Industry Reports

Deutsche Bank Reports Summaries

080221 Deutsche Bank Report - January Containerboard Monitor

Deutsche Bank - Equity Research

* January box volumes down, but in-line with '07 declines

January containerboard & corrugated box numbers reflect a sluggish economy, but they don't suggest a sharp incremental fall-off in volumes.  We note that operating rates increased, but inventories at the mill and box plant level rose an aggregate 200K tons.  This is the most cautious indicator for those trying to handicap a proposed March price increases.

* Volumes off modestly

Box volumes fell 0.8% on a y/y basis.  While this number isn't great, it's roughly in-line with the declines seen through most of 2007.  It is much better than the 6.8% drop reported in December.  Faced with a slowing economy, we expect box demand to be down something in the range of 1.5-2.5% in 2008.

* Inventories increased

Inventories at the mill and box plant level rose an aggregate 200K tons - - - a somewhat larger-than-normal build.  Over the past decade, the Jan. inventory build has averaged 156K tons.  This suggests that even with strong exports, the mills will need to throttle back on production or face the prospect of rising inventories.

* Operating rates & trade flows

Operating rates increased from 97.0% in Dec. to 98.3% in Jan. Production for export was 335K tons, up from 278K tons last January.  The export growth reflects strong demand and pricing in offshore markets as well as the weaker US$.

* Prices

All of the big producers are out with a $50/ton containerboard price hike for early March.  We think the big determinants are operating rates and inventory levels.