June Box Shipments Flat, Inventories Continue Decline

U.S. domestic box volumes provided more evidence of a sluggish economy, according to Mark Wilde, senior analyst with Deutsche Bank. There was some good news, he adds. Operating rates were better than expected and the inventory decline was three times the average May to June decline. Exports were healthy, albeit at a lower pace than previous months.

With cost rising and prices easing, second half margins will likely be pressured, Wilde notes. With IP's hostile bid for Temple-Inland (see article in Pulp & Paper section below) and weak demand trends, a fall containerboard price hike seems unlikely, he says, adding, however, that "with cost rising and pressure on margins, we wouldn't rule out a hike attempt." Global Markets Research Company

Average week and actual box shipments were down 0.1% y/y, Wilde continues. Trade reports had suggested a "better" June result. However, softness in the numbers is consistent with a wide range of macroeconomic indicators suggesting continued economic weakness. While June's ISM index rebounded from 53.5 to 55.3 (+1.8 m/m), it remains sharply below the 60.4 recorded in April, he points out.

Combined mill and box plant inventories fell 38,000 tons m/m to 2,155 tons, Wilde reports. Over the past 10 years, inventories typically declined 12,000 tons m/m in June. The overall containerboard operating rate in June was 96.9%. "This is better than May's rate (93.8%), and better than we anticipated. Historically, operating rates at this level would have producers strutting confidently. Total containerboard exports were up 9.4% y/y," Wilde explains.

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