...nor was it big enough to trigger most paper price-indexation agreements. Time will tell whether paper buyers succeed in wiping out the remaining €10/tonne in April; they're certainly going to try.
European stocks of recycled containerboard are now at circa 550,000 tonnes, which is down on the previous week and at first glance suggests that they're in balance. However, this level is 13% up on the same period last year. Taken together with the high number of public holidays coming up in April and May, it's no surprise to see Hamburger announce that they're taking 15,000 tonnes out of the market in April to counter the drop in demand that will accompany the coming weeks. Others will doubtless follow with downtime announcements of their own.
Back home it looks like recycled containerboard's deflationary ripples will hit the UK market with a £10/tonne decrease in April, which does rather push back any potential price increase to June or September – depending on whether demand picks up notably.
Makers of brown Kraft and white top liners have announced increases of €50/tonne across Europe, but don't seem to have crystallised the aspiration into an implemented increase as yet. It looks like they will end up settling at nearer €20-30/tonne in mainland Europe from mid-April and £15-25/tonne in the UK from May.
The net effect of these containerboard fluctuations should be largely stable box prices through to the summer at least.
As expected, UK corrugated demand in March largely mirrored that of February. Volumes up to mid-March were steady and consistent if not spectacular, before rising toward the month end. Year to date, UK volumes are slightly up on the same period last year.
After some years of relative inactivity, there has been a spurt of renewals in the stock of UK corrugators (five have been announced and another five mooted).
In turn this will doubtless lead to fewer, more efficient corrugators and an increase in the use of lightweight liners. With 10% less grammage typically delivering much the same performance, this can only be good news for almost everyone in the supply chain. The unhappy exception will be those with older corrugators who will be limited to an increasingly uncompetitive product range…which is just not tenable in the long run. Expect further investment in new corrugators in the coming year or two.
With lead times for 0201 cases down to two days for many, pricing is soft. Hence modest box price decreases are occasionally being realised by canny buyers with significant spends…resulting from tender exercises that have seen notably sharp pencils employed. Sheet board prices are broadly stable, with no notable requirement to reduce prices given the decision not to pass on the November recycled containerboard price increase. All the same, the odd fringe player is giving some smaller sheet plants far sharper prices than their spend would normally command.
A ballot of 2,000 members of the Unite union approved a country-wide strike in Confederation of Paper Industries (CPI) box plants with whom they have failed to reach an agreement regarding a pay rise. CPI offered a 2.95% increase for September 2013 to September 2014, whereas Unite are asking for at least 3.3%. With UK inflation dropping to 1.7% and corrugated margins under increasing pressure thanks to industry capacity creep, it is perhaps surprising that Unite have recommended this course of action to their members. Indeed, pay for the average UK worker is up just 1.4% in the year to January 2014, which is less than half of CPI's relatively generous offer. Whatever happens with the large integrated paper and corrugated companies, the independent sector would seem to be ready to assist if service is disrupted.
