US corrugated box and containerboard market trends to watch for in 2023

Post-pandemic shift in consumer spending is changing packaging demand, but supply has yet to react

The emergence of Covid-19 in early 2020 caused massive disruptions to everyday life and triggered a period of high volatility that continues today. Consumers and the US economy are transitioning to the emerging post-pandemic, post-stimulus reality in 2022, but this shift has brought its own tumult, putting many of the trends of the past two years into a state of flux and creating a somewhat bumpy transition period.

A hallmark example of this has been in consumer purchases of goods, which were catapulted far above trend in 2020-21 by the fact that services became almost completely blocked and that heavy fiscal stimulus supplied ample buying power. Both of these drivers reversed in early 2022, with consumers moving spending back to services and confronting heavy inflation, sending goods purchases sharply back down.

The post-pandemic shift in consumer spending is changing packaging demand

These ups and downs have been reflected, even amplified, in packaging markets.

Corrugated box shipments began their own rollercoaster ride in 2020, first jumping due to major purchases of essentials as the pandemic became serious before crashing during the initial, strict round of lockdowns. However, as 2020 progressed, corrugated box shipments and containerboard demand began to show incredible strength due to consumers’ purchases of packaged goods, especially those shipped via e-commerce.

Corrugated and containerboard markets have continued to reflect broader trends, taking a step back in the second half of 2021 as burgeoning issues with logistics, materials shortages and labor became major factors in the US economy. The shift in goods spending in 2022 has also had major ramifications for packaging demand. Because many businesses and retailers remained in a mode of aggressively building stocks, the rapidity of the transition caught them somewhat off guard, creating a severe inventory whiplash that has driven yet more cycles of volatility throughout the supply chain.

Containerboard supply continues to grow despite forecast cooling in demand

Containerboard supply and availability have also fluctuated a great deal over the past few years.

The demand boom of 2020 was accompanied by very little capacity growth, partly because pandemic restrictions made it difficult to carry out work at mills, leading to a market desperate for more supply and rising prices.

By 2021, the blowout demand conditions had triggered a massive supply response, but the market remained tight because of the combination of continued demand strength and the need to rebuild severely depleted containerboard inventories.

Even though the outlook for demand in 2022-23 has been cooled by the post-pandemic transition trends and concerns over a potential recession, producers are continuing to add supply, adding yet another fundamental shift for the market.

What market dynamics are at play as we head into 2023?

Corrugated box and containerboard markets have developed rapidly over the past several years, and we see no reason that the speed of transitions will slow anytime soon.

Indeed, the dramatic flip for goods purchases in early 2022 is a reminder of just how quickly conditions can change, and the incoming cluster of capacity additions in late 2022 and early 2023 will create yet another opportunity for market dynamics to evolve rapidly and with complex effects.

Just as the pandemic-driven demand strength resulted in a major round of capacity additions, supply and demand will continue to interact; if demand weakens significantly heading into 2023, new supply disruptions could emerge in the form of curtailments or even closures. For buyers, supply risks are not abating completely but will take a new form.

The extent to which corrugated box demand can get back on track will depend a great deal on how quickly the goods segment of the US economy can finish its adjustment to the post-pandemic, or at least post-stimulus, environment, or if this recovery will be stymied or delayed by economic headwinds and continued supply chain issues.

With a seemingly endless parade of global disruptions, including but certainly not limited to the Russia/Ukraine war and resulting energy crisis, continued pandemic restrictions and the specter of rising interest rates, there is little reason to believe that volatility and rapid changes will not continue for the US economy and the dynamics that drive prices and availability in packaging markets. Staying on top of changes in the outlook for containerboard demand, supply, costs and prices will present substantial opportunities for responding to and finding value in market developments.

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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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