Continuous Decline in Capacity and Production

The American Forest & Paper Association (AF&PA), headquartered in Washington, recently released its 64th Annual “Paper Industry Capacity and Recycled Paper Consumption Survey.” The results indicate a continued decline in both the overall capacity and production of paper and paperboard in the United States. This marks the sixth consecutive year of capacity decline and the second consecutive year of production decline.

In 2023, the overall capacity for paper and paperboard in the United States fell by 1.6%, the largest drop since 2020, which also saw a 1.6% decline. According to AF&PA data, this downward trend has persisted annually since 2018.

Significant Decrease in Production

The most notable decline last year was in the production of paper and paperboard. The AF&PA reported a 7.2% decrease in production in 2023, with all categories, except for tissue paper, experiencing reductions. In the previous year, the AF&PA reported an overall production decline of 3.3%, with some grades performing better than others due to an increase in containerboard production and stable tissue paper production.

New Recycled Paper Capacity

Several major plants began operations last year, adding a total of 2.1 million tons of 100% recycled paper capacity. Notable developments include Domtar’s transition to recycled packaging grades at its Kingsport plant in Tennessee, Cascades’ new recycled containerboard plant in Ashland, Virginia, and Pratt Industries’ new recycled paper and corrugated box plants in Henderson, Kentucky.

However, the AF&PA noted that over 1.7 million tons of virgin wood fiber capacity were permanently removed last year due to weakened demand from customer inventory reductions and economic headwinds.

Containerboard Capacity Trends

After eleven years of growth, U.S. containerboard capacity peaked at 42.3 million tons in 2021, marking the fastest expansion in 25 years and surpassing 50% of the total paper and paperboard capacity for the first time.

In 2023, containerboard capacity slightly declined for the second consecutive year, dropping 0.7%, following a 0.6% decrease in 2022. Despite this, due to the eleven-year growth period, containerboard capacity remains near historic highs, with an average growth rate of approximately 1.6% from 2011 to 2021.

Global Containerboard and Corrugated Packaging Trends

Smithers, an Akron, Ohio-based consulting and information services provider, released a report in mid-May examining global containerboard and corrugated packaging demand trends. The report aligns with the AF&PA’s findings on declining U.S. paper and paperboard production.

Smithers reported that global containerboard production in 2023 was 183.4 million tons, a 4% decrease from 2022. This translated to approximately 165 million tons of containerboard and corrugated board, a drop of over 7% compared to 2022.

The report attributed this to the end of the “disruption period” caused by the COVID-19 pandemic, characterized by global logistics disruptions affecting demand and price volatility leading to high inventory levels and subsequent destocking.

Smithers now predicts modest growth in 2024, with the market value increasing to $231.7 billion. Global demand is expected to recover more broadly, with an annual growth rate of 2.5%. This shift is driving manufacturers towards higher-quality, more refined corrugated grades, which can compete with folding cartons in industries such as cosmetics, confectionery, and consumer electronics. By 2029, global corrugated packaging production is expected to reach 190 million tons, with a market value of $277.6 billion, adjusted for constant prices.

Future Outlook and Industry Investments

The growing popularity of discount grocery chains in developed markets and the expanding retail infrastructure across Asia are expected to increase the demand for retail-ready packaging (RRP). Some manufacturers plan to install new high-throughput inkjet printers for higher-quality custom RRP production. The e-commerce shipping box industry is also expected to benefit from the same equipment, combining design innovations to offer visually appealing and user-friendly cartons, enhancing brand visibility and consumer engagement.

Smithers observed that many major containerboard suppliers have started investing in increased capacity. Therefore, utilization rates are expected to be lower for most of the forecast period. Additionally, billion-dollar mergers between companies like Smurfit Kappa and WestRock, as well as DS Smith and International Paper, are expected to reshape the commercial landscape of the corrugated packaging industry. Other companies are delaying further investments, taking additional downtime, or closing older plants and carton factories to streamline operations.

This trend follows the AF&PA’s late-April data showing an increase in U.S. containerboard production in the first quarter of 2024 compared to the same period in 2023, marking two consecutive quarters of growth.

Containerboard production had been declining throughout late 2022 and most of 2023, before rebounding later in the year, contributing to last year’s overall production decline. However, the fourth quarter of 2023 saw a 12% increase in U.S. containerboard production compared to the fourth quarter of 2022, and a 7% increase in the first quarter of this year, potentially indicating Smithers’ forecasted growth for this year.