However, the most recent second-quarter figures throw cold water on it. While industry insiders are hoping for a rebound in demand, the reality is that it will not be nearly enough to ease the plight of older factories. At the same time, the new generation of 100% recycled paper machines continues to increase production throughout the year.

"These new machines appear to produce better quality paper than previous 100 percent recycled machines, and they also operate more efficiently," Doug Larson, a paper packaging pricing analyst at Bloomberg, noted in a presentation in mid-August. "If demand doesn't improve, these two factors could put even more pressure on older equipment," he added.

Bloomberg recently hosted a webinar titled "Box Board Report - Market Dynamics: A Review of Sentiment and Data for Q2 2024." Bloomberg senior analyst for basic Materials Richard Burke, corrugated market analyst Ryan Fox, and Doug Larsen spoke at the event.

Fox said: "We entered this year with high expectations, everyone is hoping for a recovery in the box board market. As early as more than a year ago, many institutions, including Bloomberg, predicted the growth of box board shipments in 2024. However, as we approach the end of 2023, we find that headwinds remain on the demand side and the year promises to be a difficult one."

Larson pointed out that last year, the carton board supply side can be described as "rapid action", adding five new machines and adding 2 million tons of capacity. It is the first such expansion since 1996.

"Despite the addition of 2 million tons of capacity, total box board capacity at the beginning of 2024 has not changed significantly from last year," Larson said. "Because last year, nearly 2 million tons of capacity was permanently shut down. So the net increase isn't really that big.

"What we are seeing is a shift in the structure of capacity: the new machines coming on stream are all made from 100% recycled materials, while those that are closed are mostly made from raw wood pulp or mixed feedstock. In addition, these new capacity are mainly from independent or medium-sized suppliers, while most of the capacity closures belong to industry giants such as International Paper and Weslock. In the entire box board industry of about 40 million tons of capacity scale, 4 million tons of capacity transfer is undoubtedly a huge change."

Larson further noted that in addition to the 2 million tons of capacity permanently shut down last year, some of the largest players in the industry have temporarily shut down more than 2.5 million tons of capacity for economic reasons, which leads to a more significant production gap in 2024.

"Even if the annual average of permanent shutdowns is 660,000 tonnes, in the first quarter of this year alone, International Paper and Weslock's temporary shutdowns were close to 165,000 tonnes. It's another indication that the imbalance between supply and demand is quite significant."

Regarding the recently closed McKinley Paper recycled paper mill in Port Angeles, Washington, Larson said that based on his data analysis, it was a relatively low-cost plant. While he could not reveal the specific reasons for the decision within McKinley, the incident is yet another sign that older factories are under increasing pressure to survive.

When it comes to box board shipments, Fox said that although the sequential data showed an improvement, it was still down about 1% year-on-year. He predicted shipments in the third quarter would be flat compared with the second quarter. It is important to note that the third quarter is usually the best quarter of the year based on historical data.

"Despite expectations for this year's market performance, shipments in the first quarter fell 1.1% from the same period last year, hitting a new low since 2016. This shows that the year has not started well." "Although there was a 1 percent quarter-on-quarter increase in the second quarter, year-on-year shipments still declined by about 1 percent," he said.

Larson pointed out that one positive sign is that the export volume of carton board paper has increased in the first half of the year. That helped prevent a sharp rise in domestic inventories and helped factories run at 90% of capacity for the first time in the first quarter, the highest rate in nearly a year.

"The increase in export demand is undoubtedly a big positive, but the first quarter data also suggests that the shutdown in the industry will continue." "I think the peak of outages in the third and fourth quarters of last year is behind us, but we are unlikely to get back to the 93 or 94 percent operating rates we had during the pandemic," he added. However, it is possible to maintain the operating rate above 90 percent.