In late 2022, the “cardboard box recession” began to take shape, echoing echoes of the Great Financial Crisis, according to some analysts. Packaging companies worldwide anticipated a rise in containerboard demand by the end of last year, spurred by new mill productions, but reports last spring suggested this boost might not materialize until 2024.
Now, halfway through this year, a seasoned paper and packaging analyst suggests that the U.S. box recession is finally nearing its conclusion, which bodes well for the broader economy.
“Why does the corrugated box market matter?” asks George Staphos, a senior analyst at Bank of America Securities, speaking on Yahoo Finance’s “Market Domination” in mid-June. “Essentially, 80 percent of the economy relies on corrugated boxes. Despite economic progress, we’ve been in a packaging slump since late 2022 due to destocking for various reasons.”
According to Staphos, independent box makers surveyed by BofA Securities have revised their growth forecasts for box shipments from 0.6 percent to over 3 percent, which he considers a significant improvement.
“Moreover, respondents overwhelmingly expect prices to continue rising,” he adds. “This is largely driven by inflation and rising costs, but it reflects confidence that prices will continue to climb.”
Staphos notes that current box shipment levels are comparable to those seen in 2016, indicating that despite economic growth, box shipments have lagged until recently.
“The uptick in shipments suggests that consumer demand remains robust, and restocking activities may be underway,” he explains. “Additionally, our survey data shows some optimism around e-commerce, prompting us to revise our pricing and earnings forecasts upward by 2 to 4 percent.”
This positive outlook comes after a period of price declines for old corrugated containers (OCC) and mixed paper, which saw significant drops in late 2022 and slow recoveries thereafter.
“Prices initially surged by over $200 per ton, a 20 percent increase from late 2020 to early 2022,” Staphos recalls. “Then, they dropped by about $100 per ton during the destocking phase of the recession. Meanwhile, costs for labor, freight, and fiber have continued to rise.”
“The packaging industry relies heavily on recycled fiber, a green market where prices have also risen by approximately $100 per ton when factoring in transportation premiums,” he adds. “As a result, containerboard companies are now adjusting prices upward to offset these rising costs and hopefully meet increased demand.”
Survey results reflect this cautious optimism. According to Staphos’ report, 62 percent of respondents anticipate stronger demand over the next six to twelve months, compared to 39 percent who held this view in April.
Reference: Recycling Today – End of the Cardboard Box Recession in the US
