Democracy Dies in Darkness

How Big Cardboard is handling the 2020 box boom

The supply chain industry is working hard to combat potential cardboard shortages with the pivot to more
online shopping amid the pandemic

By Hannah Denham

Dec. 30, 2020 at 2:00 p.m. GMT+3

For families stuck indoors and desperate for entertainment, a cardboard box can transform into a makeshift
playground for the kids or a refuge for the cats. Day to day, though, they have been a crucial if often overlooked link
in the nation’s supply chain.

But now boxes are piling up in homes across the country because of the explosive growth in e-commerce this year.
That’s left the corrugated packaging industry dependent on consumers to recycle the products to support its
financial and environmental needs.

Corrugated box shipments grew 9 percent in March from the year-ago period, industry data shows, despite a brief
dip in revenue when the pandemic’s initial shock froze up the supply chain. But shipments were again soon boosted
by retailers’ overstocking of food, cleaning supplies and toilet paper amid the panic buying so prevalent in the early
days of the coronavirus pandemic. Shipments continued to climb through the fall, peaking in October, and box
makers are on pace to end the year with record production to meet this year’s skyrocketing demand.

In fact, retail analysts say, e-commerce sales squeezed in more than two years’ worth of growth since the pandemic
began nine months ago. And the corrugated industry is scrambling to keep up: paper mills are running at full speed
and some producers are capping orders and contracting out to smaller companies.

“At some point, yes, there was some pantry loading as people were preparing for what the effect might be of the
pandemic, but I think we’re past that point and what we’re seeing here is new consumer behavior,” said George
Staphos, a senior analyst covering paper forest and packaging for Bank of America Securities. “Once you establish a
new pattern, it’s really hard for it to change.”

The cardboard box and container manufacturing industry, which employs 139,000 in the United States, took in
$67.3 billion in revenue from January through October, according to an IBIS World report. Even as the broader
economy slid into recession and industries took a hit, e-commerce sales stayed afloat.

“Industry operators have largely been buoyed by the movement of consumers to shop online,” according to the
report. And demand will continue to rise as consumers increasingly choose e-commerce over bricks-and-mortar
stores.

Georgia-Pacific LLC, one of the world’s largest manufacturers of pulp and paper products, is already running its
mills at full capacity, executive Brian Smith said in a Marketplace interview. He said the Atlanta-based company
has had to buy from smaller producers to keep pace.

“It’s certainly been a challenge, because we’re taking extraordinary steps to keep all of our employees safe, which
can slow production down considerably ” Smith said “So sometimes it involves running extra hours and into
can slow production down considerably, Smith said. So sometimes it involves running extra hours and into
weekends to keep up with demand.”

Memphis-based International Paper, the nation’s largest forest products company, produced more than 2.7 million
short tons of corrugated packaging, up 2 percent year over year, according to its third-quarter earnings report.
Chairman and CEO Mark Sutton said during an Oct. 29 conference call that it continues to see “very strong double-
digit growth in e-commerce, with increased consumer reliance on e-commerce as a spending channel.”

WestRock Company produces 1 out of every 5 cardboard boxes in the United States. The Atlanta-based
manufacturer of corrugated packaging, paperboard and containerboard employs 50,000 workers.

Box demand typically peaks in September, then tapers off through the end of the year as merchandise arrives in
stores. But this year, between June and October, box shipments met 34 billion square feet — an industry record —
each month. Demand swelled as retailers and shoppers alike adapted to the pandemic, according to Rachel Kenyon,
vice president of Fibre Box Association, an industry tracker. Well-documented backlogs at the U.S. Postal Service
also motivated consumers to start online shopping earlier.

“Based on data that we have dating back to 1999 (from the Fibre Box Association), this is a record," Staphos, the
Bank of America analyst, said. “Two months in a row would be a lot, five months is unheard of.”

Staphos said the containerboard industry is now raising prices — a $50-per-ton hike on shipments in November —
and putting caps on client orders amid the tightest market since 1994. According to his research team’s most recent
survey of box producers released Dec. 13, growth in production was still up — 5.1 percent in November and 4.5
percent so far in December, which doesn’t account for much of the holiday season and last-minute shoppers
ordering shipments.

Most of the companies surveyed expect another price hike in the first half of 2021, anticipating even more demand,
including from vaccine shipments.

On the flip side of the industry’s growth is the environmental impact. Cardboard is more biodegradable than plastic
packaging, but its production is linked to deforestation and heavy chemical use by paperboard mills. Industry
experts say ensuring most of those boxes don’t end up in landfills needs to start at the beginning of their life cycles.

Global consumption of paper and paper products goes through 15 billion trees each year, according to the
Environmental Paper Network. The industry relies on recycling virgin fiber — the basis of cardboard boxes — five to
seven times, saving trees and improving the bottom line.

Kevin Hudson, WestRock’s senior vice president of forestry and recycled fiber, described how this “circular
economy” works: Fibers produced in its paper mills are sent to production facilities, which make and ship boxes to
clients such as Amazon and Domino’s. The boxes that make their way to WestRock’s 18 recycling plants are then
turned into fibers again to start the process all over again.

WestRock invested $2 million in an upgrade to its Marietta, Ga. recycling facility in October — which Hudson said
was crucial to handling this year’s high demand.

“It’s absolutely critical that the investments in single-stream sorting technology continues to occur so that the
industry as a whole can match with the change in how recyclable material comes available,” he said.

Hudson said WestRock works with private landowners to ensure the fibers it uses come from sustainably managed
forests. He said his team also works with nonprofits to expand community recycling and make curbside programs
more efficient and municipalities to educate residents on what can be recycled.
“As the e-commerce has grown, so has that ability for the resident to recycle cardboard, and how that has evolved
where it is easy and more knowledgeable for us to catch more and more of that product,” Hudson said.

And as packaging changes, the more that retailers and corrugated producers learn about consumer needs. Several
years ago, it was common for an Amazon order to arrive in a huge cardboard box, with several smaller cardboard
boxes inside wrapped in plastic air bubbles. But WestRock now uses its box-sizer machine for customers to right-
size the package and reduce waste.

“We’ve optimized the box size to the product, so we’re reducing the amount of fiber that box requires. We're also
reducing the amount of fill product that box requires,” Hudson said, as bubble wrap and similar fillings are hard to
recycle.

That means the packaging is more protective, ensuring suppliers’ quality for its customers, and more efficiency:
Smaller packaging means postal and delivery workers can fit more packages on trucks, which reduces carbon
emissions from gas and saves time.

Clients play a role in efficiency, too. Amazon now relies on proprietary artificial intelligence to calculate the best fit
for orders, which sometimes means using an envelope instead of a box. As a result, Amazon says, it has reduced
outbound packaging by 33 percent in the past five years, eliminating more than 915,000 tons of packaging material
— the equivalent of 1.6 billion shipping boxes. The company has also invested $10 million in the Closed Loop
Infrastructure Fund to improve recycling for 3 million homes in the United States. (Amazon founder Jeff Bezos
owns The Washington Post.)

Target spokesman Brian Harper-Tibaldo said the company has been recycling cardboard from stores since the
1960s. In 2019, the Minneapolis-based retailer recycled more than 514,564 tons of cardboard, up 4.5 percent from
2018 and nearly 6 percent from 2017, some of it through its partnership with a paper mill. According to the
company’s 2020 corporate responsibility report, 51 percent of Target’s owned-brand paper-based retail packaging
are sourced from sustainably managed forests.

“Target is committed to using resources responsibly, eliminating waste and minimizing our footprint,” Harper-
Tibaldo said in an email. “All the cardboard Target uses within its operations is bundled and brought to local
recycling vendors.”

Both Amazon and Target declined to share cardboard usage data. T.J. Maxx declined to comment on this story.
Walmart and Gap representatives did not respond to requests for comment.

Now, with the transition to more cardboard boxes showing up on doorsteps rather than in stores, the industry is
relying on more consumers to keep up with recycling.

“More paper by weight is recovered for recycling from municipal solid waste streams than glass, plastic, steel and
aluminum combined,” Heidi Brock, president and chief executive of the American Forest and Paper Association,
said in an emailed statement. “As more people stay at home, it’s a good reminder that the box at your doorstep is
designed to be recycled.”

The United States historically has exported much of its waste materials, including old corrugated containers
(industry speak for used cardboard boxes), mostly to countries in Southeast Asia and Mexico. But trade data shows
money made from exporting recyclables has tumbled since China enacted restrictions on U.S. imports in 2018, and
some countries followed suit. Those declines intensified last year during the U.S.-China trade war: Fiber exports,
mostly from old cardboard boxes, dipped 3.1 million tons to its lowest volume since 2006, according to Resource
Recycling.
That meant the industry had to step up efforts to process more of those recycled fibers domestically. Brock said that
the containerboard industry — of which corrugated boxes make up the most — increased production 3.8 percent
between March and October in 2020, year over year, and saw a 4.1 percent in recycling. Meanwhile, three new
recycled containerboard mills are expected to be built over the next two years, with a $4.1 billion investment in
manufacturing to continue recovering fiber for reuse, Brock said.

Cardboard reuse has come a long way since 1993, the year the three-sided recycling symbol first appeared on boxes,
when just over half of all boxes were recycled, Kenyon said. In 2019, the recovery rate stood at 92 percent. Today,
the cardboard box landing on your doorstep typically includes about 50 percent recycled fibers.

Updated December 19, 2020

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