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News & Press: Pressroom

AICC Questions Medium Increases

Monday, June 5, 2017   (0 Comments)
Posted by: Alyce Ryan
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AICC notes the recent announcements of an additional $30/ton in the price of corrugating medium and finds these increases objectionable. Within six months, the North American containerboard industry has implemented two increases in the price of linerboard and corrugating medium totaling $90/ton. Last fall, major producers attempted to implement a $50/ton increase on October 1, but due to a lack of justifiable reasons (e.g., lackluster demand, lower energy costs, and stable OCC prices, etc.) only $40 was “recognized” by the trade press in its October price reporting. This implementation resulted in higher input costs for independents, but a general lack of ability to recoup the full increased costs in the marketplace. Even though the increase occurred during a time of increasing demand due to the holiday ecommerce shipping season, it wasn’t until January and February that boxmakers were able to achieve any reasonable pass-through. In fact, in a survey done by AICC earlier this year, a majority of members reported they were only able to recoup a portion of the 8% average increase in input costs. In March, on the heels of last fall’s increase, producers pushed through an additional $50/ton which was “recognized” by the trade press in April. The principal driver for this increase, according to the containerboard companies, was a rapid rise in OCC prices due largely to increasing demand in China. Increased box demand was also cited, although April’s numbers were softer and put in doubt the sustainability of the pace of demand. Yet, according to recent trade press reports, this second increase has been implemented with relative ease. Pulp & Paper Week quoted one independent converter as saying, "the paper increase went in without a peep.” But while producers have implemented the containerboard increase, they are not, according to these same press reports, following through on their previously announced 10-12% increase in boxes. Still relying on the justification of rising OCC prices, some North American medium producers have now announced a $30/ton increase in the price of corrugating medium, effective July 1. We believe this increase is totally unjustifiable given the fact that prices for OCC, the major fibre source for medium producers, are now declining. According to RISI, OCC prices have declined $32/ton since their March high of $173. The decline has affected even the smaller boxboard sector, whose producers recently backed off a recent price increase due in part to declining OCC prices. AICC members constitute a majority of privately held, independent converters in the US and Canada. While we recognize the need for all our suppliers to operate profitably, we believe the most recent round of medium price attempts deserves the strongest possible challenge from the independent sector. Increases in the cost of medium are difficult to recoup because many contracts which independents may have with their customer base are typically governed by linerboard prices, not medium. This additional increase is unjustified and unwarranted at this time. About AICC, The Independent Packaging Association AICC, The Independent Packaging Association, is uniting and celebrating the success of inspired, independent packaging companies. We are a growing membership association which has served independents since 1974. AICC Serves: Passionate professionals; The independent and united; The responsive and agile. AICC Will: Connect and cultivate; Deliver success.