What a difference a year makes

The North American paper industry has faced a challenging year, to say the least, as sluggish packaging demand has led to production declines and site closures, while billions of dollars have been spent in merger and acquisition activity.

Paper and packaging companies have been making an effort to use more recovered fiber over the past several years, particularly after the e-commerce boom in 2020 and 2021 spelled major increases in packaging demand. From 2017 to 2024, 25 expansions or new builds were announced, according to data from the Brattleboro, Vermont-based Northeast Recycling Council (NERC).

“While we do not know yet what the total new capacity will be, we know this expansion in using recycled paper is unprecedented,” NERC said in early 2024.

When the initial surge in packaging demand subsided, there was much speculation about what the new capacity would mean for the market as North America entered what was coined a “cardboard box recession” in 2023. In the summer of 2024, many in the industry were hopeful that box demand had picked up enough to finally end the box recession, but tariffs and global economic conditions have made 2025 arguably the most challenging year this decade.

As the first half of the 2020s ends, we examine the dynamics of the last year, including pricing, demand, the effects of consolidation and the outlook heading into the second half of the decade.

Consolidation and closures

Over the last year-plus, three major acquisitions have closed involving some of the largest containerboard-producing companies globally.

First, in July 2024, Dublin-based Smurfit Kappa completed its $11 billion acquisition of Atlanta-based WestRock, then, in February of this year, Memphis, Tennessee-based International Paper (IP) acquired London-based DS Smith in a deal worth $7.2 billion. Finally, in September, Packaging Corp. of America (PCA) finalized its acquisition of the containerboard business of Delaware, Ohio-based packaging company Greif Inc. in a deal worth $1.8 billion.

According to Fastmarkets RISI, these three deals totaled approximately $20 billion, representing the highest annual amount of containerboard merger and acquisition activity.

Including Greif, PCA remains the third-largest containerboard producer in North America after IP and Smurfit Westrock, according to Fastmarkets. IP’s containerboard capacity market share is about 29 percent, and Smurfit Westrock’s is about 20 percent. With the acquisition, PCA increases its share to nearly 16 percent, and the largest three companies have a combined share that totals about 65 percent of the more than 40 million tons per year of U.S. containerboard capacity.

But as notable as this merger activity was, so were the shutdowns as Greif, IP, Smurfit Westrock, PCA and Georgia- Pacific all announced facility closures. The Smurfit Westrock and IP closures alone account for the loss of more than 1,300 employees and 1.3 million tons of capacity.

As of October, multiple reports from analysts covering the paper and packaging sector suggest that nearly 10 percent, or about 3.9 million tons, of North American paper capacity has been shuttered this year. Additionally, a report from Fastmarkets suggests that nearly 3 million tons of containerboard capacity, specifically, will be removed from the market by 2027.

“I’m unaware of a year in recent decades in which this much capacity was shut on an absolute and percentage basis, which is indicative of the state of industry conditions,” industry analyst Adam Josephson writes in his newsletter, “As the Consumer Turns,” in August.

Market implications

According to the Itasca, Illinois-based Fibre Box Association, U.S. box shipments reached their lowest second- quarter reading since 2015 this year, and data from Bloomberg reveals box shipments fell by 2.3 percent in the first half of this year, largely due to continued uncertainty surrounding tariffs.

Compared with the height of the e-commerce boom, box shipments are down about 12 percent, according to Bloomberg corrugated packaging market analyst Ryan Fox.

“That’s a massive falloff,” he said on an episode of Bloomberg’s “Odd Lots” podcast in September.

As far as the outlook for the rest of the year, Fox expects box shipments to remain “very challenged,” estimating total box shipments in the U.S. will be down 2.5 percent this year and possibly down as much as 3 percent as the industry faces continued uncertainty over tariffs and other trade policies.

That shrinking demand led to consecutive quarterly declines in boxboard and containerboard output this year.

According to a November report issued by the American Forest & Paper Association, based in Washington, total U.S. containerboard production in the third quarter of this year decreased 3.1 percent compared with the third quarter of 2024 and is down 3 percent compared with the first nine months of last year.

U.S. containerboard production essentially was flat throughout the first quarter of this year but has declined the rest of this year. In the second quarter, total containerboard production was down 5 percent compared with the second quarter of 2024, while production for the first half was down 3 percent compared with the first half of last year.

Also, in the second quarter of this year, mill inventory levels peaked in May, reaching their highest levels in more than 15 months to end the quarter at 433,000 short tons, and have since peaked again. In the third quarter, inventory levels in August reached nearly 462,000 short tons before declining by 8 percent in September.

Meanwhile, boxboard production in the third quarter of this year was down 2 percent compared with the third quarter of last year.

The news on the pricing side hasn’t been much better this year, with prices for old corrugated containers (OCC) and mixed paper plummeting. As of November, the U.S. average price for OCC was $44 per ton, down nearly 41 percent from $74 in November 2024, while mixed paper prices have been reduced by more than half, averaging $20 per ton this November compared with $44 a year earlier.

A seven-month stretch last year saw OCC prices hovering in the range of $101-$106 per ton, but the grade has otherwise not topped $100 per ton since the summer of 2022.

“This tariff-led reduction in consumer spending has become more apparent, creating a domino effect across the entire supply chain,” Myles Cohen, board member of Vipa USA Inc., wrote in the Brussels-based Bureau of International Recycling “World Mirror on Recovered Paper” this summer. “Lower consumer expenditure ultimately leads to lower demand for paper packaging.

“The general state of the paper business is simply not pretty.”

The author is managing editor of Recycling Today and can be reached at mmcnees@gie.net.