The North American containerboard industry is slowly recovering from a post-COVID inventory contraction and demand is expected to bounce back at a “modest” 0.53% compound annual growth rate (CAGR) through 2027, according to Rabobank’s Q3 2025 report.
The market’s “destocking cycle is over,” said Xinnan Li, Rabobank analyst and co-author of the report, marking a turning point for an industry that has struggled with weak demand and operating rates in the high 80% range for the past two years.
“During the COVID-19 period, everybody was ordering a lot of products, and all of the product manufacturers were ordering a lot of packaging,” Li said. “Everybody had a huge inventory on paper packaging and they were trying to destock that to alleviate the pressure on their balance sheet. So, for the last two years we saw, I think, a pretty significant decline in containerboard prices, but also operating rates.”
While the worst of the demand decline appears over, tariff implications and trade policies could disrupt supply chains and shift costs.
Tariffs reshape fiber costs
While US GDP dipped into negative territory in the third quarter of 2025, the country also continued to deal with unresolved trade tensions. Tariffs on the horizon could cause supply chain shifts for pulp and paper products, according to the report.
Rabobank analysts expect inflation will finish the year between 3-4%, while consumer spending stays constrained and GDP growth remains weak. “GDP is expected to be negative in Q3, weighed down disproportionately by declines in business and residential investment, both of which are sensitive to trade-related uncertainty,” the report indicated.
Inflationary impacts for the pulp and paper industry depend largely on where the mills source their fiber, with tariff rates ranging from zero to 15%. For example, softwood pulps imported from Canada are exempt from tariffs under the United States-Mexico-Canada Agreement, which leaves the market unaffected. Hardwood pulp from Brazil however, which the US imports a lot of, faces a 10% tariff and is spared from the 50% tariffs for broader Brazilian products. Pulp and some paper products are also imported from Europe and those are subject to 15% tariffs.
“From this perspective, we’re going to see prices and costs going up overall,” Li said. “Tariffs are inflationary. If we are still going to buy, maybe to a lesser amount, let’s say European pulp and definitely Brazilian pulp, then producers in North America are going to pay a higher price.”
As trade patterns shift, the exact volumes will change from country to country, causing little impacts on global trade volume.
“We do think the overall tariff impact on trade is going to be a zero sum game, meaning that the trade patterns would shift specifically,” she added. “Whether it’s European imports coming into the US or Canada imports, the exact amount is going to change.
“But if we’re looking at global trade volume on a global level, that’s not really going to be impacted.We think it’s going to be pretty minimal, but definitely there will be inflationary pressure on the producers domestically, just because the raw material prices are going up and the supply chain prices are going up as well.”
Still, tariff-driven cost increases are pressuring mills to scrutinize costs and tighten their margins.
“If we’re looking at the cost of production globally, South America in general has the lowest pulp production cost by far, Li said. “The difference we’re talking about is $100 to $150 per ton, which is very significant for the pulp and paper sector.” He adds that South America is more likely to benefit from current economic conditions.
European producers are faced with both the 15% tariff as well as implications from the European Union’s Deforestation Regulation, leaving mills with sizable regulatory and compliance costs.
“I would say the market over there is definitely more volatile and there’s more changes coming to them,” Li said. “Here at home, in both the US and Canada, I think there’s less of a moving piece, despite all of the changes of tariffs for us.”
The report noted that while US companies may enjoy short-term investment gains from tariff protection, potential damage to the nation’s trade relationships could hurt export markets over time.
For now, mills should maintain capacity discipline and reassess sourcing strategies to reduce trade-related risks and strengthen domestic supply chains to protect from future headwinds, the report said. The industry is already responding, with mills taking steps to align production with current market dynamics.
Mills cut excess capacity
US containerboard producers consistently align production with demand forecasts, adjusting operations as economic conditions change.
Production is expected to recover at a CAGR of 2.82% through 2027, with inventory replenishment happening across mills and converters. Linerboard prices are expected to hold steady through the first half of 2026, signaling resiliency due to “relatively stable demand fundamentals and disciplined supply-side management,” noted the report.
Greif shut down its West Coast paper mill in Los Angeles in June as part of “optimization efforts.” Closure of the facility eliminated 50,000 tons of coated recycled paperboard capacity and 22,000 tons of uncoated recycled paperboard capacity. Greif also reported that it shut down a recycled paperboard machine in Georgia and an uncoated recycled paperboard mill in Massachusetts earlier in 2025.
In May, Smurfit Westrock announced four plant closures as part of a “streamlining and decentralization” effort. The closures reduced the company’s containerboard and coated recycling board capacity by more than 500,000 tons.
International Paper announced in August that it would halt operations at its containerboard mill and timber and lumber facilities in Savannah and Riceboro, Georgia. The closures shrunk the company’s capacity by 430,000 tons.
“We are seeing some of the producers starting to either take downtime or even permanent closure of their facilities, and we don’t think this is the end yet,” Li said. “This is exactly what we would expect them to do in a soft environment.”
While facility closures loom in the short-term, the industry’s strategy is setting the stage for improved pricing power as the market begins its slow climb.
Recovery drives price gains
Despite broader economic challenges, upcoming promotional activities during the US holiday season are anticipated to boost containerboard pricing.
E-commerce sales volumes are expected to recover despite a dip in consumer spending, leading operating rates in terms of production capacity from the current high-80s range to about 92% by mid to late 2026, according to the report.
Pricing recovery is expected to be slow but steady, with demand in the packaging and industrial sectors stabilizing as inflation eases and trade tensions resolve. However, producers with high fixed costs may face pressure in the short term, as noted in the report.
“Given the challenging macroeconomic backdrop, we anticipate continued headwinds for containerboard supply, driven by an oversaturated market and persistently weak operating rates,” the report said.
“While the actual trajectory of corrugated production may deviate from the modeled forecast, it reflects anticipated mill downtime, closures and capacity optimization following recent acquisitions. These adjustments are expected to precede a modest recovery, which could support gradual restocking and renewed investment in operational efficiency.”
