Boxboard capacity outlook: How could US capacity growth affect imports and European competition?

Learn more about the boxboard capacity projects in the US and how the additional investment could revive the region’s boxboard industry

Boxboard capacity in North America has seen two decades of decline. For the first time in years, there is a significant investment in building up US domestic capacity with what is intended to be more efficient.

Together with Fastmarkets senior economist, Steven Honeyman, we take a look at what has been driving boxboard market demand, where the new boxboard capacity projects are going to be and how this increase in capacity in the US could affect its current position on imports and competition with the European market.

Boxboard market demand pushed by plastic substitution

Over the last 20 years or so, e-commerce has skyrocketed and there has been more demand to package products sold by online retailers, as well as for classic retailers like Walmart and Target switching over and providing services like curbside pickup and delivery, which often require additional packaging.

The move towards plastic substitution has led to an increase in demand in the boxboard market. Producers see an opportunity to replace plastic straws, cups, plates and plastic packaging with what they consider to be more environmentally friendly options made out of boxboard. They are trying to make sure they invest in the additional capacity for that purpose of replacing plastic packaging.

Honeyman said that boxboard producers are also trying to gain back some of the markets they lost.

“A lot of people moved towards liquid soaps packaged in plastic bottles and away from bar soaps packaged in boxes. People also moved from powder detergents to liquid detergents. All that moving from boxes to things that were packaged in plastic. Now for environmental reasons, they’re looking at ways of maybe packaging liquid detergent in boxboard, for example, (and) trying to come up with alternatives to the plastic packaging.”

New boxboard capacity projects

The new capacity planned in the US spreads across boxboard’s grade structure.

Billerud is considering a 600,000 tons/yr converted print paper machine project to folding boxboard (FBB) in Escanaba, MI, for most likely 2025.

Sappi North America is planning a converted print machine project to solid bleached sulfate (SBS) boxboard at its Skowhegan mill in Maine. It plans to swing from coated freesheet (CFS) paper to the SBS and double the capacity on its paper machine No. 2, which is scheduled to come online in mid-2025. The planned capacity expansion for the PM 2 is to 520,000 tons/yr of SBS from 250,000 tons/yr of CFS.

Graphic Packaging is planning a new 550,000 tons/yr coated recycled paperboard (CRB) machine in Waco, TX, that is to be similar in production style to its new Kalamazoo machine No. 2 in Michigan. This is among the top US projects to add domestic capacity in coming years, according to contacts. The $1 billion investment is ultimately expected to increase capacity in the CRB market in North America by just about 200,000 tons/yr because Graphic plans to close another CRB mill within its system apparently when Waco is ready to run.

Graphic CEO Mike Doss told Pulp & Paper Week in February that the new capacity could also compete with certain applications of SBS – with CRB being an even lower cost alternative to SBS for some uses, such as smaller beverage packages, frozen foods, and packaging for dog food and cat litter. Ultimately, Doss plans for the Waco CRB mill to help reduce the company’s annual open market purchases for paperboard.

“There’s just going to be so much domestic capacity in the US,” Honeyman said of the planned additions.

Either the import share is going to have to come down or you’re going to see some pretty big closures in the coming years.

Steven Honeyman, senior economist, Fastmarkets

What happens with trade between the US and Europe in the coming years will in part depend on whether European energy prices remain high and the international competitiveness position of the two places. For example, if the US dollar gains strongly or the Euro drops, or US production costs significantly rise, then there could be more of a threat from European imports, according to contacts.

There are also capacity projects planned for FBB and SBS boxboard around the world, especially in Europe. Metsä Board and Stora Enso are also considering adding more boxboard capacity, and Metsä Board recently did so at its Husum mill in Sweden.

Stora Enso is working on the conversion project to convert a coated print paper machine into a 750,000 tonnes/yr of FBB and coated kraft back machine in Finland. This machine is supposed to start up in 2025 as well.

Folding boxboard vs. solid bleached sulfate cartonboard in the US market

North American boxboard has become more competitive on a grade-to-grade basis since European energy prices started to rise in recent years, but FBB competing with SBS cartonboard is a trend that has been seen more.

The US does not have an FBB mill as the grade is used more in Europe. It shares similar qualities to SBS at a lower cost, but SBS seems to still be preferred for luxury brand carton packaging.

When asked about how much FBB can penetrate the US market, Honeyman said: “It seems, from what I keep hearing, that there are certain converters that just don’t want to touch FBB,” Honeyman said. “There’s something about it that – it wears more on the machine and it’s not as easy to use as SBS, but that being said, there is more coming in. I don’t know if it’s starting to gain some traction there.”

New boxboard capacity to replace imports

“When we’re looking at some of that new capacity coming on, I definitely think there is an opportunity for some of that to replace some of the imports,” Honeyman said. “It’s all going to be new, high-efficiency machines that are going to be lower cost.”

The US could even boost its exports in the next five years, he said.

Boxboard exports in January and February 2023 declined 10.4% from the same time last year. Imports in January and February this year rose 1.3%, according to the latest data release from the American Forest & Paper Association (AF&PA) that is based on trade statistics from the US government.

US boxboard export shipments year-to-date totaled 346,000 tonnes. Canada and Mexico make up the biggest export share with 114,000 tonnes and 71,000 tonnes, respectively, according to the AF&PA statistics. Exports to Europe totaled 53,000 tonnes.

US boxboard imports totaled 218,000 tonnes for the first two months this year, including about 110,000 tonnes from Europe.

Based on January/February US boxboard statistics, imports are about 10% of total US boxboard production, according to a P&PW estimate. US boxboard producers also export about 15% of their boxboard production. US boxboard production last year totaled 13.6 million tons, according to AF&PA statistics.

European FBB imports will likely continue to increase through next year but may take a smaller share of demand once new domestic capacity comes online, said Honeyman.

Read our outlook for the boxboard market to find out more about what to expect in 2023. Speak to our team to access our latest insights into the boxboard market.

Case Study

Learn how to monitor packaging prices using cost and price indices and understand the underlying cost drivers, from material cost to labor, energy and more. Examples include cartonboard, liquid container and paper bag.

What to read next
Can the food export market and shifting consumer habits help sustain Brazil's paper packaging sector, defying domestic challenges?
Fastmarkets (Random Lengths) plans to formally launch the industry’s first daily price assessment for Southern Yellow Pine #2 2x4 (eastside) on Thursday 8 August along with more than a year of pricing history.
Steel industry participants in the United States are unclear whether Brazilian slab imports will be exempt from the 25% tariffs under Section 232 that will be levied on Mexican imports for steel that is not melted and poured in Mexico, the US or Canada, sources told Fastmarkets on Wednesday July 17
Fastmarkets advises that, as of Wednesday July 10, certain monthly North American ferrous scrap assessments had yet to be settled.
DS Smith announced a Euro 60/tonne price increase for European customers, with stable RCCM production costs and rising old corrugated container prices, while UKL prices surged across Europe except in the UK, hinting at potential hikes and market fluctuations.
From price adjustments in the GCC to shifts in consumption patterns, learn what's driving the latest Middle Eastern containerboard price movements in June