Sheila Rezak
Product Manager, Mill Intelligence
Ryan Burgess
Product Manager, Mill Intelligence
Fastmarkets RISI North American Conference 2019
The United States of Corrugators (and Canada, too): A regional comparison of the corrugated supply chain
• Background
• Corrugating basics
• Regional coverage and characteristics
• Focus on the US Midwest
• Comparing North America and Europe
• Narrow-web single-face laminators
• Ongoing project: A quick look at Mexico
• Global containerboard cost competitiveness
2019 | Fastmarkets | North American Conference 2
Agenda
Background
• In the United States and Canada, corrugated packaging
demand has been rising in recent years. Research of
cost efficiency throughout the corrugated supply chain
often focuses on containerboard costs, but several other
factors can affect corrugating plant competitiveness. Our
recent study, North American Corrugators: A
Comprehensive View focuses on these factors by
evaluating asset characteristics.
• This study is an extension of our previous study, European
Corrugators: A Comprehensive View, published
September 2018.
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• Analysis of 575 corrugators in the US and Canada
across 41 states and eight provinces allocated to six
different regions (US Midwest, US Northeast, US South,
US Southwest, US West and Canada).
• The benchmarked product is 123 lbs per thousand sq ft
(600 gsm) C-flute single-wall corrugated board sheet.
• Asset characteristics
Number of corrugators, capacity, technical age, width, regional
market shares, distance, integration and cost estimation.
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Corrugating basics
• Corrugated boxes are widely used for heavier products or products that require a
stronger box for shipping and product protection, such as food. In the US, more
than 95% of all products are shipped in corrugated boxes.¹ Corrugated
paperboard accounts for more than half of all the paper recycled in the US.
• The primary component in corrugated board is containerboard paper, specifically
medium and linerboard.
• Linerboard has two main groups
Virgin linerboard, which can have a slight content of recycled fibers
Recycled linerboard, which is generally made from 100% recovered paper, e.g., DLK, OCC or other mixed papers
• Medium has two main groups
Semichemical medium, which is made mostly from hardwood semichemical pulp
Recycled medium, which is generally made from 100% recovered paper
2019 | Fastmarkets | North American Conference
1. Miji, Kuboc. "Corrugated Boxes Design". www.theprintingdaddy.com.
5
Corrugated board construction and common types
• Corrugated board is made by bonding
one or more sheets of fluted
containerboard (medium) to one or
more sheets of flat containerboard
(linerboard).
• Common types of corrugated board:
single-face, single-wall, double-wall,
triple-wall.
• There are two flute profile types:
standard & non-standard. Generally, the
larger flute profiles give more strength
and cushioning while the smaller flutes
help to improve graphic/printing
capability and foldability.
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Corrugating machine
• A corrugating machine has several main parts: single facer, double backer, heating/drying, rotary/slitting
and cross cutter.
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Asset type
Corrugated sheets and boxes are produced
at converting plants, such as corrugator
plants, sheet feeders or sheet plants.
• Corrugator plant – has a corrugator and
converting equipment and runs both
sheets and boxes
• Sheet feeder – a plant that operates a
corrugator to run sheets exclusively for
box plants to convert into boxes
• Sheet plant – purchase sheets from
corrugator plants or sheet feeders; does
not have a corrugator but does have
converting equipment
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Regional coverage
US Northeast: Connecticut, Maine, Massachusetts, New Jersey, New York, Pennsylvania
and Rhode Island
US Midwest: Colorado, Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota,
Missouri, Nebraska, Ohio and Wisconsin
US South: Alabama, Florida, Georgia, Maryland, Mississippi, North Carolina, South
Carolina, Tennessee and Virginia
US Southwest: Arkansas, Louisiana, Oklahoma and Texas
US West: Arizona, California, Idaho, Montana, Nevada, New Mexico, North Dakota,
Oregon, South Dakota, Utah, Washington and Hawaii
Canada: British Columbia, Alberta, Manitoba, Saskatchewan, Ontario, Quebec, New Brunswick and Nova Scotia
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Regional characteristics
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Number of corrugators Corrugator capacity
• The US Midwest has the largest number of
corrugators, with a market share of 32% of the total
North American region.
• Canada has the lowest number of corrugators with a
market share of 7%.
• Total North American corrugated capacity in Q4 2018
was an estimated of 439.7 billion sq ft per year.
• The US Midwest has the highest corrugated capacity
at 146 billion sq ft per year and a market share of
33.2%, followed by the US South with a 20.1%
market share.
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2019 | Fastmarkets | North American Conference
Technical age
• Technical age estimation: Modern (less
than 10 years old), average (between 10-
20 years old), and old (more than 20 years
old).
• More than three-fifths of North American
corrugator machines are considered old,
while one-fifth are average and the rest
are considered modern.
• This is not surprising given the long history
of the corrugated industry in North
America, with many plants still running
their original machines.
• Technical age is gradually shifting from
having mostly old machines to greater
percentages of average and modern
machines.
Regional characteristics
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2019 | Fastmarkets | North American Conference
Corrugator width
• The majority of corrugator machines in
the US and Canada are 98-inch
machines, which compromise 32% of all
corrugator machines.
• Modern corrugators, such as those in
the 110-inch category, are becoming
more popular due to high machine
efficiency. This corrugator type accounts
for about 11% of North American
machines.
• The 132-inch corrugator machines are
still uncommon: Alliance Sheets (Bristol
Plant, IN – 2014), Encorr Sheets
(Ontario Plant, CA - 2017), and
WestRock (Tupello, MS – announced in
2018).
Regional characteristics
12
North American corrugator plants map
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• Distance to regional containerboard assets: Delivery is one of the key factors in the
corrugated industry. Proximity to customers is far more important for a corrugator plant than for
a containerboard mill.
o The US Northeast has the shortest average distance from containerboard mill to corrugated
plant, followed by the US South.
o The most highly concentrated corrugated plants are in the US Midwest.
o Canada has the longest average distance to any containerboard mill because of its large
area and low population.
Regional characteristics
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2019 | Fastmarkets | North American Conference
• Integrated assets commonly have more benefits over non-integrated assets. Corrugator plants
and sheet feeders in North America are typically integrated into the same company or group. The
average level of integration in North America is about 82% of plants and 84% of capacity.
• Currently, the highest level of integration in North America is in the US South and the lowest is in
Canada.
Integrated vs non-integrated
Advantage Disadvantage
Better delivery control between containerboard
mills and corrugated/converting plants
Need to invest large amounts of capital, including buying
new facilities, having a large number of employees and
more resources invested in controlling the facilities
Flexibility with supply, demand and logistics Less streamlined focus because of the combination of two
different process areas
Lower material and operational costs More complex management level
More sustainable operational system
Regional characteristics
15
US Midwest region
2019 | Fastmarkets | North American Conference
• The 98-inch and 78-inch corrugator machine distributions are around 30%, while the other
categories each represent 15% or less.
• The US Midwest region is known as
“America’s heartland” because of its
primary role in the nation’s manufacturing
and farming sectors.
• The corrugated board and packaging
industry is large in this region, accounting
for around 33% of corrugated sheet
capacity in North America.
• More than two-thirds of US Midwest
corrugator machines fall into the old
category of technical age; the rest are
either average or modern.
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US Midwest region
2019 | Fastmarkets | North American Conference
• The average distance from a corrugator plant to the nearest containerboard mill is
approximately 80 miles.
• Top integrated companies in this region include: IP, WestRock, PCA, Pratt, G-P, The
Schwarz Group, GBP, Greif and CSC.
• Midwest expansion 2019–2022:
o A 110-inch corrugator machine is scheduled to be installed in Indiana at the DS Smith
Lebanon plant.
o LDI will install a new 98-inch Fosber machine at its subsidiary plant in Omaha, Nebraska.
o Pratt plans to install a new modern corrugator machine in Wapakoneta, Ohio, on the same
site as its new 400,000 ton per year containerboard mill.
o Bio-Pappel/US Corrugated plans to open a new plant in Lebanon, IN.
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US Midwest region
2019 | Fastmarkets | North American Conference
Containerboard
• Containerboard mills in the US Midwest region have an estimated total capacity of about 4.77
million tons per year, mostly focused on recycled containerboard products with the exception of
some virgin medium made by PCA.
• This region has the highest corrugating capacity; however, the containerboard supply in this
region is short by almost 4.6 million tons per year. Therefore, corrugator plants need to import
raw materials from other regions.
• The top containerboard producers, which are primarily integrated companies, include IP,
PCA, Pratt, GBP, Greif, CSC, WestRock and New-Indy Containerboard, with Midwest Paper
and Liberty Paper being the non-integrated exceptions.
• Announced expansion in the US Midwest in 2019–2021 will add more than 1 million tons of
containerboard per year
o Including ND Paper, Green Bay Packaging, Phoenix Paper and Pratt.
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US Midwest region
2019 | Fastmarkets | North American Conference
• The US Midwest has the third-
highest estimated cash costs in
recycled- and virgin-fiber-based
corrugated board production.
• Note that this region has a deficit of
containerboard supply; therefore,
both recycled and virgin grades
need to be imported from other
regions.
• In comparison to other regions, the
US Midwest has higher electricity
and natural gas prices and lower
labor and chemical costs.
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20
19
e
Special topics
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Comparison of North American and European corrugator characteristics
2019 | Fastmarkets | North American Conference
• Europe
o 882 corrugators in 38 countries
o 12 regions
• North America
o 575 corrugators in 2 countries, 41 states and 8 provinces
o 6 regions
• Results
o Total North American corrugating capacity was an estimated 439.7 BSF versus 786 BSF in Europe.
o Europe has more average and modern machines than North America, where more than 60% of the machines
are considered old.
o However, the level of integration in North America is much higher than in Europe due to recent mergers and
acquisitions in North America.
o Other detail results are explained in the study.
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Narrow-web single-face laminator
2019 | Fastmarkets | North American Conference
• Litho-laminated products are value-added products in the packaging industry. They have been
among the fastest growing corrugated segments for more than ten years. The laminated products
combine high-quality, litho-printed surfaces with the structural strength of corrugated boards using
litho-laminating machines.
• In general, we categorize two types of litho-laminating machines: standard litho-laminators and
single-face laminators. Single-face laminators operate both a corrugating unit and a laminating unit in
one operation. These
are commonly known
as narrow-web single-
face laminators because
of their narrow machine
width, which normally
ranges from 21-65 inches.
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Narrow-web single-face laminator
2019 | Fastmarkets | North American Conference
• Some advantages of single-face laminators over standard litho-laminator machines include
1. Lower manufacturing costs due to the corrugating and laminating units being combined in a single
production line
2. Lower containerboard consumption (medium and bottom liner) of about 20-30% per square foot,2
which reduces the total weight of boards used
3. Higher laminating performance and quality due to the process being streamlined and improved by
avoiding the need for a second top sheet.
2. Norton, The Future of North America Containerboard: A Strategic View, Vol II, p. 33.
• A single-face laminator machine has
three main parts: wet end, laminating
section, and conditioning and stacking
section.
• Detailed equipment and locations are
available in the study.
23
Mexican corrugator plants map (an ongoing project)
2019 | Fastmarkets | North American Conference
Statistics
• 30 containerboard mills, 1 future mill,
3 rebuild projects
• 161 corrugator plants/Sheet Feeders
with 180 corrugating machines
• 181 sheet plants
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Mexican corrugator plants (ongoing project)
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• Top corrugated producers: Bio Pappel, Grupo Gondi/WestRock, Smurfit Kappa, PCM,
International Paper, CECSO, CEMSA, Grupo Unipak, Copamex
• Integration level for corrugator plants: 60% independent and 40% integrated
• Containerboard mills capacity = 3 millions tons per year, approximately 96% are recycled grades
• Top containerboard mills: Bio-Pappel, Grupo Gondi, Smurfit Kappa, Grupak, PCM, Copamex
• Containerboard expansion projects in 2019–2020
o Copamex – Anahuac Mill
o Grupak Comercial – Hidalgo
o Grupo Gondi – Nuevo Leon
o Empaques Nova – Uman Mill
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Cost Competitiveness
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Global containerboard cost competitiveness
2019 | Fastmarkets | North American Conference
• Methodology overview
• Information based on manufacturing cash cost analysis
• Overview of cash cost structure for global kraft and recycled linerboard,
semichemical and recycled medium
• Cost competitiveness of mills in Latin America, Europe, Asia, Africa, Oceania and
North America
- Natural expense categories
• Historical cost drivers
- Changes due to fluctuating recovered paper prices
27
Cost estimation methodology
2019 | Fastmarkets | North American Conference
Mass and
energy balance
Cost
calculations
• Governmental reports
• Wage & benefits data
• Suppliers
• Consultants
• Periodicals
• News releases
• Magazine articles
• Capacity data
• Directories
• Trip reports
• Outside consultants
• Internal data
• Personal
• Knowledge
• Internet
• Suppliers
• Studies
• Experience
• Mill and machine level cash manufacturing costs estimated for non-converted, ready-to-deliver rolls at mill gate
- No indirect costs (capital costs, depreciation, corporate overhead, etc.)
• A mass and energy balance is calculated for existing mills to determine consumption for each mill process
• Consumptions are multiplied by regional average market prices
Cost = (Consumption) X (Price)
• Data gathered from a variety of available sources, including:
• Company reports and websites
• Pulp and paper directories
• Magazine articles
• Technical literature
28
• Consultants
• Mill visits
• Surveys and interviews
• Equipment suppliers
Global containerboard mill map
2019 | Fastmarkets | North American Conference
Most recycled containerboard is produced in densely populated areas, where recovered paper is locally
available or imported, whereas virgin-fiber-based mills tend to have more remote locations, close to their
fiber supply.
Source: Fastmarkets, Google Maps.
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2019 | Fastmarkets | North American Conference
China accounted for
only 4% of global
capacity in 1990, but
will approach 28% in
2020.
Global containerboard capacity, 1990-2020
0
20,000
40,000
60,000
80,000
100,000
120,000
1990 1995 2000 2005 2010 2015 2020
Thousa
nd t
onnes
Asia/Oceania EMEA North America Latin America
China will remain the top producing country for the foreseeable future.
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2019 | Fastmarkets | North American Conference
Averages
Africa: $260/MT
Europe: $292/MT
North America: $306/MT
Oceania: $312/MT
Latin America: $331/MT
Asia: $383/MT
Second quarter 2019 global containerboard cash costs
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Containerboard furnish distribution
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2019 | Fastmarkets | North American Conference
Historical OCC prices, US dollars per tonneUS South, China and Europe
0.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00199
5 Q
1
199
5 Q
3
199
6 Q
1
199
6 Q
3
199
7 Q
1
199
7 Q
3
199
8 Q
1
199
8 Q
3
199
9 Q
1
199
9 Q
3
200
0 Q
1
200
0 Q
3
200
1 Q
1
200
1 Q
3
200
2 Q
1
200
2 Q
3
200
3 Q
1
200
3 Q
3
200
4 Q
1
200
4 Q
3
200
5 Q
1
200
5 Q
3
200
6 Q
1
200
6 Q
3
200
7 Q
1
200
7 Q
3
200
8 Q
1
200
8 Q
3
200
9 Q
1
200
9 Q
3
201
0 Q
1
201
0 Q
3
201
1 Q
1
201
1 Q
3
201
2 Q
1
201
2 Q
3
201
3 Q
1
201
3 Q
3
201
4 Q
1
201
4 Q
3
201
5 Q
1
201
5 Q
3
201
6 Q
1
201
6 Q
3
201
7 Q
1
201
7 Q
3
201
8 Q
1
201
8 Q
3
201
9 Q
1
201
9 Q
3
US
do
llars
pe
r to
nne
US OCC China OCC Germany OCC
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2019 | Fastmarkets | North American Conference
Capacity: Unbleached linerboard by world regionSecond quarter 2019
Global unbleached linerboard capacity is estimated to be 103.5 million tonnes
51.37
1.59
18.78
25.20
4.95 1.64
Asia
Africa
Europe
North America
Latin America
Oceania
67% recycled
24% recycled
72% recycled
75% recycled
29% recycled
95% recycled
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2019 | Fastmarkets | North American Conference
Second quarter 2019 global unbleached linerboard cash costs
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Global Average: $333/MT
2019 | Fastmarkets | North American Conference
Second quarter 2019 global unbleached linerboard cash costsSorted by cash cost with configuration ID
BRL – 3.9240/USD
EUR – 0.8900/USD
RUB – 64.578/USD
RMB – 6.8236/USD
AUD – 1.4287/USD
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2019 | Fastmarkets | North American Conference
100
150
200
250
300
350
400
450
Integrated Non-integrated Semi-integrated Recycled
323
342
421
335
152
180
282
205
US
dolla
rs p
er
tonne
Fiber Cost
Second quarter 2019 global unbleached linerboard cash costs by configuration
37
0
50
100
150
200
250
300
350
400
Africa Asia Europe Latin America North America Oceania Global average
US
dolla
rs p
er
tonne
Fiber Chemicals Energy Labor Materials, etc.
2019 | Fastmarkets | North American Conference
Second quarter 2019 global unbleached linerboard average cash costs by world region and expense category
45% 69% 45% 47% 42% 48% 58%
$257
$369
$278
$319$308
$317$333
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2019 | Fastmarkets | North American Conference
Capacity: Corrugating medium by world regionSecond quarter 2019
Global medium capacity is estimated to be 76.6 million tonnes
39
45.08 M
1.19 M
14.82 M
10.77 M
4.06 M 0.68 M
Asia
Africa
Europe
North America
Latin America
Oceania
47% recycled
93% recycled 96% recycled
99% recycled
79% recycled
88% recycled
0
50
100
150
200
250
300
350
400
Africa Asia Europe Latin America North America Oceania Global average
US
dolla
rs p
er
tonne
Fiber Chemicals Energy Labor Materials, etc.
2019 | Fastmarkets | North American Conference
Second quarter 2019 global corrugating medium average cash costs by world region and expense category
$252
41%
$397
68%
$260
40%
$332
48%
$277
32%
$282
44%
$347
59%
40
Global containerboard cost competitiveness shows significant regional
advantages based on recovered paper prices and exchange rates
▪ Asia is still the high cost containerboard producing region, mainly due to ongoing
restrictions on recovered paper imports
▪ Africa and Europe are the low cost producing regions, aided by a high concentration of
recycled mills along with relatively low recycled fiber prices
▪ Average cash cost for integrated mills is marginally lower than that of recycled mills
Key take-aways Corrugated board efficiency depends on various factors▪ Key components (raw material costs) depend heavily on country or world economic
business cycles
▪ Additional components (productivity, asset quality, supply chain relationships, distance
between corrugators and containerboard mills)
North America has a long history in the corrugated industry▪ Majority of corrugator machines are considered old
▪ Recently, the technical age distribution is gradually shifting to modern machines
Consolidation reforming the US/Canada corrugated packaging industry▪ Key mergers and acquisitions over the past five years
▪ Ownership structure (integrated/independent) has a direct impact throughout the corrugated
supply chain
2019 | Fastmarkets | North American Conference 41
Study subjectsKey metrics for comparing corrugators
An analysis of North American corrugators: To provide general information, identify
and compare regional characteristics and cost benchmarking
01
Regional comparative analysis and four-year projected cash
cost estimation
Regional comparison covers number of corrugators, capacity, technical age, width,
regional market share, distance to the regional containerboard assets, integration and
cash cost estimation
02
Special topic: A comparison of North American and European
corrugator characteristics
A higher level comparison of North American and European corrugator characteristics
03
Special topic: Narrow-web single-face laminators
Information about these laminators, their technological advantages and their
applications in North America
04
2019 | Fastmarkets | North American Conference 42
Thank you for your attention
2019 | Fastmarkets | North American Conference
Analytical Cornerstone Cost Benchmarking Tool
https://www.risiinfo.com/product/analytical-cornerstone-4-0-cost-benchmarking-
tool/
North American Corrugators: A Comprehensive View
https://www.risiinfo.com/product/north-american-corrugators-study/
Asset Database
https://www.risiinfo.com/service/mill-data-costs/asset-database/
43
Sheila Rezak, Product Manager, Mill Intelligence: [email protected]
Ryan Burgess, Product Manager, Mill Intelligence: [email protected]
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