I was recently having a discussion with a senior executive in the containerboard industry. We were talking about the move to lighter weight containerboard. I was pointing out the pressure the recycled mills with their lighter weight board are putting on the old line virgin or mostly virgin fiber mills in the US. His comeback was that they still represent 90% of the market and dictate what happens in the business.
I am not so sure that their representation of position in the market is accurately reflected if one thinks only of tons. An illustrative, theoretical example may be in order. Let's assume in the grades we are talking about, the US market manufactures 50 million tons per year, with 10% of that, or 5 million tons, being made by the new recycled mills. Let's further suppose the old line mills' average basis weight is 42 lbs/MSF and the new mills' average basis weight is 35 lbs/MSF.
Doing a little math, the old line mills represent 2.38 billion square feet of cutup. The recycled mills represent 0.285 billion square feet of cutup. On this basis, the new mills are closer to 12% of the business, not 10%. This is not very significant so far, but it will become more so.
Long term, I think the old line virgin mills represent the past, not the future. Here is why I think this. These virgin mills are necessarily located near the trees, their source of fiber, not near their customers--a logistical disadvantage. Nearly all, if not all of them, are supplementing with recycled fiber, due to limitations in their pulping systems that can only be corrected by large expenses in the recovery island (with themselves, the recovery islands, nearing the end of their useful lives in many cases). On top of that, they are balanced, in energy as well as their production departments, to manufacture at a sweet spot of 42# liner. Reduce this to 35#, a 16% reduction, and everything falls out of balance.
Finally, 35# is not the new norm, it just happens to be the number currently being passed through as the modern mills drive to a new lower norm. I have seen 19# linerboard in trials. It will be coming in ever greater numbers. Today, the business is about performance, not weight. The box customer dislikes weight--it only contributes to tare weight in their shipping costs, an obvious inefficiency. They would prefer to have a high performance container that weighs nothing, a theoretical impossibility. However, zero is the goal and providers will continue to innovate towards that goal with as many practical innovations as possible.
I started out talking about tons vs. MSF. I'll close by observing that the future of the containerboard industry does not seem to be in the woods--especially when one considers there has not been a new greenfield virgin mill built in the United States in any grade since 1989, now 25 years ago.
Jim Thompson is Executive Editor of Paperitalo Publications. He can be reached by email at email@example.com.