Gabrial Hajde: It does. It absolutely does. And then maybe the low-hanging fruit just to make sure we kind of have math calibrated right. If I extrapolate out the comment that you guys made it seems to imply maybe 16 million square feet for the first quarter or down 4% to 5% or so on a year-over-year basis. I’m assuming that whatever your experience has been thus far in January, went into that calculation, and it’s the best estimate in terms of backlogs and what you have line of fight to.
Thomas Hassfurther: Yes. That’s a fair assumption, Gabe.
Operator: Our next question comes from Cleve Rueckert from UBS.
Cleveland Rueckert: Just a couple of follow-ups for me. I wanted to just ask more specifically on the work that you’re doing at Jackson. I’m wondering, does that change PCA’s capability and product offering at all? In other words, are there new market opportunities from that project? Or is it more just about optimizing your existing book of business?
Mark Kowlzan: Yes, I’ll let Tom take care of that.
Thomas Hassfurther: Cleve, what it does is it enhances some of our proprietary capabilities. That’s how I would put it. And we need that, quite frankly. So that’s the big short-term objective. And then obviously, we talked about the longer-term objective in Phase 2 being that ability to grow with our customers.
Cleveland Rueckert: Okay. That makes sense. And then just a couple of quick follow-ups, inventories, you talked about them a couple of times. I just explicitly like where are inventories relative to where you would like them versus your plan in containerboard.
Mark Kowlzan: Well, we never give absolute numbers. Again, we dropped down 60-some-odd thousand tons from the third quarter to the end of the fourth quarter. We’re going to build, again, some extra inventory in January, February period to get ready for the outages at the DeRidder, Louisiana mill and the Counce, Tennessee mill. It’s not an extraordinary amount of inventory. It’s just a little bit of insurance cushion here for making sure that we take care of the box plants. But I think I will say it this way. What we ended the year 2022 with, we’re in a good comfortable range of where we need to be now going forward with what we’re seeing in the marketplace demand and our capabilities now. So this lower inventory certainly meets the current requirements.
But with just a little bit extra build to get us through these big outages. Annual outages are always an uncertainty. You never know what could happen. Obviously, we’re very good at what we do, but we always plan to try to mitigate some risks and the risk mitigation comes in a little bit of an insurance policy with some extra inventory on hand to make sure the box plants are well taken care of and our outside customers.
Cleveland Rueckert: Right. I think that makes a lot of sense. And that’s very clear. And then I know you said that the #1 machine is down at Jackson is idled temporarily. I mean, are you expecting to take any other economic downtime in Q1? Or is it really more about maintenance in the first quarter?
Mark Kowlzan: I’ll let you know in April, what we did.
Operator: Our next question comes from Anthony Pettinari from Citi.
Anthony Pettinari: Just a couple of follow-ups, Mark or Tom, the second phase of the Jackson conversion that you’re postponing from spring, maybe until next year or beyond, sorry if I missed this, is there a capacity number that you would kind of associate with that second phase or any kind of finer point you can put on that?
Mark Kowlzan: Well, I’ll go by historically what we said in the last 2 years. The ultimate project at Jackson would on paper, get us a 2,000 ton a day containerboard machine. It would be one of the largest machines in the Western Hemisphere in terms of productivity and if you could understand and appreciate our efficiencies, it will not only be one of the largest, most productive virgin kraft linerboard machines in the Western Hemisphere, but it will be one of the lowest cost machines. And so I said we started up last week. We’re in that 1,300 ton a day rate right now. We’re obviously — we’ll probably push the machine and see what we — like having a new toy. We’re going to see what it will do for us over the next month or two.
What are the limitations and making sure we haven’t missed anything from a process point of view. And if we missed anything, then we have ample time to correct it over the course of the months ahead of us. But ultimately, the final phase will give us the extra drying and the speed on the paper machine to take us from let’s just say we could run 1,500 tons a day right now with the machine we have. the last phase of work gets us that extra 500 tons a day, just to help you with some math.
Anthony Pettinari: Okay. That’s very helpful. And then just another quick question. You talked about the fiber flexibility projects. And with those done, where does that put your fiber mix or your ability to maybe flex from Virgin to OCC? And then just maybe a related question. I mean, I think historically, you’ve talked about the customer preference and the benefits of kraft liner, it seems like the price spread between kraft liner and recycled has kind of moved up a bit or moved out a bit. Are your customers — do you see any specific trend in terms of increased demand for recycled or vice versa? Or just kind of how is that dynamic playing out? And what do your capabilities look like now to move between the two.
Mark Kowlzan: I’ll answer part of that, and I’ll let Tom answer part of that. We talked about some of these fiber flexibility projects. The biggest ones at the Wallula Mill, we over a 2.5-year period, we added a big OCC plant out there and then did completely rebuild the woodyard and improved our chip handling, chip screening and fiber yield capability in the woodyard but now Wallula has the ultimate flexibility to push OCC at very high rates if the pricing and availability is there. And then we just finished up the big OCC project at Jackson in conjunction with the rest of the work at the mill. And so Jackson, Counce, DeRidder, Wallula in terms of our linerboard mills primarily linerboard, even though DeRidder and Jackson and Wallula can make medium, but they have incredible opportunity to flex the amount of OCC, DLK that goes into the furnish depending on pricing and opportunities to take advantage of various fiber sources.
And so I think if you did the math, and I’m not — I don’t have this right now, Bob might have this, but we’re probably still around 20% in total — of our total makeup of what would be OCC, DLK and virgin fiber. But we have now improved significantly by mill, what we can use in any given day. Tom, do you want to add?
Thomas Hassfurther: Yes, yes. I’ll just add, Anthony, from a customer point of view, what do our customers want? They want the same thing we want, and that is performance. And one of our advantages being primarily virgin is that we have a lot more opportunity to hit the performance numbers at particular basis weights that I think give us a distinct advantage so that we can take advantage of all this fiber flexibility that we have, and we can also minimize some chemical use and some other things in that process. So that’s really how we view our — what our output from our mills is performance-based, and I mentioned some proprietary products that we have, and those are all based around performance.
Operator: Our next question comes from John Dunigan from Jefferies.
Philip Ng: It’s actually Phil. I guess a quick question. Great results in a tough backdrop. I guess my first question is normal cadence of prices moving higher with — on the container wood side, we kind of have a good feel for how that kind of flows through your P&L. Does that dynamic from a timing perspective accelerate when prices fall, and in this current environment, have you seen more business actually put up off for bid lately?
