Due to the continued impact of the epidemic, the global carton demand and price system has been in dynamic adjustment. As the global economic situation and related policies continue to change, commodity experts and financial analysts generally believe that the carton market will still experience more volatility in the future.
According to data released by Fastmarkets RISI on Friday, North American box board prices have remained stable since August. After several price increases in 2024, this leveling off is in line with market expectations. According to the latest survey results from Bank of America Global Research, respondents generally believe that carton prices will not rise again until early 2025.
"Market demand continues to improve and factory inventories are now at 4-6 week levels, a slight increase from last month," Michael Loxland, senior paper and packaging analyst at Truist, noted in a report released Sept. 22. He further stressed that average daily demand in the third quarter had improved from the second quarter. "Overall, carton manufacturers have balanced supply and demand through moderate production cuts, while the carton market has gradually stabilized after several price increases."
Cascades, North America's sixth-largest producer of box board, announced that it will raise its prices effective Oct. 7. Among them, the price of cow cardboard is $40 per ton, the price of corrugated paper is $70 per ton, and the price of white cow cardboard is $40 per ton.
Cascades' price increase is its third such increase in 2024. In general, when one company is the first to raise prices, other competitors will follow. For now, however, it does not appear that other large paper producers have followed Cascades' price hike.
Michael Loxland, senior paper and packaging analyst at Truist, said it was estimated that about 80 percent of buyers and sellers reported that prices had remained unchanged, while the rest reported that prices had declined. Loxland believes Cascades' decision may have had something to do with the unexpected shutdown of its new plant in Bear Island, Virginia. In addition, he noted in a Sept. 16 report that large purchases of corrugated media in the market by large conglomerates, as well as rising labor and operating costs, may also be contributing to Cascades' price increases.
Loxland also noted in the report that while prices for old corrugated boxes have fallen recently, the cost of raw materials is still high (up 245% from January 2023), so Cascades' decision to raise prices makes sense.
This follows a round of price increases by companies such as Pratt Industries, Murphy-Westlock and Graphic Packaging International, which led to a $20 per ton increase in CRB prices, the first increase since October 2023. While there have been reports of weakening market demand, prices for solid bleached sulphates and uncoated recycled paperboards have remained stable.
At the same time, RBC Capital Markets reported that Finnish paper giant Finlin Cardboard plans to raise the price of its FBB and food packaging cardboard by 85 euros/ton from November 1. These price adjustments take place against the backdrop of a complex and volatile global economic environment, and the market remains uncertain about when demand will recover.
Derek Marburg, director of printing and packaging for North America at Fastmarkets RISI, said in a September 18 webinar: "The carton industry has been in a downturn for the past year and a half to two years. "We see that carton shipments have fallen to 2016 or 2017 levels and have stagnated there for a long time, which is a clear departure from previous trends."
Marburg noted that traditionally, carton shipments in the retail and commodity sectors are closely linked to overall economic activity. During the pandemic, however, that link was broken. At the beginning of the epidemic, orders surged due to supply chain disruptions, and then gradually decreased, entering a long-term destocking phase. While packaging companies say the destocking process is largely over, inflation is still holding back consumer spending.
Analysts pointed out that the global carton overcapacity is about 22 million tons, of which the Asian region has the most serious surplus, reaching 16 million tons, followed by Europe and Latin America, and there is no excess capacity in North America. In order to cope with the impact of destocking, a number of packaging companies in North America have been reducing production, or even closing or idling some capacity. At present, the industry's operating rate is still below its recent peak. Fastmarkets RISI expects that by 2026, the overall operating rate of the global carton industry is expected to return to the level between 2010 and 2019.
This trend follows the recent commissioning of a number of new facilities in North America to process recycled raw materials. Most of these new devices will be operational by 2023. With the exception of Graphic Packaging International's upcoming new plant in WACO, Texas, it is unlikely that there will be any other large projects on the market in the near term. "Producers in North America seem to be in a wait-and-see attitude to see if demand can really return to healthy levels that will allow factories to run at higher rates." Only then will the market be ready for the next round of new capacity." "Marburg said.
Bank of America's 40th survey of the carton industry, released on September 12, found similar results. Growth for the next two quarters is expected to be 2 per cent, down slightly from the 3.4 per cent forecast in June, according to the survey of 25 industry figures. Respondents also cited continued increases in transportation and labor costs as having a negative impact on their business.
Bank of America research analyst George Stafos wrote: "While customers are bidding more for business, carton mills are still busy heading into the fall. When prices were rising earlier this year, customers might have turned to other suppliers to reduce costs, but this has eased now that demand is strong."
Looking ahead, manufacturers are also keeping a close eye on the possible impact of the old corrugated paper (OCC) market. A recent industry seminar noted the growing demand for waste paper in factories and the upgrading of waste paper recycling facilities. The upcoming EU deforestation regulation is likely to impose stricter requirements on the use of virgin fiber, further stimulating the demand for recycled fiber.
"While it mainly produces virgin fiber products, recycled fiber products are also affected," said Alejandro Mata, RISI's director of Packaging and printing paper for Europe. "We can foresee that EU emission reduction measures could lead to a significant increase in the proportion of recycled fibres used in the production of paper and paperboard in Europe in the coming years."
Marburg pointed out that North America both exports cattle cardboard to Europe and imports some bleached and coated cattle cardboard from Europe, so the market for these categories could be affected, which in turn affects the price of old corrugated paper (OCC).
Looking ahead, Marburg said he will keep a close eye on developments in the food sector and domestic manufacturing, rather than just consumer spending at the retail end and parcel volumes in e-commerce. "Will we use corrugated paper as much as before for food and industrial products? If you look at the express packages around us, you will see that there are more and more brown paper envelopes and plastic envelopes, and fewer and fewer cartons."
