Industry Reports

Deutsche Bank Reports Summaries

071218 Deutsche Bank Report - November 2007 Containerboard Monitor

Deutsche Bank - Equity Research

* November Shipments - still tepid

Box volumes remain sluggish, but we see no evidence of incremental slippage in the numbers. However, inventories remained tight and operating rates increased slightly after a modest dip in October.  The bottom line? Continued lackluster demand, but no sign of incremental easing from a slower economy. Cyclical upturn remains intact and we remain positive on containerboard stocks.

* Volumes sluggish

Box volumes fell 1.1% y/y in Nov. (same number of shipping days this year as last). YTD numbers are down 0.9% on an actual basis and down 1.7% on an avg. week basis. We utilize a rolling 3-month avg. to moderate some of the m/m volatility. On that basis, shipments are down about 0.2% y/y.

* Inventories - still tight

Combined mill and box plant inventories rose 19K tons m/m to 2.211MM tons. Historically inventories normally fall 4K tons in Nov.

However, inventories are still more than 300K tons lower y/y and at a level that we consider extremely lean.

* Operating Rates & Trade Flows

Operating rates increased from 96.6% in Oct. to 98.7% in Nov. For the second straight month, net exports of containerboard declined y/y (-5% in Nov.). Given the volatility of month to month numbers and the continued weakness of the US$, we still think that the trade numbers the last two months are an aberration.

* Prices

IP and GP are out with a $60/ton price hike initiative on white-top containerboard. We expect a broader industry initiative within the next few months.