Industry Reports

Deutsche Bank Reports Summaries

071016 Deutsche Bank Report - September Containerboard Monitor

Deutsche Bank - Equity Research

* A solid September

Box volumes were up on a y/y basis, inventories remain lean, operating rates averaged 98.3%, exports rose and imports fell.  The strength of these numbers along with the rapid implementation of the autumn box price hike, declines in the US$ and rising fiber costs should fuel speculation about a Q1 price hike attempt.

* Volume growth modest, but shows solid improvement from earlier this year

 “Average week” shipments increased 3.7% y/y, while “actual” shipments fell 1.5%.  We prefer to take the average of the two - - - suggesting growth of 1.2%.  YTD box volumes are off 1.7% on an avg. week basis and 1.2% on an actual basis.

* Inventories still tight but operating rates remain high

Total inventories at the box plants and mills dipped to 2.372MM tons.  On a month-to-month basis, inventories fell 22.1K tons.  Over the past decade, the inventories have typically declined a scant 4.1K tons between August and September.  Operating rates remained high at 98.3% (Sept. YTD 97.5%).

* Exports are being aided by the falling US$

Exports rose 9.3% in September to 307K tons and are up 16.0% YTD.  Imports fell to 78K tons, down from 96K tons last year.  90% of all imports originate in Canada and are sensitive to the rise in the C$ relative to the US$. 

* Could we see another price hike attempt in Q1? 

We think so. We think today's data and the evidence of better-than- expected pricing dynamics will have analysts scurrying back to their spreadsheets to reconsider “peak cyclical price assumptions”.