US box demand continues to outrun containerboard supply

What box makers are saying about steady demand, domestic liner prices, and clogged US supply chains

North America’s containerboard market ended an “unprecedented” year with the same unresolved, nagging dynamics: corrugated box demand outrunning containerboard supply, and high-cost transport with labor shortages that delay shipments.

At the end of December, buyers and sellers of linerboard and boxes reported no discounting for linerboard or corrugating medium in the open market in North America, mostly four- to six-week delivery time for boxes, and a smoother flow of containerboard to corrugated converting than during the first half of 2021.

The unprecedented state of the North American market resulted because of the pressure turned on the business from the Covid-19 economy and rising input and logistics costs.

Some have termed the market “unprecedented,” not only due to $160 per ton of linerboard price increases in 10 months, but in combination with a potpourri of market shocks and supply-chain imperfections.

All to say, national boxmakers in North America complained but did not scream about the dynamics. One global linerboard supplier this week even claimed that the market remained “snug” supply- and demand-wise because of the supply chain issues.

Along with unbleached kraft and recycled linerboard prices increasing the $160 per ton, corrugated box prices were up about 15% to 20% today vs a year ago, contacts said this week. US box shipments were on track to increase by about 6% for 2020 and 2021 combined – the highest two-year volume increase in 27 years.

“Every plant is trying to get as much out the door as it can,” one national boxmaker said.

Another representative with a national boxmaker company told of the strongest per-day shipment total for the firm in the first 10 days of December – for the entire 2021 year.

Still, all of this was being done at a slower rate than before the pandemic. As an example, a one-plant company in the Northeast used to focus mostly on delivering boxes to customers on an overnight, next-day basis. Today, the best this company can do is deliver in five, seven, and 10 days.

Costs are high for boxmakers

Further, there was the highest old corrugated container (OCC) price for US mills in 30 years several months ago. There were 50% higher diesel fuel cost for truckers at the pump. There were not enough truckers, industry contacts continually said. There were box plants turning away business because they just couldn’t make more boxes fast enough. And, just recently, there was reportedly higher natural gas cost, higher wood fiber cost in the Southeast, and higher rates for rail.

“Costs are still coming at us, left and right,” a contact with the national boxmaker told Fastmarkets reporters. “It’s very important for us to work to preserve what we have done on the top line (from pricing increases).”

Costs have torn away some of the price increase total but major integrated companies seem to have coyly not stated anything specific, other than to tell analysts that price increases offset the cost uprising.

One national boxmaker called demand ”still brisk but not like it was” in fourth-quarter 2020 and first-half 2021. The contact reported a “low single digit” shipment increase in the fourth quarter of 2021, year-over-year. Industry-wide, that’s up against a fourth-quarter 2020 US actual shipment leap to 106 billion ft2. The contact made no estimate for first-quarter volume, saying it was “too early to tell” on December 14. Fastmarkets’ forecast calls for US actual box shipments in the fourth quarter this year to decline compared with the big-fourth quarter 2020 total.

Others were similarly uncertain about first-quarter 2022. Some thought delayed December business would be loaded into January, helping increase January shipments more than expected. Others, thinking of what typically occurs in America, expected less demand in first quarter as consumers don’t spend at the rate that they did during the holiday-inspired fourth quarter. Further, US federal government stimulus funds are being reduced after $4.9 trillion from the Trump and Biden Administrations in 2020 and 2021.

First-quarter 2021 US actual shipments trailed fourth-quarter 2020 shipments by three billion ft2 and by almost 3%, before shooting back up to higher volume of almost 106 billion ft2 in second-quarter 2021, according to Fibre Box Association statistics.

E-commerce buying stronger than ever this past holiday season

However, while individual box deliveries to homes last holiday season dramatically increased because of the COVID pandemic, there appeared that more people, while still purchasing aggressively via e-commerce, picked up more holidays gifts at store curbside or purchased items inside the store. One millennial reported doing so, because of fear of gifts being delivered late due to the supply chain issues. How much this might affect fourth-quarter box shipment volume is unclear.

Box plant worker shortages remain

Labor remained a top problem impeding boxmakers. Contacts continued to say they had difficulty hiring workers to run a corrugator or even to add for a shift. In the end, they had workers retiring, workers exhausted, and said they struggled to retain workers, much less add new ones in December. They also noted concern with workers related to the new Covid-19 variant, Omicron.

“Even though box demand is still keeping high, (box plants) can’t produce as much because of a lack of labor,” said a contact in the West.

Unchanged linerboard pricing in North America

December linerboard pricing held unchanged in the open market in North America, compared with November’s level. A wider pricing range developed yet did not indicate a decrease in prices from a majority of those surveyed.

For the export market, kraft linerboard was holding unchanged from levels a month ago, to China and Mexico. Prices continued to increase for US kraft linerboard to Italy and Spain, and were up to Euro 775-795/tonne even though there was limited tonnage moving to southern Europe. Also, the export US kraft linerboard FAS price at the port of Savannah in Georgia narrowed and slightly increased to $820-830/ton from $800-830/ton for shipments to customers in South and Central America, contacts said.

Reports this week were that containerboard inventory was less of a problem for boxmakers and not like it was in the first half of this year, when some had just a few days of containerboard supply sitting on their plant floors.

‘Horribly busy’ to manageable. Handling box demand “is manageably better now; it was horribly busy” early this year, a boxmaker in the East explained.

No price increases expected

Contacts this week made no claims about any sort of new linerboard price increase in the short term for the domestic open market in North America.

One contact with an integrated company did not expect a price increase in the short-term, noting that OCC to US mills declined almost $30 per ton on a national basis at the FOB seller’s dock since early October, based on a Fastmarkets pricing survey. He said the decline in OCC makes it difficult for some producers to support a board and box increase to their customers.

One national boxmaker said another containerboard price increase would be primarily about “if there is too much demand for boxes.”

“Some (box) customers said they would pay for more for linerboard and medium but only if they could get more (volume),” one supplier said of the West.

Only one new containerboard machine representing less than 1% of North American capacity is to start up in the first three quarters of 2022.

Still, out West, several contacts told of difficulties finding 23- and 26-lb corrugating medium.

Some told of containerboard machine backlogs that meant they would not make January orders until probably the end of the first week of January, at the soonest.

This said, though, various boxmakers reported that they would run their corrugators as much as possible from Christmas Day through New Year’s Day. Both holidays fall on a Saturday. One said he would operate his corrugator as much as possible if he could bring in enough workers.

No supply chain solutions seen yet

Both board and box contacts were uncertain about and did not expect relief soon from high trucking rates or higher rail rates, or the lack of glue that some told of this week.

Packaging market facing “a new reality”

“This is unrecognized territory,” said a company official who works in the US and Mexico packaging markets, about the US box market dynamics. “And COVID is not over. We have a New Reality in boxes today.”

“We keep thinking (a box demand decline is) coming but we don’t see it,” a Northeast boxmaker added, shaking his head.

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.

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