On Thursday, Jefferies provided an update on the containerboard industry, forecasting a price hike for linerboard that could significantly benefit International Paper and Packaging Corp (NYSE:PKG) of America. The firm's experts, after conducting industry channel checks, anticipate that the January linerboard price increase of $60-70 per ton will gain traction. They expect RISI, an industry pricing benchmark, to report a partial increase in the range of $20-50 per ton by February.
The firm's update comes in the wake of strong box demand observed in the fourth quarter, which is expected to persist. Growth has been noted particularly among smaller buyers and sellers, with regional producers experiencing a sharp uptick in orders. This trend is occurring despite January typically being a slower period for the industry, suggesting a robust demand environment. Jefferies highlighted that this demand, along with pre-buying activities and market share gains by independent converters, could lead to a stronger demand backdrop.
Should RISI report the anticipated price hike of $20-50, both International Paper and Packaging Corp of America stand to benefit significantly. The firm estimates that such a price increase could result in an EBITDA boost of 6-17% for the two companies.
Jefferies maintains a buy rating on both International Paper and Packaging Corp of America, signaling confidence in their market positions and financial outlooks. This positive outlook is based on the potential for increased profitability due to the projected rise in containerboard prices and the sustained demand in the industry.
Investors in International Paper and Packaging Corp of America will be watching closely as RISI updates its pricing data in February, which could confirm the anticipated benefits to these companies' bottom lines.
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