Containerboard Growing Faster Than GDP - Packaging-Online

Containerboard is growing faster than world GDP, as emerging economies expand, shipments become more discrete, and trade grows, says Chip Dillon, managing director, Citigroup Investment Research, New York City. In a recent report on containerboard, he points out that:

•China has been the fastest-growing major region, with demand compounding at a 12 percent annual rate since 2000;

•Asia is the largest consumer. This region consumes the most overall, accounting for 41 percent of global demand, followed by North America (26 percent) and Europe (22 percent);

•Containerboard demand is growing. After declining in the early 2000s, U.S. demand is growing again, as outsourcing is moderating, boxes are getting heavier, and shipments are getting smaller and more numerous;

•Capacity is flat globally. But in China, a two to three million metric ton annual increase in demand is being met by domestic, recycled fiber-based production;

•North America has an advantage. This exists in tree-based and recycled fiber, especially versus Asia. The level of the U.S. dollar and the cost of recycled fiber will determine whether this will lead to improved returns; and

•In North American containerboard, he likes Smurfit-Stone Container and Weyerhaeuser best.

“North America has a substantial surplus of both wood-based fiber and recyclable old corrugated containers (OCC), while fast-growing areas, such as Asia, are fiber deficient,” Dillon states. “The U.S. containerboard industry stands to benefit if the tightening strain on global OCC supplies drives up OCC costs and/or the value of the U.S. dollar continues to drop.”

For more information on this report, visit www.citigroupgeo.com/pdf/SNA00604.pdf.