Current Containerboard Market Conditions In North America: Part 3

Market analysis

The corrugated marketplace remains very strong; the US containerboard and box market is up 5.5% over last year and the increase sits even higher in Canada at 8.5%

The upward trend was spurred by increased overall global demand for containers. With growth over last year of 30 percent, e-commerce continues to drive demand for boxes. Domestically, consumer spending remains strong, propped by government stimulus as well as other budgetary savings. Household spending remains elevated, particularly on food (think of the phrase “pantry loading,” coined in the pandemic’s early days) and other home commodities. Strong industrial demand points to more locally made products being sourced in the bounding Canadian economy.

Because of this strong demand, the supply of containerboard and therefore boxes have dramatically tightened. Consequently, we continue to operate under conditions of long lead times between production and delivery. In fact, a drastic deficit of some grades of paper has meant an unprecedented shortage of certain box types. In North America, weather and ransomware attacks have contributed to the shortage of containerboard supply.

This macroeconomic condition leads to price increases. Our industry has already experienced two increases in the past year. A potential third price increase is expected.

There are inflation pressures as well, supply chains are experiencing major shortages, wood, raw materials, such as OCC (Old Corrugated Containers that are used to make recycled paper), energy, and freight.

Questions remain around the employment rate for part-time and lower-income workers. Perhaps linked to the aforementioned explosion of e-commerce.

Amazon has built and leased out over 50% more space in 2020, with 2 and likely more distribution locations coming in 2021. Wal-Mart has used its massive footprints as distribution centres to move products and offer more pickup centres. Regardless, these conditions have contributed to our expansion. Royal is moving our London operation into a much larger plant. We must focus on efficiency and learn how to produce more with less. Our St. Thomas building is an exciting part of our future. 

These are very strange times, for some of us the growth is tremendous, and yet many of our local businesses suffer. We have endured a pandemic that is still among us over a year later and has impacted our daily lives, specifically in a very depressing way. A big part of what makes us human, our communication and relationship building, has been put on hold. Now more than ever, we need to care for our mental health and find the strength to remain resilient, to stay authentic to our values, to stay the course, and remain empathetic. Royal Containers will continue to align our decisions with our Continuous Improvement Plan by creating a supportive environment that improves the work environment to maintain safety and productivity.

With the momentum our vaccinations are having, we can finally look forward to some semblance of normal. And this is good😊.  We could all use a rebound like the one experienced by the Montreal Canadiens in the Stanley Cup Finals! Go Habs Go! ~Kim Nelson

Source: Royal Containers