Packaging Stocks Higher on Attempt to Raise Containerboard Price

By Bob Tita

Industrial-packaging stocks moved higher Thursday on reports that Georgia-Pacific Corp. plans to raise its price for containerboard by $50 a ton this spring.

Georgia-Pacific declined to comment. But Deutsche Bank reported the increase in a note to investors and another industry analyst confirmed that Georgia Pacific customers had received notices of the company's intent to raise prices beginning in April.

The increase would move the benchmark price for containerboard to about $740 a ton. Containerboard is a heavy-weight paper used to make corrugated cardboard for boxes and other packaging. Higher costs for containerboard typically get passed along in prices for corrugated boxes.

Georgia-Pacific's attempt to raise its price will likely be followed by price increases from other containerboard producers as well. Prices rose by $50 a ton on Sept. 1, ending a stretch of more than two years when prices were unchanged.

U.S. containerboard makers had difficulty getting customers to accept higher prices because sluggish economic growth and excess production capacity kept containerboard inventories high.

Industry consolidation and tightening inventories have lately given producers more pricing power going into the spring and summer when demand for shipping cartons usually increases.

"If [Georgia Pacific] has in fact announced an increase, I think it'll stick," said paper and packaging industry analyst Chip Dillon of Vertical Research Partners. "The supply and demand conditions are conducive for prices going up."

Shares of International Paper Co., (IP) the largest seller of industrial packaging, were recently up 2.8% at $41.20. Rock-Tenn Co. (RKT), the second-largest producer, was up 4% at $82.76 a share. Packaging Corp. of America (PKG) was up 3.3% at $82.22 a share and KapStone Paper & Packaging Corp. (KS), which instigated the last price increase, recently was up 2.2% at $25.81 a share.

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