A mix of cost relief, demand fluctuations, and capacity changes will define the North America paper packaging industry in the coming years. Prices are expected to see a modest decline during the second half of 2025, influenced by weak demand.
However, capacity rationalization and eventual demand recovery in 2026 could lead to a rebound, potentially tightening market conditions by 2027. Recent reductions in US-China tariffs improved the economic outlook slightly. However, ongoing tariff risks and weak manufacturing activity pose persistent headwinds for box shipments and production.
Outlook for 2025
We expect cost relief and weak demand to cause a modest decline in US containerboard prices in late 2025. Capacity rationalization and demand recovery may drive a price rebound in 2026 and potential market tightness by 2027.
Some cost relief appeared in April due to lower natural gas prices, with further progress likely in May. OCC prices have also decreased, adding to the cost relief in early 2025.
This month’s forecast for containerboard demand in 2025 is slightly less pessimistic due to the ratcheting down of US-China tariffs in mid-May; however, tariff-related risks remain extremely high, and discouraging May manufacturing surveys have cemented our view that the increased tariffs and uncertainty of 2025 will ultimately prove headwinds for corrugated demand.
We expect box shipments to sink 1.9% in 2025 before recovering 2.2% in 2026 and returning to a typical growth rate of 1.0% to 1.5% in 2027.
GP’s announcement of the Cedar Springs closure matches last month’s assumption that more than 1.0 million tons of additional closures would be announced for 2025, so the overall baseline capacity outlook is little changed, though the projected rationalization has been de-risked and condensed into the third quarter.
Despite the more than 2.0 million tons of net closures in 2025, we do not expect operating rates to regain the 94% threshold until 2026 due to headwinds from exports and inventories that will compound the negative demand outlook for 2025. In 2027, operating rates could surpass 95% or even 96% if the next round of capacity investment does not materialize, with tightening market conditions being the main driver of that year’s projected upward price movement rather than the cost and margin dynamics of 2024-25.
How are tariffs impacting the market?
This month’s outlook incorporates the reduction in tariff levels between the US and China that occurred in mid-May, resulting in a slightly stronger US economic outlook. Although we still expect tariffs and uncertainty to be a drag on US economic growth, the baseline economic outlook no longer includes an outright recession in 2025.
Our baseline forecast effectively assumes that the incremental broad 2025 tariff increases of 30% on China and 10% on most other countries (excluding USMCA-compliant goods) will mostly remain in place at current levels, though the status of tariffs continues to develop rapidly.
For the containerboard outlook, the change in the economic forecast has narrowed the projected loss for US corrugated box shipments in 2025 to 1.9% and the loss for production to 3.7% compared with a 4.8% production decline in last month’s forecast.
Box shipments slumped in first quarter and expected to slide in 2025
US corrugated box shipments sank 2.1% in the first quarter on a non-seasonally adjusted basis according to the latest statistics from the Fibre Box Association (FBA), a discouraging performance that came despite stability in the US manufacturing sector and for consumer spending.
Due to the strong growth for spending in the second half of 2024, the downward revision to consumer spending in the second of the BEA’s three first-quarter GDP estimates still left the year-over-year growth for real personal consumption of goods (excluding autos and energy) at 3.5%.
Last month, we highlighted the difference between long-term trends for various aggregates of nondurables industrial production, the traditional bellwether for underlying corrugated demand from manufacturers.
Compared with the total nondurables industrial production index or even the index for consumer goods excluding energy, inflation-adjusted nondurable manufacturers’ sales (excluding energy goods and the chemicals sector) corresponds much more closely with the extended weakness of box shipments over the past three years.
In March, this alternative view of the nondurables sector recovered after declining in February.
With consumer sentiment deteriorating even further in April, we expect box shipments to extend their very weak performance into the early weeks of the second quarter before beginning to recover.
US containerboard prices to decline slightly in before rebounding in 2026-27
US containerboard prices were unsurprisingly flat in May, with the market in a holding pattern amid the explosion of uncertainty. In February, most US containerboard prices rose $40 per ton, while 42-lb white-top liner prices rose $30 per ton.
As with the 2022 price increase that was driven by rapid cost inflation and implemented just before the steep downward turn of demand became clear, the February 2025 price increase barely beat the eruption of tariff-driven uncertainty and sentiment plunge that would have made it much more difficult to achieve any upward price movement.
Due to the deterioration of the economic and demand outlooks, last month’s price forecast for the remainder of 2025 shifted to a modest price decline emerging in the second half of the year, conditional on production cost relief.
In this month’s forecast, the projected decline has narrowed marginally, by $5 per ton, due to the slightly healthier economic outlook and GP’s announcement of the Cedar Springs closure. While in line with our previous expectations, the timing of the Cedar Springs announcement nonetheless means that the full slate of expected capacity rationalization has been announced prior to any price erosion actually emerging, which we anticipate will limit the extent to which prices decline unless enabled by cost relief.
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