There is a packaging and paper industry analyst whom I have known for probably 25 years or so and whose opinions I read regularly. Currently he is in (awe) (disbelief) that margins in the containerboard sector are staying so high while operating rates have reached the sub-90% levels.
I think the margin support is great news. Decades ago, I recall when this industry was led by people rising through the ranks and who had the temerity to say. "If it is brown and round, ship it." They drove prices through the floor with the nonsense of seeing who can make the most tons in a down market.
Today, the industry is largely operated by professional businesspeople, and they bring professional business thinking to the process. Although I am loath to give them credit when it comes to day to day operations (most demonstrate little understanding of the need for planned, predictive maintenance), when it comes to short term profitability, they have it nailed.
There is even one maintenance area where they have shown understanding over the last two years. In 2018, when prices were very high, the virgin containerboard manufacturers were doing all they could to stretch out recovery boiler outages to eighteen to twenty-four months. This year, they have willingly played catchup on this score and are, in a few cases, even extending outages a bit longer so they can put these boilers in top shape to go another eighteen to twenty-four months if necessary. This is sharp business management--take your necessary downtime when selling prices are down.
It was no easy feat to do this--in many cases it was a struggle to get insurance companies and state regulators to ease up on the traditional twelve-month outage. At the same time, I think some lessons were learned concerning thoroughly doing a maintenance outage in such a way that future stretches between outages will not be risky.
Maybe we are getting smarter as an industry.
Jim Thompson is CEO of Paperitalo Publications.