Price Increases Offset Higher OCC Costs for End Users
In the world of paper packaging, Greif is making moves to offset higher costs and keep up with the demand. The Ohio-based company, known for producing containerboard and corrugated packaging products, recently revealed plans to increase prices on recycled fiber products at the start of 2025. This strategy aims to counterbalance rising costs of the raw material used in production, like OCC, and account for overall cost growth.
During a recent call with investors, Greif’s chief financial officer, Larry Hilsheimer, shared that the company will be implementing a price increase of $70 per ton on linerboard and $100 per ton on medium, the inner layer of containerboard, effective January 1st. Hilsheimer highlighted the strong demand in the market as a driving force behind this decision.
It’s not just Greif making adjustments – other industry players such as Packaging Corporation of America, International Paper, Georgia-Pacific, and Smurfit Westrock have also announced upcoming price hikes for early 2025. This trend reflects the broader market conditions where costs for raw materials, particularly OCC, have been on the rise throughout most of 2024. Starting the year at an average of $87 per ton, OCC peaked at $108 per ton in mid-2024, before gradually decreasing to $77 per ton by November.
Despite facing some profit decline earlier in the year due to increased raw material costs, Greif managed to stabilize its profit margins by the fourth quarter. By adjusting recycled paperboard prices in July and observing a decline in OCC prices starting in September, the company reported a near-flat gross profit of $118.7 million for the fourth quarter. Overall, in the 2024 fiscal year, Greif’s paper packaging and services division generated $2.3 billion in sales, marking a 2% increase from the previous year.
Looking ahead, while demand for Greif’s containerboard and corrugated products remains strong, sales volumes for recycled paperboard tubes and cores have lagged behind due to lower demand. Despite these challenges, Greif is optimistic about the future, especially with the recent increase in finished product prices and the decline in OCC prices which are expected to benefit the company by an estimated $83 million.
In addition to pricing strategies, Greif also announced a reorganization of its business divisions, categorizing them by material type rather than market type. This shift, aimed at leveraging the company’s competitive strengths, includes divisions focused on sustainable fiber solutions, customized polymer solutions, durable metal solutions, and integrated solutions.
With ongoing adjustments to offset rising costs and meet market demands, Greif and other industry players are navigating a dynamic landscape while keeping their eyes on profitability and sustainability.
