Dive Brief:
- International Paper and Georgia-Pacific are both pursuing higher prices for multiple fiber categories, according to Fastmarkets RISI and financial analysts. The new prices are set to take effect Jan. 1.
- International Paper announced a $70 per ton increase for linerboard, including white top, and $90 per ton for corrugating medium.
- Georgia-Pacific announced increases of $60 per ton for kraft and white top linerboard, $90 per ton for recycled linerboard and $90 per ton for medium in its East region. In the West, it announced increases of $80 per ton for kraft linerboard, $90 per ton for recycled and white top linerboard and $90 per ton for medium.
Dive Insight:
These moves by North America’s first and fourth largest containerboard producers, respectively, could be the sign of a potential trend heading into 2025. It follows an active year of numerous price increases throughout 2024.
Packaging Corporation of America was the first to move last week with its own price increases planned for Jan. 1 — $70 per ton for linerboard and $90 per ton for medium. That news surprised some in the sector, who generally expected to see companies make smaller and later increases due to the current supply situation.
While a recent BofA Securities survey showed the sector is starting to rebound, it’s still not considered fully recovered and multiple companies have excess supply. Last week, Ryan Fox, corrugated packaging market analyst at Bloomberg Intelligence, said box prices were on a “downward trajectory” due to this supply situation.
On Friday, in a note to investors, Fox reiterated that point when referring to International Paper’s announcement.
“This comes as quite a surprise given the 500,000 tons of economic downtime they've taken through the first nine months of the year, and the 9% year over year slide in volume last quarter,” he wrote.
Fox went on to note that the increase may or may not be recognized by the market.
“We find it hard to believe the market will accept an increase of this magnitude given the current demand context, he said. “Green Markets’ analysis indicate that conditions have not only stabilized but softened. Recent declines in OCC, diesel, and natural gas prices have contributed to the downward trend.”
IP, which announced its second round of 2024 price increases in May, recently reported positive results from the move. The company attributed a $70 million boost to its Q3 earnings to positive pricing index movements and anticipates more to come.
“As we look into the fourth quarter, we expect higher earnings across our packaging business as our price increases from the prior index movement stick,” said CEO Andy Silvernail on an Oct. 31 earnings call.
Michael Roxland, senior paper and packaging analyst at Truist Securities, said the International Paper and Georgia-Pacific announcements could also be favorable for the stock prices of competitors such as PCA, Greif and Smurfit Westrock.
“Overall, we believe the increases to be driven by increasing market demand and persistently elevated input costs,” he wrote in a Friday note to investors.
Many of these companies have announced multiple price increases throughout 2024. Some have been more successful than others and acceptance isn’t always guaranteed. For example, a September announcement from Cascades (its third price increase this year) wasn’t recognized by the Fastmarkets RISI data from October.
