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Whether from consumers, ESG directives, shareholders or a sense of duty, there has been an increase in awareness of a need for an alternative to traditional packaging materials, particularly plastics. Regulation has already come into force in some markets, and technology innovations such as fiber-based packaging and barrier technology are in development to find sustainable packing solutions.
However, overinvestment in capacity in recent years, combined with pandemic-driven increases in demand, has led to a global oversupply crisis, particularly in Europe and Asia. The balance between supply and demand on a global scale means that the immediate future for sustainable packaging is uncertain.
The Fastmarkets team consistently monitors market shifts to provide timely, accurate and valuable insights. We are committed to supporting informed decision-making with in-depth analysis of the key factors driving market trends, prices and forecasts in the global paper packing market.
The need to switch to sustainable packaging is undeniable from an environmental and business perspective. While sustainable packaging is sometimes thought to be primarily a social and ESG policy, it is now also becoming a regulatory requirement in many markets to move towards more circular economies.
Offering more sustainable products may not immediately improve business margins – it will come at a cost, and this is something that the industry may need to accept and understand
The challenges and costs over the next ten years could at first create more problems than solutions, but equally there are opportunities for growth in some markets.
Overcapacity in the packaging industry in China has led to dwindling demand for recycled pulp manufactured in Southeast Asia, where most plants are operated by Chinese parent companies, with output shipped back to feed their machines or to be sold on the Chinese market.
There’s a huge amount of boxboard capacity growing in China. But lower consumer confidence and slower industrial production has driven a decrease in demand.
In 2017, China began banning the import of papers for recycling, which affected its ability to produce recycled containerboard. As a result, many Chinese companies have invested in nearby countries to produce containerboard and export it to China. China-affiliated recycled pulp mills in Southeast Asia, especially Thailand, usually pay a premium price for US premium brown grades, such as double-sorted OCC (DS OCC 12).
With OCC demand from the recycled pulp plants subdued, suppliers sought to sell US tonnages to regional board mills at discounted prices. As a result, sellers’ offer prices were split – DS OCC offered to China-based customers was priced at $220-230 per tonne, while offers to regional board manufacturers were below $220 per tonne.
Low-grade paper consumption remained understated across key consuming regions in July. The general feeling among traders is that the three key areas of packaging, agriculture, and manufacturing are experiencing muted demand across the board.
Wooden and wood-polymer composite pallets have consistently been shown to have the best environmental impact in all categories, yet the pallet market is only showing signs of life this year after retrenchment in 2023.
Market indicators including industrial hardwood and low-grade softwood lumber demand suggest that most of the increase in pallet production over the past year has been on the recycled side of the market rather than the new side.