Industry Reports

Deutsche Bank Reports Summaries

080418 Deutsche Bank Report - March Containerboard Monitor

Deutsche Bank - Equity Research

* OK shipments, higher inventories

March containerboard & box numbers show that domestic box volumes remain sluggish, but incrementally no worse than before.  The bigger issue is inventory build.  Inventories rose modestly in a month when they typically fall significantly.  The spring price hike initiative appears dead for now, with some risk that prices may slip.  Given the magnitude of the pullback in the stocks, we maintain a positive bias for now, but our concerns have heightened.

* Shipments – sluggish but no worse

Volumes fell 6.7% y/y in March, but adj. for two fewer shipping days, they increased 2.7% y/y on an avg. week basis. Many observers tend to focus on the avg. week, but we think that the “real” number is a blend of the two, or a decline of about 2.0% y/y.  Many industry players had feared the result would be worse. 

* Inventory levels continue to raise concerns

Combined mill and box plant inventories rose 51K tons m/m.  Looking at the last 10 yrs, inventories typically fall by an avg. of 89K tons, suggesting a neg. variance in March of 140K tons.  At 2.53MM tons, we would call inventory levels about average.  They are up substantially from the low of 2.19MM tons reached last Oct.

* Prices

The industry's $50/ton spring price hike initiative failed to stick in March and we suspect that the hike attempt is “dead” until late summer. As we noted on Monday, spot prices for incremental tons have actually slipped in recent months, and we think the near-term risk is that prices in the broader market go down rather than up.