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New capacity, imports weigh down boxboard: Moodys

In a new report, Moody’s analysts highlight the headwinds facing boxboard prices as enhancements to capacity come online, in addition to the supply overhang in China and Europe and the impact of a stronger U.S. dollar weighing on coated recycled board (CRB) tonnage.

The boxboard report notes that coated recycled board (CRB) prices fell US$30 per ton in April and another US$20 per ton in May, erasing last year’s $50 per ton increase. The reversals comeg amid soft demand in the core food segment and additional CRB capacity, Moody’s analysts say.
Caraustar, the fourth largest CRB producer, is increasing its capacity for clay-coated boxboard with new equipment at its Sweetwater Paper mill in Georgia, while converting-facility consolidation by industry leaders Graphic Packaging and WestRock, is also disrupting the market.

Moody’s expects the largest integrated and diversified recycled boxboard producers – Graphic Packaging and WestRock – to be able to offset negative impact from lower board prices with additional volume from acquisitions and operational improvements. Caraustar, which was a net buyer of this board, will benefit from producing the board itself. PaperWorks, which is less integrated and concentrated in CRB, is expected to see more of a negative impact.

Moody’s continues to anticipate price declines for solid bleached sulfate board (SBS) in 2016 and 2017, as U.S. exports of the board declined due to stronger U.S. dollar. There is oversupply in Europe and China as well, and Moody’s expects weaker SBS prices to eventually pressure all other grades of boxboard.