- International Paper, Packaging Corp. share prices tumble
- Kraft linerboard prices are down for first time in 6 years
In a world of falling raw-material prices, add one more: the humble cardboard box.
Containerboard, the corrugated raw material used as packaging by everyone from FedEx Corp. to Office Depot Inc., is getting cheaper. That sent manufacturers’ shares prices tumbling on Monday, with International Paper Co., the world’s largest paper producer, sliding the most in six years.
Industry publication Pulp & Paper Week estimated containerboard prices will fall as much as $20 a ton from December levels, said Mark Wilde, an analyst at BMO Capital Markets in New York. The price of kraft linerboard -- a type of cardboard used in containerboard -- declined in January for the first time since 2009, Bloomberg Intelligence analysts Joshua Zaret and Matthew Hagerty said Monday in a report, citing industry information provider RISI Inc.
The containerboard decline is likely to feed through to cheaper cardboard-box prices, according to Deutsche Bank AG.
The linerboard price drop is a surprise given commentary on stronger-than-expected December box shipments, analysts at Citigroup Inc. said in a note. Still, supplies have been increasing, and the competitiveness of exports to Latin America have suffered from the strength of the U.S. dollar, BMO’s Wilde said.
“We’ll continue to see pressure on containerboard pricing because demand has been fairly static," Wilde said Monday in a telephone interview. “It will have an impact on earnings with these companies."
International Paper fell 11 percent to $32.58 in New York. Packaging Corp. of America tumbled 13 percent and KapStone Paper & Packaging Corp. plunged 21 percent.
Macquarie Group Ltd. downgraded its rating on KapStone and Packaging Corp. shares to sell from hold as the impact of the price decline is especially negative for those two containerboard producers, Danny Moran, an analyst at the bank, said Sunday in a note.
“We would not be surprised to see an additional $10 a ton decrease in February with risk to the downside,” Moran said.