The Cardboard Box Recession: Signs of Recovery and Optimism in the Packaging Industry
In late 2022, the “cardboard box recession” began. Some analysts compared it to the Great Financial Crisis. Packaging companies expected a rise in containerboard demand by the end of last year. However, reports suggested this boost might not come until 2024.
U.S. Box Recession Nearing Its End
Now, halfway through this year, analysts believe the U.S. box recession is ending. This recovery could have a positive effect on the broader economy.
Why the Corrugated Box Market Matters
“Why does the corrugated box market matter?” asks George Staphos, a senior analyst at Bank of America Securities. He explains that 80 percent of the economy relies on corrugated boxes. Despite economic progress, the packaging industry has faced a slump since late 2022. This slump was due to destocking for various reasons.
Growth Forecasts Are Improving
Independent box makers have revised their growth forecasts. Box shipments are now expected to grow by over 3 percent, up from 0.6 percent. This is a significant improvement. It shows growing confidence in the packaging market.
Rising Prices Reflect Confidence
“Prices are expected to keep rising,” says Staphos. This is driven by inflation and rising costs. However, it also shows confidence that prices will continue to climb. This trend is helping to strengthen the market.
Strong Consumer Demand and E-Commerce Optimism
“The rise in shipments shows strong consumer demand,” Staphos explains. Restocking activities are also underway. Survey data shows optimism about e-commerce. This is helping to revise pricing and earnings forecasts upward by 2 to 4 percent.
Rising Costs Affecting the Industry
The positive outlook follows a period of price drops for old corrugated containers (OCC) and mixed paper. These prices fell sharply in late 2022 and recovered slowly. Meanwhile, costs for labor, freight, and fiber have been rising.
Meeting Increased Demand
The packaging industry relies on recycled fiber. Prices for recycled fiber have risen by about $100 per ton. These higher prices include transportation costs. As a result, containerboard companies are adjusting prices upward to offset these rising costs.
Growing Confidence for the Future
Survey results show growing optimism. According to Staphos’ report, 62 percent of respondents expect stronger demand in the next six to twelve months. In April, only 39 percent felt the same way. This reflects a significant shift toward recovery in the packaging sector.
Reference: Recycling Today – End of the Cardboard Box Recession in the US
