Unmade orders have steadily loosened over recent weeks with skepticism among buyers whether brown prices would hold in place, never mind white prices go up.
Coated recycled folding paperboard (CRB) prices especially came under pressure due to lackluster packaged food markets, slow seasonal retail demand improvement and lower furnish costs. Despite spot deals that emerged in July-August, supply was tightening due to the early shutdown of Fusion Paperboard in the Northeast, contacts said.
Boxboard prices were on average unchanged in August from July amid the general summer malaise, with some spot discounting, market positioning, and customer substitution of grades.
CRB market contacts described some temporary lower prices in July and this month as unmade orders held steady but stayed down by a third compared with a year earlier, when two price increases were achieved.
Some said anecdotally that CRB backlogs were firming on back-to-school business and that the suspension of production at Fusion Paperboard, reportedly on Aug. 12, would tighten the market further.
"If there were deals," said a producer contact, "they have disappeared with Fusion."
Fusion's 146,000 tons/yr mill in Sprague, CT, represents about 6% of the North American market. Owner Open Gate Capital said it would shut the mill on Sept. 22. Contacts said the mill was selling off remaining inventory at low cash prices.
The impact on broader spot prices was limited, other contacts said, though things could have gone the other way without the capacity cut.
"Everybody's boats will get floated," said a contact about the closure.
One competing producer executive told analysts he expected "some short-term dislocation" as Fusion customers sought out new suppliers, noting that industry backlogs were not tight but also the market was not "materially weak."
"We see opportunities with customers in that region," another competing executive told analysts, "and we will operate our business in a way that hopefully we can earn some of that."
CRB unmade orders entered August at 127,000 tons, consistent with the previous month, down 37% from a year ago. Backlogs were now expected to escalate due to the Fusion closure.
Bleached board unmade orders have also been consistent over the past several weeks though have narrowed to 561,000 tons in early August, down 13% from a year earlier.
One producer told analysts bleached backlogs were six weeks compared with three to four weeks for unbleached.
July statistics.Solid bleached folding board production in July of 184,000 tons was down 4% from June and 1.3% lower than a year ago, the American Forest & Paper Association reported. The sector operated at 93.3% in July from 101% in June and 97.4% a year ago.
Production through seven months at 1.237 million tons was up 0.8% from the same period in 2013 with domestic production up 1.7% and export down 2%. The operating rate year-to-date was 94.6% from 96.5% last year.
Bleached total food service production in July rose 9.3% from a year earlier to 286,400 tons with an operating rate of 103.1% from 94.6%. Cupstock production in the month was 16.4% higher to 78,600 tons, and plate/dish/tray rose 9.5% to 64,900 tons.
Year-to-date total food service output was up 4.2% to 1.84 million tons with cupstock up 6.7% and plate/dish/tray 4% higher.
Bleached folding boxboard exports through June at about 248,000 tonnes were 0.7% above the same period last year, with plate/dish/cup/tray at 113,000 tonnes up 1.9%, according to Census data.
July unbleached kraft production of 225,000 tons was up 2.7% from June and 8.3% higher than a year ago with an operating rate of 101.7% from 95.9% in July 2013, AF&PA showed.
Year-to-date output of 1.458 million tons was 0.8% above the same period of 2013 with domestic production down 3.1% and export up 15.1%.
Recycled folding boxboard production, mostly coated, was down 3.3% in July from a year ago to 190,100 tons, with year-to-date output up 0.3% to 1.314 million tons. Tube/can/drum production in the month was up 0.8% to 110,600 tons and year-to-date was down 1.2% to 772,300 tons.