Medium prices hit highest levels since 1995; recycled, light grades lead growth

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.

Of total U.S. medium capacity, semichemical medium has declined to 58.5% in 1999 from 79% in 1980; recycled medium’s share was 41.5%, up from 21% 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 (56% of medium production in 1998). Producers have moved most aggressively toward making lighter basis weight medium, such as less than 26 lb (with production of 7% in 1998 compared to less than 1% in 1998). Another 20% of medium production was in 33 lb.

PRODUCTION/CAPACITY. U.S. producers made 9.99 million tons of corrugating medium in 1999, an increase of 4% over 1998 production. The operating rate for production of semichemical medium was 94.5%, down from 96.1% in 1998. At the end of 1998, two companies, Smurfit-Stone Container Corp. (SSCC) and Packaging Corp. of America (PCA), indefinitely or permanently shut two mills and a machine with total capacity of 430,000 tpy. The shutdowns took our 4% of total medium capacity in the U.S. Companies also took at least an estimated 550,000 tons of market-related and maintenance downtimes at medium and linerboard mills from October 1999 through June 2000.

In 2000, Inland Paperboard & Pack-aging planned by July to convert the 285,000 tpy recycled medium mill in Newport, Ind., to gypsum wallboard paper.

U.S. corrugating medium capacity is expected to grow at just 0.5% annually from 1998 through 2002, according to the American Forest & Paper Assn.

OUTLOOK. Prices for corrugating medium in the U.S. increased four times in 13 months through March 2000. A build in inventory in early 2000 found suppliers taking downtime to steady the supply line and hold up the last price increase. Suppliers expected to continue working the second half of 2000 to manage inventory and sustain pricing for medium.

Since the pricing trough of $270/ton in January 1999, 26 lb semichemical medium prices increased 70% to $460/ton in the East by March 2000. Prices increased so significantly because of consistent demand (U.S. box shipments increased 2.4% in 1999), and the thinner supply line caused by downtime and mill/machine shutdowns.

U.S. box shipments totaled 405.0 billion ft² in 1999. With a steadily growing U.S. economy in 2000, box shipments were expected to reach 411 billion ft² (up 1.5%).

Semichemical medium mills operated at 96.5% of capacity through April 2000, compared to an operating rate of 96.4% in 1999 through April. Inventory of medium at U.S. box plants and containerboard mills was higher in April 2000 than in April 1999. Medium represented 28.5% of total inventory in April 2000, compared to 27.8% in April 1999.

PRICES. In February, semichemical medium prices for 26 lb moved up $20/ton and moved up an added $40/ton in March to bring prices in the East to $455-$465/ton. The March 2000 medium price was the highest for the grade since fourth quarter 1995.

The average price for 26 lb semichemical medium has been $495/ton 1995, $313/ton 1996, $272/ton in 1997, $315/ton in 1998, and $360/ton in 1999.

By Greg Rudder

News Editor