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Strategic & Financial Arguments(TM)
for the pulp and paper industry worldwide

April 2018

Participating as industry experts in pulp and paper financing and M & A deals around the world  for over two decades, we continue to see the same mistakes made over and over.  This newsletter is designed to help you avoid costly mistakes we have seen others make.  We will be giving you one or two points each month to help improve your performance.
Future headwinds for containerboard?

By Jim Thompson

Interest rates are rising and the President of the United States has Amazon in his sights...does this spell trouble for the ten year bull market in US containerboard expansion? 

Possibly, but I don't think so.  Amazon may be the leader in near-instant gratification, but they are not the only duck in the pond, so to speak.  And near-instant gratification requires corrugated boxes, lots of them.  If I were to bet on bricks-and-mortar stores or  containerboard, I would still bet on containerboard.

As for interest rates, there are plenty of containerboard assets funded at rates higher than the current rates, indeed higher than the wildest predictions for interest rates in the next year or two. So, the ROI goes down fractionally, that is not going to have much of an effect, especially if there is a demand for the boxes.

Then there is the ace in the hole--China's stringent new standards for incoming waste paper.  This has been the big news in the last six months, causing a nearly complete collapse in the price of recycled raw materials.
So, I am not much for predicting, but my guess is, for the near term, say the next five years, business is going to be much like it has been in the past ten years--likely strong growth will continue. 

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If you have a casual question or a major deal, call me on my personal cell phone - 404-822-3412 or email me at jthompson@taii.com. We are here to help.




Jim Thompson, CEO
Talo Analytic International, Inc.

JRT Banker's Engineer