Commodity Market Scan: Paper and Packaging — Observations, Trends and Forecasts (Part 1)

At Commodity EDGE last week, Alvarez & Marsal's Bill Stotzer and I co-presented during a breakout session on packaging and indirect materials. Bill stole the show with a truly expert and engineering-centric outlook, providing not only a market forecast, but also examples -- using real boxes!! -- showing ways companies can take cost out of the packaging equation. We'll share a number of his suggestions in an upcoming series, but we'll begin with a market backdrop in the paper and packaging area to set the commodity stage for these evolving categories.

In his talk, Bill noted that containerboard and boxboard represent 33% and 22% respectively of the broader market for US paper products. Printing/writing paper, newsprint, tissue and packaging paper represent 27%, 6%, 8% and 4% respectively. On an aggregate basis, these numbers add up to a market representing some 90-100 million tons per year that generates $175 billion annually in revenue. At the start of his talk, Bill provided some observations on the market, noting that there was a significant decrease in newsprint last year and "declines are expected to continue" owing to more and more individuals and businesses consuming daily and weekly media digitally rather than in print.

However, the corrugated and packaging market turned the other way compared to print in recent years. Here, Bill notes that "box shipments increased 3.5% in 2010 and by 0.5% in 2011" and the "expectation is flat for 2012 then increasing as economic conditions improve." Despite rising demand, pricing remains flat, as we "have not seen a price increase in nearly two years." In other market developments, Bill remarked that the old corrugated container (OCC) collection-to-domestic board "consumption ratio was 100% in 2011, up from 93% in 2010 and 87% in 2009." This trend indicates a "high ratio of recycled imported boxes," according to Bill's remarks.

Stay tuned as our paper and packaging commodity market scan continues.

- Jason Busch

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