Most of the paper companies have attempted (some successfully) announcing and successfully implementing price increases or at least transaction prices (that is reduction of deep discounts). Although pulp prices continue to increase, many of the other raw materials have been steady such as labor costs, transportation and energy.
Creating demand continues to be the biggest challenge and Coy Paper safety predicts more capacity rationalization - both shuttering equipment and short term production curtailment. Beyond stimulating demand, prices will remain under pressure and the end to the infamous 'black liquor ' credit are large concerns.
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But in the wake of fiber cost hikes and energy cost rise(reflected by the crude prices),why hasnt the containerboard manufacturers come out with price hikes?$150 pulp hike in Q3 2009 is quite a great impact.Even though capacity shuts from IP and SSCC correct the market-imbalance,doesnt manufacturing cost play any role at all in price determining??
Some costs on raw materials are advancing, but producers are afraid that an increase in container prices might slow an already depressed demand for containerboard. The industry always seems to struggle with the relationship to costs for raw materials and market demand for their product. Biggest challenge for the major producers is maintaining demand. The fixed costs are high.
But isn't the demand increasing??we see a constant rise in the industrial production index and ISM for 4 consecutive months??YoY data will definitely show that demand is weak but month-on-month movements shows progress. In all probabilities,my guess is that there'll be a price increase in late Q4 2009.what do you think??
No demand for containerboard has not increased and producers such as International Paper and Smurfit will need to consider curtailing capacity to balance supply with the depressed demand. Box demand follows the economy and accordingly, given the poor business conditions, and unemployment, people are not buying and if end users are not buying, the demand for boxes to package items will be down.
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