Paper packaging giant Greif is the latest containerboard producer to announce a price hike for the recycled fiber end product at the beginning of 2025, employing a tool the company has used throughout this year to offset higher OCC feedstock costs and account for other cost growth.
Ohio-headquartered Greif produces containerboard and other corrugated packaging products, as well as recycled paperboard. In a Dec. 5 call with investors, Chief Financial Officer Larry Hilsheimer noted that the company is in the process of rolling out a per ton containerboard price increase of $70 on linerboard and $100 on medium – the wavy internal layer of containerboard – set to take effect Jan. 1.
“Obviously, the demand dynamics in that space are very strong right now and we believe supports that price increase,” he said.
Other companies including Packaging Corporation of America, International Paper, Georgia-Pacific and Smurfit Westrock, have also announced plans for price hikes to start at the beginning of 2025.
Throughout most of 2024, OCC costs were elevated, starting the year trading for an average $87 per ton, more than double its price at the beginning of 2023, according to RecyclingMarkets.net. The grade climbed to $108 by June and July 2024, before beginning to fall back down. As of November, OCC averaged $77 per ton.
Increases in prices for raw materials, including OCC, cut into Greif’s paper packaging division profit, which decreased by 22% year over year, the company reported in its 2024 fiscal year earnings report covering the 12 months that ended Oct. 31.
But the profit dynamic stabilized by the fourth quarter, which ran from August through October. The company had increased recycled paperboard prices in July, and OCC prices began to taper off in September. For the fourth quarter, Greif reported $118.7 million in gross profit, nearly flat on the year.
Over the course of the year, the company reported its paper packaging and services division saw $2.3 billion in sales, up 2% year over year, which the company attributed to “higher average selling prices as a result of higher published containerboard and boxboard prices.”
Beyond the price and cost of its products, Hilsheimer said the underlying demand for Greif’s paper packaging products remains “mixed.”
“Containerboard and corrugated volumes are solid and operating rates of 90-plus percent,” Hilsheimer said. But the company’s sales volumes for recycled paperboard tubes and cores, which are used as the durable center of rolled products, have “continued to lag due to soft paper core demand,” he said. “This is driven by the overall boxboard industry, which is generally less positive than containerboard.”
While Greif and other paper firms are free to set their own prices for non-contractual sales, their contract sales pricing is typically set by price indexes, primarily Fastmarkets RISI. In its latest call, Greif noted RISI recently hiked finished product prices, which, combined with the recent decline in OCC prices, will benefit the company to the tune of an estimated $83 million.
Greif also reorganized its business into new divisions in its latest earnings report, which are separated by material type rather than market type. The divisions are sustainable fiber solutions, customized polymer solutions, durable metal solutions and integrated solutions.
“Making steel drums is very different from making polymer drums, which is again different from making small plastics or tube and cores,” CEO Ole Rosgaard told investment analysts on the call. “So aligning operations by material solution greatly enhances our ability to leverage our five distinct competitive advantages.”
