1. Paper packaging will surge and level.
Moody’s Investor Services found that the early 2020 increase in paper packaging appears temporary, noting a decline in pricing for paper products and demand. The organization generally combines its outlook for paper packaging alongside tissue and other global paper products. A review of the report notes that ecommerce gains have been offset by significant sector losses, such as the closure of restaurants and schools.
At some points during the pandemic, paper products did rise to 10% higher than usual. However, most countries and economies viewed these materials as essential, so there was minimal risk to production facilities unless they had a specific outbreak. Corrugated packaging has had a partial bright spot in this sector thanks to increased ecommerce demands, though some industrial needs have declined.
Sustainability is an important selling point to watch for the sector.
On a smaller scale, we’ve seen that ecommerce-focused 3PLs in the US still have access to adequate supplies of paper packaging materials. Prices have not fluctuated significantly, and demand has not yet outstripped supply. As some states and economies begin to open back up and consumer spending shifts, there doesn’t appear to be any shorting of supply.
The COVID-19 risk in the space remains small, though there are some concerns over how manufacturers will respond to any slowdown. For some, there is a risk of overproduction. However, this will most likely be a leveling effect instead of any significant decline.