Recently, the boxboard paper market in North America has changed its gloomy situation and seems to be showing a glimmer of hope, which has drawn widespread attention and discussion within the industry. Despite the remaining challenges, a series of positive signals indicate that the industry may be on the verge of a golden period of development.
Current market situation: Challenges and opportunities coexist
According to the monthly data released by Fastmarkets RISI in Pulp & Paper Weekly, the price and demand of the North American containerboard market in June were basically the same as those in May. The report indicates that although the demand for cartons has fluctuated, it generally shows a slightly improving trend. However, some insiders in RISI have also expressed concerns, believing that the current market uncertainty has intensified and the future demand trend remains difficult to predict. This view reflects that after experiencing previous fluctuations, the market still holds a cautious attitude towards its future direction.
Although the market performance stabilized in June, analysts at Bank of America Securities predict that the price of boxboard paper may face downward pressure after June. In the latest boxboard market research report released on June 17th, they pointed out that the 18 independent corrugated box manufacturers surveyed generally believe that "the corrugated paper market is deteriorating". It is worth noting that currently about 61% of the respondents expect the price of boxboard paper to fall soon rather than rise, a significant increase from 11% in March. Meanwhile, 67% of the respondents believe that the possibility of boxboard paper prices falling is greater than that of rising, which undoubtedly casts a shadow over the short-term market.
George Stafoss, a research analyst at Bank of America Securities, expressed curiosity about this phenomenon in a memo. He pointed out: "Although there are also some positive aspects in the data, the results of this survey are weaker than those of our recent comments at the industry roundtable, which piques our curiosity." Our experience shows that before the benchmark price of the report drops, it usually takes several months of weakness. He further speculated that respondents might not have fully felt the impact of the recent factory closures, which could be one of the reasons for the spread of short-term pessimism.
Capacity optimization: A catalyst for structural transformation
However, while the market is concerned about the short-term price trend, a series of significant factory closures are regarded by analysts as key factors driving the boxboard paper industry into a period of active transformation. Michael Roxland, a senior paper and packaging analyst at Trust Securities, pointed out in a report to investors on June 22 that by 2025, major producers including Georgia Pacific, International Paper, and Smurphy-Weslek have announced the closure of their boxboard paper mills. These shutdowns are equivalent to a loss of approximately 5.5% of boxboard production capacity in North America. RISI sources also revealed that more factories might face closure in the coming months, further reinforcing expectations of a tightening market supply.
In a memo on June 17th, Roxland expressed a positive outlook on these changes. He firmly stated, "We believe that the North American boxboard market has entered a golden age," and expected this "golden age" to continue for at least the next few years. He believes that this positive transformation will be driven by an improvement in the balance between supply and demand, which "mainly benefits from rationalization of supply aimed at reducing costs, increasing output and efficiency". This optimization of the supply and demand balance stands in sharp contrast to the persistent oversupply that analysts have been talking about for several years, especially after the slowdown in demand growth caused by the COVID-19 pandemic.
Leadership transformation and strategic focus shift
In addition, the new leadership of industry giants such as International Paper and Smurphy-Vislock has also readjusted their company strategies. They have focused their strategic efforts on cost control, enhancing profitability and improving profit margins. Roxland emphasized that these aspects had not received the attention they deserved before, and the current strategic adjustment will help improve the health of the entire industry.
He said, "Conversely, we believe this could drive a structural transformation in the industry, thereby achieving sustained price increases and enhanced profitability." This view indicates that under the leadership of the new leadership, the industry will pay more attention to long-term sustainable development and value creation rather than merely pursuing market share.
Roxland concluded that, on the whole, the current transformation in the boxboard paper industry indicates that the industry "is becoming a worthy investment industry throughout the cycle." This means that although there may be price fluctuations and demand uncertainties in the short term, in the long run, the fundamentals of the boxboard paper industry are improving and its investment value is also increasing accordingly.
Demand expectations: Bottoming out and rebounding, with an optimistic outlook
Although a survey by Bank of America shows that growth expectations for the next two quarters have weakened, with a 1% decline expected, compared to a 0.5% growth forecast in March, respondents' demand expectations are not as pessimistic as those in the full-box survey conducted by Bank of America in March.
Looking back at the previous market situation, a survey conducted in March this year showed that nearly half of the respondents indicated that the current demand was worse than it was three months ago. This proportion was much higher than 8% in January and zero in November 2024. This indicates that the feeling of weak market demand was very strong at that time. However, the latest June survey shows that only 28% of respondents said demand was worse than it was three months ago. This is undoubtedly a positive signal, indicating that the downward pressure on demand is easing. Although the proportion of respondents who believe demand has improved rose by only 3% to 22%, the main contribution to the quarterly change lies with those who think demand remains unchanged. In June, this proportion reached 50%, significantly higher than 33% in March. This indicates that the market's view on demand has stabilized, eliminating the previously widespread pessimism.
What is even more encouraging is that the market shows a more obvious optimistic attitude towards the demand sentiment in the next 6 to 12 months. A survey shows that only 12% of respondents believe that future demand will be worse, a proportion far lower than 30% in March and zero in January. More than half of the respondents now believe that future demand will remain unchanged, which indicates a relatively stable growth expectation.
Of course, tariffs and other changing geopolitical factors may have an impact on these fiber markets in the coming months, bringing new uncertainties to the market. The complexity of the global economy and the fragility of supply chains may both affect the demand and price of boxboard paper to a certain extent. However, as of a survey by Bank of America in June, 72% of respondents said they had not seen an increase in inventory related to tariffs or other supply chain factors. This indicates that, at least for now, external factors have not yet had a significant impact on inventory levels, and it also indirectly suggests the relatively healthy supply and demand relationship in the market.
Overall, the boxboard paper market in North America is undergoing a complex transitional period. In the short term, prices may face downward pressure, but to a large extent, this pressure is a lagging reflection of the previous market weakness. In the long term, the closure of factories and the optimization of production capacity, as well as the renewed focus of industry leadership on costs and profitability, are driving the boxboard paper industry to undergo structural adjustments, leading it towards a healthier balance between supply and demand.
Market expectations for future demand also show signs of bottoming out and rebounding. Although the growth rate may be relatively moderate, the stability of demand is strengthening and pessimism is gradually dissipating. Although the potential impact of geopolitical and macroeconomic factors still needs to be guarded against, the positive changes within the industry are making it a more resilient and investment-worthy area.
