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| FORECAST (000 tons) |
| U.S. Production1 |
1998 |
1999e |
2000e |
| Semichemical |
5,710 |
5,732 |
5,850 |
| Recycled |
3,887 |
4,089 |
4,100 |
| Total |
9,597 |
9,821 |
9,950 |
| U.S. Capacity1 |
| Semichemical |
6,103 |
6,219 |
6,227 |
| Recycled |
4,479 |
4,480 |
4,664 |
| Total |
10,582 |
10,699 |
10,891 |
| Utilization rate, % |
| Semichemical |
93.6 |
92.2 |
94.0 |
| Recycled |
86.8 |
91.3 |
88.0 |
| Imports2 |
505 |
512 |
518 |
| Exports |
248 |
215 |
245 |
| Apparent U.S. Consumption |
9,854 |
10,118 |
10,223 |
| lb/capita |
72.6 |
73.9 |
74.0 |
| GNP Ratio* |
1.3 |
1.3 |
1.3 |
| E=Pulp & Paper estimate.1. American Forest & Paper Assn. 2. Primarily from Canada.*Tons/$ billion real GDP (1992). |
| TOP N. AMERICAN PRODUCERS |
| Company |
Semi-chem. |
Recycled Medium |
Total |
Market Share% |
| 1. Smurfit-Stone1 |
| 1,137 |
| 875 |
| 2,012 |
| 16.3 |
| 2. Georgia-Pacific2 |
| 930 |
| 230 |
| 1,160 |
| 9.4 |
| 3. Weyerhaeuser3 |
| 415 |
| 655 |
| 1,070 |
| 8.7 |
| 4. Packaging Corp. of America4 |
888 |
| 0 |
| 888 |
| 7.2 |
| 5. Mead |
| 670 |
| 145 |
| 815 |
| 6.6 |
| 6. International Paper |
| 575 |
| 0 |
| 575 |
| 4.7 |
| 7. Inland Paperboard5 |
| 265 |
| 280 |
| 545 |
| 4.4 |
| 8. Norampac Inc. |
| 191 |
| 345 |
| 536 |
| 4.3 |
| 9. St. Laurent |
| 76 |
| 365 |
| 441 |
| 3.6 |
| 10. Greif Bros. |
| 288 |
| 153 |
| 441 |
| 3.6 |
Total U.S. capacity (1999): 11,014
Total Canadian capacity (1999): 1,318
Capacity share of top five companies: 48.2%
Capacity share of top 10 companies: 68.8%
1. Includes capacity from two idle mills; Snowflake, Ariz., mill; and Bathurst, N.B., mill. 2. Includes Sonoco's 186,000 tpy medium mill. 3. Includes Cedar River mill. 4. Formerly Tenneco Packaging. 5. Medium machine in Newport, Ind., converting to gypsum wallboard by July 2000.> 13 |
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GRADE STRUCTURE. Corrugating medium, the wavy, middle fluting material in corrugated containers, is made from semichemical pulp and recycled fiber. By definition, semichemical medium can contain up to 25% recycled fiber. In 1998, medium made up 28% of the total U.S. containerboard production. Of total U.S. medium capacity, semichemical medium has declined to 59.5% in 1998 from 79% in 1980; recycled medium's share was 40.5% in 1998, up from about 24% in 1980. Basis weights for medium are 16, 18, 22, 26, 31, 33, 36, and 40 lb/1,000 ft. The standard basis weight is 26 lb (60% of all production). Producers have moved toward making heavier medium, with 33 lb (21% of production) and 40 lb (7% of production) being the fastest-growing grades.
PRODUCTION/CAPACITY. U.S. producers made 9.6 million tons of corrugating medium in 1998, down 2.6% from 1997. The operating rate for semichemical medium production was 93.6%, down from 99.9% in 1997. Production declined because of an estimated 1.9 million tons of containerboard downtime that was taken in the last seven months of 1998. Along with the market-related downtime, several companies indefinitely shut down capacity. Smurfit-Stone Container Corp. (SSCC), the largest medium producer in North America, indefinitely shut two medium mills at the end of 1998: the 248,000 tpy recycled medium mill in Alton, Ill., and the 120,000 tpy Circleville, Ohio, medium mill. The capacity at the two SSCC represents 3% of total U.S. medium capacity. The downtime in 1998 took out an estimated 435,000 tons of medium capacity or about 5% to 6% of capacity.
U.S. corrugating medium capacity is expected to grow at 1.2% annually from 1998 through 2001, according to the American Forest & Paper Assn. Medium capacity in 1998 was 10.6 million tons followed by 10.7 million in 1999, 10.9 million in 2000, and 10.97 million tons in 2001.
OUTLOOK. For the first time in almost two years, North American containerboard producers successfully implemented a medium-only increase in May 1999. The price increase resulted from a constricted supply line (caused by the downtime and mill shuts) and the solid demand for medium from corrugated container makers (average-week shipments were up 2% through April 1999).
Box shipments were expected to surpass the 400 billion ft2 level in 1999 and reach about 403.7 billion ft2, based on at least a 2% growth in shipments. The anticipated 2% growth was an improvement over 1998's 1.4% growth in shipments.
Semichemical medium mills operated at 92% of capacity through April 1999, but recycled medium production picked up some of the slack from semichemical medium. Year-to-date through April, recycled medium production was up 9% over 1998. However, with the chance for bigger earnings on linerboard, some producers that make both linerboard and medium are switching to making only linerboard in early 1999, further dwindling the supply line for medium.
PRICES. Prices for 26-lb semichemical medium moved up for the first time in 16 months by $60/ton to $325 to $335/ton in the East in February/March 1999. Demand was strong in March and April, so producers began implementing a $30/ton increase on medium only, starting in May.
On top of the medium only increase, two of the three largest containerboard producers -- SSCC and Georgia Pacific Corp. -- planned a third increase on medium for 1999. SSCC proposed $70/ton on medium for July 1; G-P proposed $40/ton on medium for July 1. If the increases were fully implemented, the price of 26-lb semichemical corrugating medium would increase to $400 to $410/ton heading into the final quarter of 1999. That would be the highest medium price in the North American market since early 1996 ($430 to $440/ton).
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