Sales volumes are ticking up as the fiber packaging industry recovers from the depths of the post-pandemic “cardboard box recession,” according to analysts’ reports. But don’t expect the rebound to be speedy.
BofA Securities and other industry observers started signaling this summer that a turnaround might be afoot. Now, they’re more confident in declaring improvements.
“We are in an early stage of expansion after a two-year packaging recession,” and BofA’s outlook points toward a soft landing, according to an Oct. 17 note to investors from BofA Securities research analyst George Staphos.
In the meantime, newly released data suggests fiber packaging pricing remains flat. Fastmarkets RISI released its monthly containerboard and boxboard pricing data on Oct. 18, showing largely unchanged pricing in October compared with September, similar to the prior month’s trend. Approximately 90% of buyers and sellers reported no pricing changes.
Demand also held steady, unchanged from the previous month, despite minor output impacts from Hurricanes Helene and Milton. Mills largely escaped from the storms unscathed. For instance, both International Paper and Smurfit Westrock confirmed via email in early October that they had minimal operational impacts following Helene.
Although Cascades announced in mid-September that it would implement a $40 per ton increase for linerboard, $70 per ton for medium and $40 per ton for white top linerboard effective Oct. 7, the attempt appears unsuccessful, per the Fastmarkets RISI data.
In an Oct. 20 commentary highlighting the new Fastmarkets RISI data, Michael Roxland, senior paper and packaging analyst at Truist Securities, noted that other leading producers, such as International Paper and Smurfit Westrock, have not followed suit with a third round of price increases. Previously, he stated in an Oct. 15 commentary that Cascades’ increase “needs the support of the larger integrated players” to take hold.
Greif and others had indicated during earnings calls this summer that they wouldn’t pursue additional price increases this year. However, most of the major players participated — at least to some degree — in two rounds of price increases in 2024, with the most recent occurring in June from companies including Georgia-Pacific and Pratt Industries.
Industry analysts indicated companies pushed through a second attempt due to the lack of market recognition of the previous increases in Fastmarkets RISI’s monthly data at the time. The lack of recognition spurred frustration for many producers, with some company executives voicing their disapproval of the current index model during earnings calls earlier this year.
Respondents surveyed for the October Fastmarkets monthly report generally expected the current boxboard pricing and demand levels to remain at least until after the Nov. 5 election, but more likely into the second quarter of 2025. The report suggested the industry expects Q4 will be busy for sales volumes.
That said, “[e]lection-related conservatism could impede any notable demand uptick in 4Q as inflationary pressure continues and buyers and sellers defer supply and demand decisions,” according to Roxland. Truist Securities anticipates flat pricing for the rest of 2024, with increases in March.
Some analysts are releasing Q3 recaps and Q4 predictions ahead of most public packaging companies reporting earnings results in the coming days. Staphos anticipates that packaging and paperboard earnings will “be flat/up on 2% volume in 3Q.” Roxland noted continued demand improvements without indications of new capacity being added in the near term.
