Despite continued tight containerboard supply, the success of the announced October containerboard price hike and pass-through to box prices has grown somewhat more doubtful based on September survey conducted by Longbow Research analyst Joshua Zaret.
The primary findings of Mr. Zaret's survey were:

• Reduced Optimism. The percentage of respondents articulating a "weak" three-month demand outlook rose from 5% to 25%, while those having a "strong" outlook declined from 30% to 15%. Demand is widely seen as moderating, but not falling off a cliff.
• Demand Increasingly Seen as “Lower than Normal.” Nearly half of respondents (43%) reported current demand as atypical for the month of September versus 13% in August. Of those who felt demand was atypical, 93% saw it as weaker than usual, i.e., a muted seasonal pickup. Many believe consumer behavior is being impacted by economic fears.
• Tight Containerboard Supply Continues. A high proportion (83%) of those surveyed reported same-to-tighter containerboard supply. The tightness was attributed to unplanned mill outages and planned supply-side management. "We note that weeks of supply at the end of August was the lowest level ever recorded for that month."
• Mixed Price Outlook. Views on the likelihood of an October containerboard price hike of $60/ton and pass-through to boxes were mixed in terms of timing and amount realized. Half felt the containerboard price hike would be successful to some extent while a third felt it would not. Only 35% believe the full $60/ton will be realized. If the price hike succeeds, the majority felt it would then be passed through to boxes. Several felt March/April was a more realistic timeframe.
• Mr. Zaret maintained his Buy ratings on the related stocks , "Particularly in light of the recent share price decline, given our belief that industry consolidation and rationalization will lead to improved pricing power. The next few months will likely be a battle between supply-side discipline and weaker demand. If the current price initiative were to fail, we would then expect it to be implemented in 1H 2009." 


Mr. Zaret said these trends affect International Paper (IP), Packaging Corporation of America (PKG), Rock Tenn (RKT), Smufit Stone (SSCC) and Temple Inland (TIN), though he did not change any of his ratings these stocks.