U.S. Corrugated Producers Could Thrive Going Forward

 

According to a recent article by Sharpe Trade, Provo, Utah, USA, RockTenn, Norcross, Ga., USA,-based packaging producer, sees several production opportunities in today’s U.S. economic climate and has some specific strategies in mind for taking advantage of them.

 

According to the report, contrary to conventional wisdom, U.S. manufacturing is still alive and doing quite well in corrugated packaging. Not only could the industry survive, it could thrive. According to the author, "boring old paperboard," not the latest smartphone, nor a self-driving car, and not some hot Silicon-Valley venture capital backed startup that will revolutionize the world, is what is doing quite well when it comes to domestic production.

 

The Report highlights RockTenn’s (Norcross, Ga., USA) company breakdown. RockTenn is an integrated producer of a variety of paper packaging products, most notably corrugated packaging. It has recently gone through a reorganization and is now split into four segments that cover a variety of paper packaging needs. Sharpe Trade reports that RockTenn operates in the following sales capacities: 

• Corrugated Packaging (68.4% of total sales). This type of packaging is what most people think of when they hear the term "cardboard."
• Consumer Packaging (19.6% sales). Bleached and colored, in which individual consumer goods for sale would be packaged.
• Merchandising Display (8.5% sales). End caps and display stands that hold the above consumer products in the stores.
• Recycling (3.3% sales). Taking existing used packaging to be reused.

While they have a commanding presence in North America as one of its largest packaging manufacturers, RockTenn is an example of a corrugated business that has a strong export business selling to countries outside of North America, including 60% in Latin America, 20% in the Middle East, 10% in Europe, and 10% in Asia, the report notes.

 

The report further points out that RockTenn’s export business is actually one of its fastest growing segments. Last year it grew by 34% as measured by tons shipped. Of interesting note is that RockTenn does not place a high importance on Asia, which seems to be the growth place. Its primary focus is Latin and South America and it works quite well for them, according to Sharpe Trade. 

 

The report notes how the U.S. packaging industry has gone through quite a bit of mergers and consolidation. The top four companies today are RockTenn (RKT), KapStone Paper (KS), International Paper Co. (IP), and Packaging Corp. of America (PKG). In 1995, these four companies accounted for 43% of U.S. containerboard production. Last year it was 79%. 

 

Often, after buying an existing company and deciding which mills to keep open, U.S. companies like RockTenn turn to upgrading and modernizing them. However, many of these plants are very old and use outdated equipment that could not enjoy the efficiency of modern technology. 

 

For example, at the Humboldt Tenn., plant this past year, RockTenn removed four flexo folder gluers and two die cutter machines and installed just one EVOL folder gluer and one rotary die cutter. The new EVOL folder gluer gave them a 60% increase in productivity over the previous four folders. Additionally, RockTenn is removing old outdated coal powered energy sources and using natural gas based energy.

 

According to the report, for the next three years starting in 2015, RockTenn looks to spend $500 million to $550 million a year in upgrades like the ones listed above, which will give the company what it estimates are savings of $200 million each year.