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Paper and packaging

Current Dynamics in the Paper and Packaging Sector

Nathan McGuire
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May 9, 2024
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Current Dynamics in the Paper and Packaging Sector
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Paper and packaging demand has been on a bit of a V-shaped ride over the past 15 months. After hitting a high in January 2023, on the back of the massive e-commerce boom out of the pandemic, prices fell through most of last year but have been rising steadily since October.

While a seasonal rise is to be expected in Q4, demand has continued strong into the first half of 2024. The gradual recovery of sectors such as retail, manufacturing, and hospitality has contributed to paper demand for both consumer and industrial paper and packaging supplies.

Sustainability continues to be a major part of the story. Government initiatives aimed at curbing paper and plastic consumption continue, and manufacturers are striving to make more eco-friendly products using recycled materials.

Fitch has a “neutral” rating on the North American paper and packaging industry for 2024, citing demand headwinds from inflation and lower consumer demand that will impact manufacturers, especially in food & beverage, CPG, and healthcare. Research and Markets is calling for a conservative 2.5% CAGR between 2024 and 2028.

All of this will likely equate to lower shipping volumes for paper and packaging companies, which should positively impact carrier discounts. Shippers should seek out a logistics partner well-versed in the sector’s unique logistics to help them better manage transportation costs.

Industry Update: Paper and Packaging Growth

Packaging Corp. of America beat expectations for Q2, helped by growing demand and price increases. Like the rest of the industry, it saw demand fall off in 2023, but production and distribution have been growing. The company said daily shipments in its packaging segment increased 11% while rising 9.2% for corrugated products.

Smurfit Kappa, another paper giant, said in February that the worst of the slump in demand was over, after exceeding expectations in Q4 after three quarters of declines. The company said daily shipment volume in January was up 3% in Europe, and up 2%-3% in the Americas.

Similarly, International Paper beat analyst estimates for its recent quarter, helped by higher prices, improved production and a turnaround in demand.

Consolidation continues in the paper and packaging industry. International Paper recently agreed to acquire DS Smith, with a bid of $7.2 billion and the backing of the DS Smith board, although rival Mondi could still come back with a counteroffer. Last year, Smurfit Kappa agreed to acquire WestRock Co.

E-commerce will continue to be a major driver of paper and packaging demand. A report from SNS Insider valued the e-commerce packaging market at $70 billion in 2023, with a projected CAGR of 9.8% through 2031, when it’s expected to reach $147.88 billion.

“While plastic-based packaging remains popular due to its affordability, lightweight nature, and easy availability, the demand for sustainable alternatives is gaining significant traction,” SNS said in its summary. “E-commerce platforms are witnessing a rise in the use of eco-friendly packaging solutions like corrugated boxes made from recycled materials. This trend is expected to continue as consumers become more environmentally conscious.”

Trends in Paper and Packaging

Are we in the “paperization era”?

With the huge push globally to tackle the plastic beast, including literal islands in the ocean choking sea life, paper is rising to take on packaging applications that have long been the sole domain of plastics. This includes things like pouches, candy bar wrappers, and blister

packs, according to a report from the Sustainable Packaging Coalition.

“Why paper? Part of the appeal is where it comes from; trees are a renewable resource,

unlike fossil fuels. … Fiber certification and responsible sourcing best practices have been around for decades, and are more robust than any environmental or social certifications for the responsible manufacturing or sourcing of virgin plastic,” the coalition said in its report.

Manufacturers and fast-moving consumer goods (FMCG) retailers are coming up with innovative new packaging formats that increase circularity, especially the use of recycled materials. At the same time, regulatory agencies are pushing for stricter requirements, such as increasing the percentage of post-consumer materials in packaging. These were two key findings of a McKinsey report. “These innovations come as players seek to deliver on their own sustainability commitments and address consumer expectations, nongovernmental organization voices, and new packaging regulations,” the report noted.

The trend toward sustainable packaging is reshaping the supply chain, with a shift toward greater transparency, efficiency, and accountability. Manufacturers are reevaluating sourcing strategies, and prioritizing renewable and recyclable materials. The adoption of eco-friendly packaging designs and materials is prompting companies to optimize transportation and paper logistics processes to minimize carbon emissions and reduce waste.

Various partnerships are fostering innovation and accelerating the adoption of sustainable packaging. This is driving systemic changes that promote environmental stewardship and long-term viability.

Tailored Logistics Solutions for Paper and Packaging

Wicker Park Logistics, with more than 50 years of leadership in logistics, offers a range of transportation modes (FTL, TL, hotshot, expedited, dedicated, intermodal, etc.) backed by its technology platform and expert team. Wicker Park specializes in paper and packaging transportation, with expert handling of everything from roll stocks to cardboard, consumer packaging, recovered fiber, cellulose, and more.

Wicker Park has strong relationships with carriers that specialize in paper and packaging logistics. We understand the importance of keeping the product dry and free of dirt, dust and light, and at a stable temperature to avoid damage in transit. Our custom solutions for handling, transporting and storing paper and packaging are built to deal with industry-specific challenges.

Paper and Packaging: Demand Growing, Prices Rising; Sustainability An Evergreen Concern

After a dip in demand through most of 2023, paper and packaging has seen a rebound since the turn of the year, with rising prices and production improvements both good news for manufacturers. Sustainability as ever is a major factor, with a push for greater post-consumer content; an effort to move away from plastic packaging is also helping paper producers.

Wicker Park Logistics, a woman-owned logistics company and WBENC-certified business,  combines deep expertise with a technology platform that connects via API with your data sources, applications, and trading partners. Transportation is managed across a range of modes, including expedited, reefer, flatbed, dry van, and intermodal, with warehousing and distribution services available as well. Get in touch today for a quick quote.

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