The global supply glut has brought unprecedented challenges to the packaging market. In the past, the global paper and packaging industry has maintained a stable growth trend, with an annual growth rate of approximately 2.5% to 3.5%. However, in 2020, with the large-scale commissioning of new production capacity and the sudden drop in market demand, the industry landscape has changed significantly. The situation of overcapacity has led to generally low global operating rates, and oversupply has become the main theme of the industry. Despite the many challenges we face, we remain cautiously optimistic about the future development of the industry.
Slowing demand: over-investment in production capacity leads to global packaging oversupply trend
The global paper packaging industry is facing a serious overcapacity problem. Compared with the historical average operating rate, global paper packaging production capacity is nearly 11% excess, as much as 40 million tons. Global paper and paperboard production in 2023 will be 409.7 million tons. This excess capacity is the main reason for the 3.1% decline in global paper and paperboard production in 2023.
The unusually high demand during the epidemic once masked the problem of overcapacity, leading to inventory backlogs. As the impact of the epidemic gradually subsides, global destocking has become the norm. Among them, the oversupply of containerboard paper is particularly serious, with excess production capacity as high as 13%, accounting for 65% of the total oversupply. Despite this, containerboard paper is still the main force in the global packaging paper market, with its output of 188 million tons accounting for about half of the global total.
We expect global packaging paper demand to be lower than expected in the coming years. This trend is closely related to changes in consumer behavior. With the rise of emerging consumption models such as online shopping and takeout, new changes have occurred in consumer demand for packaging. In addition, the choice of cheaper and more sustainable packaging has further suppressed the demand for wrapping paper.
Overcapacity and changes in consumer behavior have combined to lead to oversupply in the packaging paper market globally, especially in Asia and Europe. This imbalance between supply and demand is expected to continue in the next few years, and the market will remain in a state of oversupply until at least 2027.
Production Reduction: Impact on Various Segments of Global Packaging Market in 2023
Container board is one of the paper products most affected by destocking. The main use of containerboard is for high-end packaging, such as packaging of consumer electronics, cosmetics, perfumes and jewelry. As consumer behavior has not returned to pre-pandemic levels, poor performance in these areas in 2023 has directly led to weak containerboard demand.