US corrugated box shipments began slowly this year but RISI packaging economist Ken Waghorne expects brighter demand days going forward this year and in 2020 from continued growth in e-commerce and a US-China trade deal that should help global packagers.

Actual US shipments were up 0.8% in the first two months this year. Waghorne forecast that shipments would rise 2.3% for the full year. That means shipments must rise 2.6% per month on average for the rest of this year to reach his 2.3% full-year average.

"If domestic demand growth picks back up to the 2.5-3.0% pace during the second half of the year, the overcapacity situation should ease. But all bets are off if growth continues to struggle to reach 1%," Waghorne told PPI Pulp & Paper Week on Mar. 27.

US containerboard capacity at mills and corrugated plants reached a 16-yr high in January and 42-lb kraft linerboard pricing in March for the domestic market dropped for the first time in three years, by $10/ton on the 42-lb and by $20/ton on high-performance kraft linerboard, according to P&PW's survey. The survey also found price declines on US kraft linerboard exports in the last six months, including a $10/tonne decline to Mexico this month.

Some analysts this week pointed to economic headwinds. February non-durable goods manufacturing in the USA was flat, vs February 2018's total, and real US GDP declined from 3.4% in third quarter last year to 2.2% in fourth quarter. RISI forecast 2.0% for US real GDP in first quarter this year.

1.4-million-ton addition. Waghorne told attendees at the Paper2019 conference in Chicago on Mar. 26 that US containerboard consumption should increase 600,000 tons this year and by 800,000 tons in 2020, if manufacturing is growing.

New capacity planned this year and next, and 1% annual capacity creep may outpace Waghorne's estimated added demand, according to P&PW research. Pratt Industries is expected to start up a new 400,000 tons/yr containerboard machine in Wapakoneta, OH, in September/October, ND Paper a converted 250,000 tons/yr containerboard machine in Biron, WI, by fourth quarter, and McKinley Paper just filed permits this week in the state of Washington to convert a newsprint/directory paper machine in Port Angeles to a 250,000 tons/yr recycled containerboard and kraft paper PM that would start up by yearend or in early 2020. International Paper also plans a conversion of an uncoated freesheet paper machine at its Selma, AL, mill to a 450,000 tons/yr white top linerboard and containerboard PM in second-half 2020.

Waghorne forecast positive packaging growth going forward from e-commerce. He expects corrugated to benefit from what is expected to be a pickup from at-home food deliveries, for example. He saw minimal short-term impact from polyethylene pouches that some say are being more actively used for e-commerce deliveries.

Offshore, Waghorne expects a China-US trade deal will help global packaging demand in the second half of this year.

'Rhinos butting (economic) heads.' He likened the US-China dispute to "two big rhinos butting heads."

Waghorne expects a one-million-tonne increase in US containerboard exports in 2020. The main reason for this large increase is the fiber crisis in China, where the government banned mixed paper last year and implemented restrictive rules on all imports of recovered paper. China was the second largest export market for US kraft linerboard in 2018.

Waghorne said that China has increased its recovered paper recovery rate to 80% to 90% yet added that "China will need to import more containerboard in order to meet the strong demand for boxes."  He admitted that his forecast was "very fluid" because of the uncertainty about China's recovered paper policies, including a potential all-out ban on recovered paper imports in 2020.  China's policy shifts "will continue to alter global trade patterns," he said.

McKinley Paper is not expected to start production in Port Angeles, WA, this September as originally planned and at the earliest would start up near yearend or in early 2020, according to a local media report. A local government official made the timeline comment after McKinley applied this week for the permits from Washington state and local agencies to install $600,000 in new equipment at the Ediz Hook site in Port Angeles where McKinley will convert two directory and newsprint machines into 100% recycled containerboard and kraft paper machines. "They won't be able to make it, and they don't intend to make" a September startup, the official said. Construction and equipment installation will begin in the second half of this year, according to a city of Port Angeles environmental checklist for the project.