FBA Blog
Fibre Box Association Mid-Year Update
I’m often asked about the overall health of the U.S. corrugated industry and issues facing Fibre Box Association (FBA) member companies. My response is usually based on box shipments, environmental pressures, supply chain and labor shortages.
Both 2020 and 2021 were record-setting years for box shipments, bolstered by 20 plus percent growth in e-commerce. Consumers took advantage of the dollars pumped into the economy by the federal government and shifted from buying goods at brick-and-mortar retail stores to on-line shopping. This accelerated rate of on-line shopping established a new baseline that will be felt for years to come. Although U.S. Census data shows 2022 e-commerce sales are declining, boxes used in e-commerce still represent 16-20 percent of total box shipments.
This year, inflation has put enormous pressure on the cost of fuel, food, and goods. The latest numbers reported by the U.S. Bureau of Labor Statistics show the June 2022 Consumer Price Index (CPI) rose 9.1 percent versus June 2021. Families are struggling to meet basic needs. The U.S. Bureau of Economic Analysis (BEA) reported that consumers spending in 1Q22 increased, but most of these dollars were used to cover the increased cost of fewer goods being consumed. The Federal Reserve Board has increased interest rates to help curb inflation. Manufacturing is suffering from decreased demand, increased costs, supply chain issues and worker shortages. Lower home sales, manufacturing output and food consumption are all drivers of box demand leading to decreased box shipments, as reflected in 1Q22 statistics.
Extended Producer Responsibility (EPR) is the environmental topic of the day. California has become the fourth state to approve EPR legislation. These laws place a fee on manufacturers to cover the disposal costs of packaging at end of life, rather than leaving local communities solely responsible for bearing those costs. Other states with EPR laws include Maine, Oregon and Colorado. It is anticipated that 1-2 additional States will approve EPR legislation later this year and potentially 10-15 more in 2023. Plastics continue to be under scrutiny as many countries and brand-owners have banned the use of single-use plastic containers by 2025 and 2030. This ban provides a huge opportunity for paper-based packaging to offer alternative sustainable solutions. More recently, the topic of microplastics in the air and water has resurfaced as a health concern. In addition, Europe is leading a movement toward zero carbon emissions by 2050 with mandates by governments to achieve 50 percent reduction by 2030 and 100 percent reduction by 2050.
FBA member companies are very concerned about the shortage of raw materials and long lead-times for manufacturing equipment. Supply chain issues continue to plague industry suppliers and have hampered the delivery of starch, adhesives, pallets, and other essentials for making corrugated boxes. Lead times for new equipment have stretched out 1-2 years for delivery, as manufacturers look to automate and optimize production lines. The shortage of plant workers has made automation a strategic initiative for many companies. According to Kearney's 2021 Reshoring Index, there is a national push to bring back key manufacturing segments from Asia to the U.S., including semi-conductor chips, batteries, appliances and steel. New and expanded production in the U.S. is expected to occur within three years.
The need for plant workers is a major corrugated industry concern. With over eleven million jobs available across the nation, the participation rate of U.S. workers is only 62.2 percent, according to the U.S. Bureau of Labor Statistics. This limited workforce has forced plants to work fewer shifts or incur higher expenses for overtime hours. In some cases, workers are moving from job to job and only lasting 3-4 weeks in each job. Hiring incentives have become a norm and starting wages are at unprecedented levels. With federal subsidies phasing out and the cost to support a family increasing, many economists believe that more workers will soon rejoin the employment pool.
On a broader scale, I recently met with five global corrugated industry association leaders from Japan, India, Europe, Canada, and Central/South America to discuss issues facing the global corrugated packaging industry and opportunities for growth. Topics of discussion included the economy, the environment and continued supply chain woes. As you might expect, each region was experiencing similar challenges, but at different levels of urgency. The good news is my association leader colleagues agree these challenges are opportunities to showcase corrugated products as the world’s preferred packaging solution. It is imperative that the corrugated industry take advantage of this opportunity to promote the attributes of boxes– renewable, recoverable, recyclable and clean.
To address these challenges, the FBA staff continues work on several initiatives begun in the first half of 2022 including:
If you have any input or suggestions, please reach out to Rachel Kenyon or me. Have a great summer.
Dennis Colley
President and CEO