When the AICC (American Independent Corrugated Box Association) was established, paper supply was insufficient. Those large carton packaging groups did not outflow enough paper suppliers to allow more independent carton companies to serve customers. As a result, many independent carton companies affected have joined together to form the AICC.
This is a huge opportunity, because the economy is still growing rapidly, so there are still a large number of new clients, and at that time, Asia and other emerging manufacturing markets in the world had not yet had a significant impact on the United States.
As a result, in the next ten years, the North American containerboard market continued to grow in capacity and demand growth gradually cooled, while other markets, especially Asia, began to grow exponentially. A new balance was found between the supply and demand of cardboard. At this point, all processors can operate without supply issues.
In 1990, North America accounted for 40% of the global containerboard production capacity, and today this number may be less than half-but most factories that existed at the time still exist.
Millions of new capacity has entered the market (millions of new capacity will be put into production in the next few years), which puts us in an oversupply situation. North American mills currently export more than 500,000 tons of cardboard to the market, many of which are developing their own papermaking systems. In the long run, no paper supply is needed. Recently, export prices have been falling. Although these markets are always up and down, the increase in domestic demand is unlikely to account for the sales of all new paper machines and paper machines put into operation in the next few years.
Worse, the trend of low gram weight will continue. The average basis weight of corrugated cardboard sold in North America in 1990 was almost 140 pounds per thousand square feet. Today, this number has reached a mid-to-high level of 120 pounds and is declining every year. When the unit weight of composite corrugated cardboard dropped rapidly, the paper mill here invested heavily in the production of 42 pounds of kraft paper. This trend is expected not only to continue, but also to accelerate, which is why in the near future a large number of new tonnages can produce very low and low gram weight paper.
In 1990, 16 large carton packaging groups accounted for 74% of the market and more than 50 companies owned paper mills. Today, four paper and packaging groups account for 76% of the market and a total of about 20 companies own paper mills. To date, this concentration of economic power has succeeded in keeping prices high, which is good for the paper and packaging group, as well as for independent carton mills.
But in my opinion, in a limited time, they will be able to violate the basic laws of supply and demand. The export market is drying up, new competition will drive lower-weight paper, and a new plant that is about to start production will be able to produce lighter paper. RISI has announced that the price of linerboard has fallen by $ 10 per ton in the past two months. In any case, the entire concept of the North American containerboard free market is an extension, because independent carton mills are buying so little tonnage. In any case, the downward trend in prices is expected to continue unless major paper and packaging groups start closing paper mills.
Technical innovation is also constantly changing the face of corrugated packaging processing. In 1990, the standard format of the corrugated board production line was 87 inches, and the average speed was 500 vertical feet per minute. Today's standard is a 110-inch machine running at a rate of 1,000 vertical feet per minute.
Processing equipment used to take half an hour to prepare orders. Its maximum output reached 5,000 per hour, but now it usually takes only two minutes to prepare and run more than 20,000 cartons per hour. Digital printing has changed from a "curious thing" to an integral part of the daily production and operation of many processors. Digital printing presses currently exceed 200 feet per minute, formatting up to 6 feet, and a total potential production area of 5376,000 square feet per 8-hour shift. With the increase of speed and continuous improvement of printing quality, they will start to bring real development to flexographic printing.
的 The biggest problem that my customers and friends have told me is that it is difficult to attract qualified employees at all levels. Unemployment is at historically low levels, and attracting and retaining high-quality employees is becoming a problem for most SMEs. In addition, the work ethic and overall mentality of young employees are different from those of our older baby boomers.
需要 On the question of how to motivate the younger generation, new strategies need to be formulated. For them, more downtime and the quality of the work environment seem to be more important than the overall salary level. They also don't seem to like staying in the same position for several years. Everyone seems worried about a recession in the near future. The current economic expansion has broken the old record of 120 months of continuous growth in history. Of course, this expansion must end at some point, and when it ends, some companies will be in trouble and people will be hurt.
Therefore, the North American market has oversupply of paper and the demand for corrugated paper products has grown slowly. Therefore, it is necessary to purchase expensive equipment to maintain competitiveness while transitioning to low-weight packaging, as well as difficulties in attracting and maintaining employees. One might think that the prospects for the corrugated packaging processing business may be slightly bleak. However, there is always a light in the darkness, isn't it? In this case, processors must accept these trends and find ways to move forward. In my opinion, this is a great opportunity. The reasons are as follows:
-Although the problem of oversupply will not go away, processors must learn to adapt to a period of falling cardboard prices. It's been too long for prices to rise to remember how to manage customer relationships in an environment of falling prices. But this is certainly possible, and independent carton mills must start developing these plans immediately. Customer contracts must reflect this new reality, and negotiations with suppliers will need to be more aggressive.
-Despite the high cost of new capital projects, interest rates are still historically low, and the current tax environment allows you to offset 100% of the year you buy equipment. In addition, the overall high cost of equipment and industrial real estate (which is also at very high levels in almost every major market) is a huge barrier to entry into the industry. The days when salespeople can compete with you by buying some old equipment and opening a shop in an old building. If someone wants to enter the processing business, they will not be allowed to make more investments.
-Although everyone seems afraid of decline, they also create opportunities. When a company with a strong balance sheet enters a recession, it will find some good deals in real estate and equipment. Similarly, there should be some qualified employees looking for a new home. The key is to stay financially strong when the recession hits. It's time to get all your financing in place, because interest rates are still low, clear your receivables and inventory. Pay more attention to those customers who pay slowly and make sure you don't bring them any excess inventory. Now is also the time to tighten credit, because if the recession hits, there will be more bankruptcy and insolvent customers to deal with.
-Increase your knowledge and experience to accumulate more experience in low-weight cardboard. See which machines can process and which machines can't, and develop a long-term strategy in corrugated board processing so that when the market fades, your customers start asking for it, and you're ready.
-Adopt high-speed processing equipment and start developing indicators to understand its impact on your operations. When you evaluate the profitability of an order, be sure to take time into account.
Change seems to be the only constant thing in the universe. Businessmen looking for future trends and starting to plan for them will have an advantage over competitors who respond more aggressively to changing market conditions. If you accept the changes that are happening, now is still a good time to become an excellent corrugated board processor.
Article link: Packaging Printing Industry Network