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Saica has $800 million plan to build US presence in containerboard, boxes; Hamilton to start by yearend

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Saica has $800 million plan to build US presence in containerboard, boxes; Hamilton to start by yearend

September 03, 2021 - 17:08

SAN FRANCISCO, Sept. 3, 2021 (PPI Pulp & Paper Week) -Spain’s Saica Group plans much more than just the one corrugated box plant that is now being built in Hamilton, OH.

Company pres Ramón Alejandro late this week confirmed to Fastmarkets RISI’sPPI Pulp & Paper Weekthat the company plans on spending $800 million in the next five years in America – and likely developing up to two or three more corrugated converting plants along with potentially a 500,000 tons/yr 100% recycled-content containerboard machine in the USA.

"We would like to have a ‘critical mass’ before we start building a recycled containerboard machine," Alejandro said on Sept. 2 toP&PW. "We will be looking for opportunities of buying an existing corrugating plant, joint-ventures with family businesses or building a second corrugated plant. … That is the initial plan but it can be adjusted depending on the opportunities we are able to find in this market."

Saica, third third largest containerboard producer in Europe and the 13thlargest in the world according to Fastmarkets RISI capacity figures, is respected for its technology in producing lightweight recycled linerboard and corrugating medium, US contacts have toldP&PW.

Saica is the third major European containerboard company to enter the US marketplace in a distinct way in the last 10 years and especially in the last four years. The other two were Smurfit Kappa Group, first in 2012 with its purchase of Orange County Container and then acquiring other assets after that, and then DS Smith after its 2017 acquisition of Interstate Resources. (Also, ND Paper, a subsidiary of China’s giant Nine Dragons Paper, started up containerboard capacity as well in Wisconsin and Maine that it acquired in 2018 from Catalyst Paper).

They enter a North American market dominated by major integrateds International Paper, WestRock, and Packaging Corp of America. These three combined manage two-thirds of North American containerboard capacity, based on RISI capacity figures. Also, one of the faster growing players in the space is No. 5 Pratt Industries, which offers a unique 100% recycled-content corrugated packaging footprint, and started up new PMs in Shreveport, LA, in 2009, in Valparaiso, IN, in 2015, and in Wapakoneta, OH, in 2019, and plans another new one in Henderson, KY, for the fall of 2023.

For its 2025 strategic plan, Saica on Aug. 25 said in a release that it would invest "$800 million in the US market, growing through strategic acquisitions or new plant construction during the next five years."

‘Products that will differentiate us.’"The journey to the US market has not been an easy road, but we are convinced that we can provide products that will differentiate us in a crowded market," Alejandro said in the release. "We believe our extensive knowledge of low-weight recycled paper production along with the increased demand for cartons makes this a great time to come to the US market."

At Hamilton, in the southwestern corner of Ohio about 30 miles from Cincinnati, Alejandro said "our (corrugated converting) plant … will start production before the end of this year."

The company is to run a 110-in corrugator, contacts have said (P&PW, June 4, p. 2.)

The $72 million project in Hamilton is Saica’s first development in the USA. The corrugator will run in a 300,000 ft2facility. This development occurs after Saica first made rounds of the US Northeast and Midwest eight years ago looking at manufacturing areas,P&PWreported.

Saica has already asked the city of Hamilton to "reserve space for possible future expansion, and the city agreed," theJournal-Newsin Hamilton reported this week.

Saica’s plan for a recycled containerboard machine might end up being installed right next to its Hamilton corrugator, as part of a highly-integrated approach that has been emphasized by Pratt at almost all its US containerboard mills. It might also be installed at another location in the Midwest, including in Indiana, Kentucky, Ohio, or Pennsylvania, he said.

"We are looking to different options and the final site for our containerboard paper mill is not decided yet. One of the options is close to Hamilton," Alejandro toldP&PW.

A key for the mill, he said, will to be well located for buying old corrugated containers (OCC). The Midwest was the second largest US region for OCC consumption in 2020, behind the South, according to American Forest & Paper Association statistics. Midwest OCC consumption totaled almost six million tons last year, which was a little more than a quarter of two US domestic OCC consumption.

Alejandro said Saica expects to gain business on the Ohio corrugator from customers it now has in Europe. DS Smith, when it moved into the USA four years ago, also said it would make boxes in the USA at its new corrugated plant in Lebanon, IN, for companies it do business with in Europe

"Some of our European customers are interested in having boxes [in the USA] similar to those we are providing in Europe," Alejandro said. "That is correct that we are having conversations with some of them related to the new plant in Ohio."

With containerboard capacity of 3.3 million tonnes/yr on 10 machines in Spain as well as France and the UK, Saica for its Hamilton corrugator will import recycled containerboard from its mills in Europe, and buy some US recycled containerboard, Alejandro said.

‘Pursue any desire they had.’"While they have not had any conversations with the City of Hamilton about current expansion plans, we of course would pursue any desire they had for additional facilities," Hamilton City Mgr Joshua Smith said, according to the HamiltionJournal-Newsstory. "We love them being in Hamilton, and will be hyper-competitive in proactively keeping any expansions in Hamilton."

This seemingly-strong local response and support in Hamilton is similar to what occurred 250 miles away in Henderson, KY, five weeks ago. Local government officials including Kentucky Gov. Andy Beshear, a Democrat, announced the Pratt Industries’ $400 million project. Beshear appeared live on local news for an almost hourlong welcoming, thank you, and announcement of the project. Pratt Industries Exec Chmn Anthony Pratt also appeared on video screen and told of project specifics to the gathering, which included the state’s lieutenant governor, the city mayor, and state economic and employment leaders, as well as Pratt leaders in the USA.

Pratt plans to build and start up a 540,000 tons/yr recycled containerboard machine in Henderson in western Kentucky by the fall of 2023.

Pratt, for the second phase of the Henderson project, plans a 700,000 ft2corrugated plant, which would be adjacent to the new PM. Construction on the corrugated plant is to start in 2026 no later than 18 months after the machine starts up. Construction for the Pratt PM starts next March.

Also, Pratt expects to gain about one-fourth of the Henderson machine’s furnish from Kentucky recovered paper.

More capacity planned.Mill capacity projects have been rushing into North America for the last three years, with more than two million tons/yr of additional containerboard capacity started up in 2018-2020 through last October.

It appears another estimated 3.24 million tons/yr are to be started up from second-quarter 2022 through yearend 2023, if all projects are completed as discussed publicly. The estimate excludes a potential 500,000 tons/yr machine project by Saica in the Midwest and includes a large project at Jackson, AL, by Packaging Corp of America (PCA) that started in October 2020.

Last week,P&PWalso reported for the first time that PCA would increase its capacity for making corrugating medium by converting a small uncoated freesheet machine in Jackson, AL. Last October, PCA quickly started making unbleached kraft linerboard on the large UFS machine at Jackson because it needed extra containerboard supply because of hot corrugated box demand. PCA plans a phased-in project in 2022 and 2023 the large Jackson machine’s capacity to reach 700,000 tons/yr by 2023. It’s unclear exactly what PCA’s capacity for medium would be on the small Jackson machine.

Four other companies plan 100% recycled containerboard machine conversions or new machine startups in the next two years. They are Atlantic Packaging in Whitby, ON, Cascades in Ashland, VA, Domtar in Kingsport, TN, and potentially Crossroads Paper in Utah.

Lack of containerboard supply has been a nearly year-long problem in North America, even with the capacity additions since 2018. Both corrugated box and containerboard deliveries today are taking twice the time to reach customer today, because of the hot demand and not enough containerboard supply. Shortages in the last year have been reported, causing box plants to actually shut down for day or two in a couple cases last year, and causing box plants to delay shipments because of being short on certain basis weights, and especially on corrugating medium, contacts have toldP&PW.

Corrugated boxes are in their 15thconsecutive month of historic demand, driven by e-commerce and overall growth in demand for industrial boxes. The demand run began in March 2020 because of the pandemic. US actual box shipments in 2020 increased 3.4% to a record-high total, compared with 2019 shipments, according to Fibre Box Association statistics. Insiders expected this year’s actual shipments to increase by 3-4% - above the record 2020 total.

In Ohio, theJournal-Newsalso reported that Hamilton city’s Economic Development Dir Jody Gunderson said that "we had always looked at Saica as being a future opportunity for expansion, so when they’re ready to go, we’ll be ready to go."

Gunderson said that there is property adjacent to Saica’s corrugated plant and Hamilton Economic Development "just acquired 87 acres, just right across the road" from the plant.

 NA containerboard dynamics/related economic notes.A mid-sized US integrated containerboard and box company official toldP&PWlate this week that market demand is "still strong." Boxmakers toldP&PWthe last two months that they expected strong holiday demand in September and October, and for steady to strong demand through yearend. For July, US non-durable, non-energy manufacturing was up 4.2% compared with July 2020 manufacturing, and overall US industrial production was up 6.6% on a year-over-year basis. The August ISM Report On Business – Manufacturing and Services PMI index increased to 59.9% from 59.5% in July.

 Major grocer/retailerCostco Wholesalereported a 16.2% increase in net sales to $15.75 billion for its retail month of August. Its actual year-over-year net sales increase totaled $2.19 billion. For the 52-week fiscal year ended Aug. 29, Costco reported net sales of $192.1 billion, 17.7% more than $163.2 billion during the similar period in 2020.

 TheRoyal Group’s Royalty Group Touchstone LLC received a 10-yr and $3.5 million tax abatement this week from the Seymour (IN) City Council for installing a color flexo rotary die cutter with a conveyor system at one of its corrugated plants in Seymour, local media reported. The color flexo rotary die cutter is to be installed by yearend. The Royal Group is part ofSchwarz Partners, one of the US’s largest corrugated converting companies. The new equipment is officially for Touchpoint doing business as The Royalty Group under Royal Group. The company operates two corrugated plants in the East Side Industrial Park in Seymour.

-bygrudder@fastmarkets.com