Board Converting News, January 17, 2022

Converter Outlook, Part 2: Virus, Variants, Pandemic Continue To Create Uncertainty KRUGER PACKAGING Montreal, Quebec, Canada: Serge Desgagnes reports, “Covid. Pandem- ic. Vaccine. These are the basic few words we keep hearing over and

over again this past year. I’m sure you are all tired of hearing these words and would like to forget about them for a long time, however, we work in an industry that is so deeply connected with the pandemic we have no choice but continuously adapt to it. “There was not one accurate forecast or predic- tion for 2021 from experts and analysts throughout the industry and unfortunately, 2022 is more of

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Serge Desgagnes

the same. Never-before-seen variables are affecting the industry in un- predictable ways and the greatest takeaway from 2021 has been to be adaptable. As change comes quickly, our strategic decisions must come even more quickly. “Looking at the numbers, the 2021 statistics were being compared with a strong 2020 year, especially in regards to the second half of 2020. Even with the strong comparable, 2021 was a very successful year. Let’s take a closer look at 2021. According to the Fibre Box Association (FBA), North American 2021 industry shipments were up 4.1 percent and demand was up 11 percent after nine months. These figures clearly still indicate a strong demand in containerboard, which should carry over to 2022. The million dollar question is how long this strong demand will last? The main ‘squeeze’ for containerboard was felt heavily during the second half of 2020 and first half of 2021. This was due to a combination of factors: 1) lowering inventories in 2020 due to expert predictions of a slowdown and 2) an exponential increase in containerboard demand. “Given these factors, we can look to North American inventories to help better understand the market trend. FBA published North American Box Plant inventories and September 2020 vs September 2021 showed an increase of 17.5 percent. Box plant inventories are much healthier, which means there is more supply in the market and less stress on finding containerboard. North American Mill inventories for September 2020 vs September 2021 is 4.6 percent. Based on these figures, we can assume there is more supply in the market, however the demand still remains very strong. Whenever there is strong demand, more supply will always follow, but these figures are healthy indicators for the time being. “No one can predict 2022 since the pandemic is not over and contin- ues to change as time goes on, however, given the past year we can make educated assumptions that will hopefully help improve our forecasts. As established above, supply in the market has increased and demand re- mains strong. “What other factors affect our industry? Staff. Employees during the pandemic have been difficult to manage. Not only did the government subsidies create more competition for businesses, the new easily conta- gious variant has caused more employees to call in sick. A lack of labor has made it more difficult to produce as efficiently as the demand would like and therefore, backlogs will remain. Another factor in our industry, which has been made quite clear after 2021, is that e-commerce is here to stay. The convenience of online shopping for clothes, groceries and any other items that may come to mind has added to the sharp increase in de- CONTINUED ON PAGE 14

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January 17, 2022

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