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In the containerboard and paperboard arena, U.S. corrugated box shipments, measured in rolling 12-month periods to smooth seasonality, have been declining since April 2007, Fitch points out. The pace of decline seemed to turn last August. Containerboard production is still soft, down 12% y/y through last September, with mills operating at 83% of capacity. Exports have been holding at just over 9% of production, courtesy of the weak U.S. dollar. Mirroring the rise in feedstock pulp prices, recycled paper prices (which feed 27% of U.S. containerboard capacity) have doubled since the first quarter of 2009, also due to Chinese demand. To preserve operating margins, the industry has announced a first-quarter price increase, which will likely set the pattern for 2010 as latex and energy join rising fiber costs, according to Fitch.

Fitch is not expecting a significant improvement in North American corrugated volumes, but overall operating profits should be flat to modestly higher. Paperboard by virtue of its linkage to disposable consumer products has been more resilient than corrugated boxes in this recession, Fitch explains. Growth in paperboard volumes will probably trail that of corrugated packaging in 2010.