Vertical Research Partners' (verticalresearchpartners.com) packaging and forest products analyst Chip Dillon, offers insight below into the U.S. containerboard sector as growth nears zero. "U.S. capacity to produce containerboard grew less than 0.1% through the first five months of 2017," says Dillon.
Capacity Growth Crawls to Near Zero – In the recent release of the May Containerboard data, US capacity to produce containerboard grew less than 0.1% through the first five months of 2017 (interpolating from AF&PA data). Noting that "everyday" is a mill day, this growth was 0.7% adjusting for the one fewer day this year versus the first five months of 2016, a leap year. However, looking at May alone, US capacity actually fell to 3.196 million tons for the month versus 3.226 million tons for May of 2016.
Inventory Decline Slightly Muted – AF&PA and the Fibre Box Association (FBA) released their May 2017 US box shipments and box plant/containerboard mill data. Total inventories in containerboard mills and box converting plans decreased by 54,300 tons, down 2.3% from the April level 9.4% year-on-year. That decline was slightly less than the 10-year average sequential inventory change from April to May of a 65,900 tons. Weeks of supply were unchanged, at 3.7 weeks from last month’s level. Inventories in May 2016 would have lasted for 4.3 weeks. At 2.334 million tons, inventories clearly are at a point that would suggest some tightness in the system.
E-Commerce Without Outsourcing – May demand was strong, with US box shipments up 8.3% on one extra shipping day (23) versus May 2016 (22). Adjusting for this extra day, shipments were up 3.4% on an average week basis. We look at the average of these two measures, 5.8%, to measure the strength of the market since some customers receive the same amount of boxes each month regardless of the number of shipping days.