Global and European containerboard outlook: What does the market look like in the next two years?
We look back at recent market changes to European and global containerboard demand and offer some expectations for the short-term future
After a tumultuous couple of years, with unforeseen global events and energy prices impacting containerboard costs and demand, we are seeing the market regroup and a potential return to growth. But some challenges and uncertainties remain. This data story outlines where the containerboard market has been and where it might lead to.
2023 could see a slow global containerboard bounce back
2021 was a positive time for global containerboard demand. It reached 192 million tons, with Asia accounting for over half that figure (95 million tons). China had 62% (or 59 million tons) of the total Asian demand, which emphasizes its dominance within the region and the global market.
It was a year that saw a post-Covid-19 surge in global containerboard demand (6.4%), which was due to a widespread economic rebound and increased goods purchasing, especially online.
However, in 2022, this had dropped by 1% as spending shifted back toward services and economies were hurt by inflation. The year also saw the sizeable Chinese market become affected by a new wave of Covid-19 lockdowns, which hurt business activity in the region.
In 2023, Fastmarkets forecasts a global demand bounce back (2% demand growth), driven by China and the rest of Asia, but sluggish growth in Europe and North America. However, next year (2024) we expect a faster recovery in Europe and North America with China continuing to set the global pace and we anticipate a 4% overall increase in global containerboard demand growth.
Global containerboard oversupply could be a problem in the near term
A couple of factors could lead to a forthcoming oversupply issue for global containerboard, which may hinder a short-term recovery.
In recent years, due to unforeseen global challenges (Ukraine conflict, Covid-19, inflation), demand has fallen behind capacity. The consequence of this is the fall in operating rates, which have reduced from 90% down to nearly 80%.
Parallel to this, we are due to see signification investments in Asia and a wave of capacity expansions in 2023-2024 in Europe and North America. For instance, paper and packaging manufacturer, Mondi, announced in 2022 that 280 million euros are to be invested in expanding capacity across Europe.
The reduction in demand, combined with the investment in capacity, could contribute towards oversupply, which could be a real problem in the near future for most major global markets and lead to a negative impact on prices.
European containerboard demand recovery needs to happen quickly
Europe had a particularly tough year for containerboard demand in 2022.
Fastmarkets estimates that demand in Western Europe decreased more than 3% during the last year and net exports dropped due to manufacturing cost increases, which disproportionately affected Europe compared to other export regions.
We expect a soft recovery this year, with a minor growth in demand of 0.2% this year, followed by an improvement of 3.2% in 2024.
However, the European demand recovery needs to happen swiftly in 2023 so that corrugated board and containerboard consumption can start to grow this year, compared to the previous year. If demand remains low for longer, we could see a reduction in demand for a second consecutive year and slower growth conditions in the coming years.
Testliner costs hang in the balance
When we look at the European containerboard market, testliner prices and the energy crisis have been big factors in the overall cost to produce the material.
European testliner prices consistently increased since the fourth quarter of 2020 because of high operating rates, rapidly escalating production costs and continued containerboard demand.
Natural gas is a key cost factor for testliner because the mills that produce it rely heavily on natural gas, so they face significant changes in manufacturing costs when energy prices are affected.
This year we forecast a more stable-looking climate for European energy prices and hopefully testliner prices, but questions remain about the impact of the forthcoming winter.
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