Mills have the runway to continue providing that over the next few years. And then you have to assume, as we have always done, we can grow the containerboard supply as we need to, whether it’s adding capacity in an existing mill or if we had to go out and buy a mill or build a mill. There’s a lot of optionality in the future that we have the ability to proceed with. But that’s never been an issue for us. And I don’t expect it to be an issue in the future. But right now, the key is that we have tremendous capability within the converting side of the packaging unit and the mill system to provide the containerboard to grow for the next number of years. So I’m very, very encouraged by where we are.
Mike Roxland: That’s great, Mark and very good call. I really appreciate it. And best of luck in 2024.
Mark Kowlzan: Thanks, Mike. Next question.
Operator: Our next question comes from George Staphos from Bank of America Securities. Please go ahead with your question.
Cashen Keeler: Yes. Hi, good morning. This is actually Cashen Keeler sitting in for George. He had an internal conflict this morning. So I guess just back to the pricing discussion. Are you able to comment at all in terms of what percent of your customer base you’re invoicing at those higher prices in both containerboard and boxes?
Tom Hassfurther: Well, with regard to linerboard and medium, I’m talking about linerboard of medium here. It’s 100% of our customers, outside customers on linerboard of medium and trade partners as well. So that’s where that stands. And I just like to add, we’re having no customer dispute us on these price increases or anything. And obviously we’re disappointed that it didn’t show up in the trade publication, as I mentioned earlier. And right now we have customers that are incredibly frustrated with the mechanism right now and feel that there’s a disconnect between what they see going on in the market and what’s being reported. Now maybe some of that is because the outside market has shrunk so severely that it’s quite small now.
And we don’t want the tail wagging the dog here, but we’ve got customers now both on the liner and the box side that are asking us to look for alternatives. And we’ll be exploring any and all alternatives going forward, including maybe not even using an index, but we’ll kind of give you some color on that going forward as that progresses. But I just wanted to make you aware of where our customer base is and how they feel about certain things at the moment.
Cashen Keeler: Okay. Appreciate that color. And then in terms of production, was the cost of production in 4Q where you had anticipated in packaging? I know you commented that you had lower operating converting costs year-over-year. But just interested if there were any items that were higher than you expected kind of in there? And as you look out for the rest of 1Q, any kind of cost items or lines that might give you pause. I know you commented the fiber and energy and chemist, but since shutdown those items.
Bob Mundy: Yes. This is Bob. I would just say, relative to 4Q, maybe OCC prices that was probably a little higher than what we had baked in. But maybe there were some, what we call, other fixed type costs around some services and equipment rentals, some outside, things like that, maybe just a touch higher. But all in, it was certainly a very good quarter from a cost perspective relative to what we had guided to. As far as the first – going to the first quarter from the fourth, there are some moving parts there. Some of them are just not what we normally see. Obviously, we pointed out the big significant change that we’re being impacted by relative to the Jackson conversion, which is on a sequential basis, is $0.16 per share.
But outside of that, if you look at all of our other costs, there’s probably 60% or so of those are what we call seasonal or timing type cost increases. Those would be weather-related, which are actually a little more severe going 4Q to 1Q this year, because of so much cold weather down in the southern mills and the box plants, which typically we don’t see much of a change relative to usages and things that get impacted by cold weather down there. And then the wages and benefits. The base – that base gets larger every year. You never have deflation with your wages and benefits. So the annual increases that we experienced going from 4Q and to start a new year in 1Q, it just gets higher and higher, the dollar impact of that. Plus this year, our medical costs alone, they were up probably over 12% to 15%.
However, on a sequential basis, the weather-related items should flip back the other way as we move from 1Q to 2Q and 2Q to 3Q, as should about half of the – those wage-related timing items. Those start to flip back the other way on a sequential basis. You have to sort of keep that in mind going forward. And I’d say the balance of well, I guess one other item is we talked about bringing Wallula on in the first quarter and taking Jackson down, so we’re replacing low-cost tons with very high cost tons. That’s a – that’s probably a $0.10 hit in and of itself right there, exclusive of the outage impact that $0.16. And then the balance of that is just inflation related things that don’t get talked about a lot. For all these cost increases we incur, believe me, anyone who provides a part, a good product service to us, they’re experiencing those same increases.
So there’s a lot of outside services, equipment rentals, rents, property taxes even. You can go on and on and on. All that is – it’s a lot of money that we have to absorb especially on – you see it mostly in a sequential nature going from 4Q to 1Q. So, I hope that gives you a little color about what’s in those numbers for the – for our guidance.
