Box factories folding fast

Cardboard box makers in the US have announced plans to shutter, in aggregate, about 9% of their production capacity this year.

The sharp reductions will put roughly 2,500 people out of work in an industry that — because of the cardboard box’s ubiquity in shipping — sometimes serves as something of a bellwether for large swaths of the US economy.

“The industry has not made such dramatic capacity moves since the GFC,” paper and forest products industry stock analysts at Citi wrote, using the shorthand for the global financial crisis of 2008 that set off a sharp recession. “We count seven mill closure announcements in total this year.”

The most recent came last week, when International Paper announced it would be closing two mills in Georgia where roughly 1,100 people worked in total. It was the latest in a string:

• January 2025: Ohio-based packaging company Greif announced plans to close its Fitchburg, Massachusetts, cardboard plant, where roughly 70 worked.

• February 2025: IP announced it will close a cardboard plant in Campti, Louisiana, employing 470.

• May 2025: Georgia-Pacific said it will shut a plant in Cedar Springs, Georgia, costing 535 people their jobs.

• May 2025: Smurfit-Westrock said it will shutter a cardboard factory in Forney, Texas, where the first round of layoffs included 200.

• July 2025: Canadian paper giant Cascade said it would shut a Niagara, New York, plant, eliminating all 123 workers.

The capacity reductions offer a glimpse of the way the Trump administration’s push for tariffs continue to ripple through the US economy, even in industries such as corrugated containers that face little foreign competition.

That’s because a lot of American boxes — about 10% to 15% of the US industry’s capacity, according to Barclays’ analysts — are used to send US exports abroad.

Such exports are expected to slow sharply this year and potentially shrink in 2026, amid disruptions related to tariffs and trade tensions.

“The biggest risk for the US containerboard industry in 2025, in our view, is around trade flows,” Barclays analysts wrote in an industry note. “As exports reduce, it could lead to excess supply in the domestic market and lower utilization rates.”

Those utilization rates — essentially how much a factory is producing versus what it could produce if it were running full blast — are a big deal in the manufacturing business.

That’s where the recent closures could provide an interesting opportunity for traders who might be looking for stocks with some potential profit upside.

Wall Street analysts following box makers like International Paper, Packaging Corp. of America, or Smurfit Westrock suggest that the sharp cuts to the industry’s US capacity could push the utilization rate, which has been around 87.5%, back to the low 90% area.

Higher utilization can produce bigger profits. That’s because a manufacturer’s fixed costs like rent, interest payments, annual salaries, and depreciation represent a lower share of each unit produced as a factory operates at rates closer and closer to it peak potential output.

And that’s a powerful thing — provided that demand and prices don’t fall off a cliff, which they haven’t.

On the other hand, the market already understands this and has clearly priced it in.

That’s why despite tariff trouble and factory closures, these stocks still aren’t dirt cheap. IP and Packaging Corp. trade at nearly 20x forward earnings, while Smurfit Westrock is a bit more affordable at 14x, per FactSet data.