Cardboard producers will freeze prices for several months

The government agreed with manufacturers of components for corrugated packaging, which rose sharply in price in 2023, to freeze prices for several months. The FAS began an investigation at the end of the year and has already managed to initiate an antimonopoly case, but market participants do not agree with the regulator’s methodology regarding both assessing the boundaries of the market and taking into account pricing within vertically integrated companies. Experts warn that long-term price suppression will negatively affect the investment potential of companies.

Key manufacturers of containerboard (used as a component in the production of corrugated cardboard and corrugated packaging), following a meeting at the Ministry of Industry and Trade on January 23, agreed to maintain prices for their products at the current level for three to six months, sources familiar with the situation told Kommersant. The meeting was attended by the largest players in the sector and representatives of the Federal Antimonopoly Service. This information was confirmed to Kommersant by Alexey Dyachenko, sales director of the Arkhangelsk Pulp and Paper Mill. In his opinion, at the moment the situation in the industry has stabilized, a common understanding of what is happening has been achieved, and no new steps are required from the government.

At the end of 2023, the FAS raised the issue of increasing the cost of containerboard. The regulator sent requests to justify prices for these products to the main industry participants, and on January 22 announced the initiation of an antimonopoly case against APPM. According to the department, the company increased prices for cardboard and paper from August to November 2023 by 42.3% and 41.4%, respectively. As the FAS explained to Kommersant, if the company’s guilt is proven, it faces a turnover fine of up to 15% of revenue in the market where the violation was committed. Kommersant’s sources in the industry remind us that maximum turnover fines are an extreme measure, and the FAS almost never uses it.

APPM notes that the price increase is of a recovery nature after a two-fold drop at the beginning of 2022. It also explains that the manufacturer and the regulator have different views on the evaluation of the containerboard market. “Now FAS separates the segments of cellulose and waste paper products, although in fact this is a single market,” says Alexey Dyachenko. “In addition, technologies for the production of waste paper containerboard have gone far ahead, which brings waste paper grades closer in properties to cellulose, and they are interchangeable.”

In addition, the plant draws attention to the fact that raw materials for the production of corrugated packaging are often sold within vertically integrated holdings, which structure such processes differently. For example, at APPM, the production of containerboard and the final product – cardboard boxes – is carried out by two different legal entities, between which there is a purchase and sale agreement for raw materials (the company within the group processes more than half of the containerboard produced). While enterprises with production within the same legal entity will not fall within the boundaries of the market and the FAS assessment. “We disagree with the FAS in market assessments and methods, but I am sure that we will come to a common understanding and solution,” noted Mr. Dyachenko.

Officially, the companies did not comment on the results of the meeting. The Ministry of Industry and Trade told Kommersant that the meeting was of a departmental nature, and based on its results a protocol with decisions and recommendations for industry participants will be formulated. The FAS told Kommersant that it will continue its economic analysis of the situation on the market for cardboard and paper used to make corrugated cardboard.

President of Soyuznapitki Maxim Novikov notes that the cost of container cardboard accounts for 80-85% of the prices for corrugated cardboard, the largest share of which in the soft drink industry is accounted for by the transportation of juices. According to him, freezing the price of cardboard for a certain period will help manufacturers curb the selling price of drinks. Freezing packaging prices, even temporary, can have a positive effect on the market, agrees Dmitry Leonov, deputy chairman of the board of Rusprodsoyuz. “The main thing is that after the agreements expire, prices for packaging do not increase exponentially,” he emphasizes. At the same time, a Kommersant source among food manufacturers noted that the cost of container board plays a small role in the formation of food inflation.

Managing Partner of the Center for System Solutions Denis Kondratiev agrees that it is necessary to clarify the methods for assessing the containerboard market by the FAS, especially taking into account the fact that the state requires the use of at least 30% of waste paper in the production of corrugated cardboard. According to him, waste cardboard now occupies a more significant market share than cellulose cardboard (for example, out of 56 manufacturing companies, only six make cellulose cardboard). The expert also notes that long-term containment of cardboard prices could negatively impact the sector, and a more effective solution would be subsidies for end consumers of packaged products.

Olga Mordyushenko, Anatoly Kostyrev