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Yahoo
6 days ago
- Business
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RFID for packaging enters new markets, despite pause on FDA traceability rule
This story was originally published on Packaging Dive. To receive daily news and insights, subscribe to our free daily Packaging Dive newsletter. Even though the U.S. Food and Drug Administration hit pause on the Food Traceability Rule, that doesn't mean companies across the supply chain have stopped adopting tracking tools. Many industry participants and observers in the RFID for packaging space don't think the changed timeline will mute work on the technology. Food companies and retailers had been pushing to embrace tracking technologies, such as radio-frequency identification, ahead of the deadline, and packaging suppliers have worked to incorporate RFID tags into their products. But some companies struggled with timely tech adoption in the lead-up to the FDA's compliance deadline of January 2026, prompting organizations including the Food Industry Association to applaud applaud the agency's March announcement of a two-and-a-half year compliance extension to July 20, 2028. FDA proposed the rule during President Trump's first term, following multiple outbreaks tied to romaine lettuce. The intent was to boost producers' recordkeeping and traceability for foods at high risk of contamination so companies could easily identify involved suppliers during a foodborne illness outbreak. Companies must track key data across the supply chain and quickly submit records requested by FDA in instances of potential harm to the public. The government mandate appeared to accelerate deployment. Although RFID has been around for decades, "I am seeing a — I'll use the word 'resurgence' — of RFID investments" in the last 12 to 18 months, said Sandeep Unni, a senior director analyst in Gartner's retail industry research practice. "This became sort of an emergency that they needed to quickly turn around and make that investment, pivot to ensure that they had the compliance come January of '26." Implementation didn't accelerate enough, though, which prompted the agency's extension. While the extension might temper movement, it's unlikely to change the overall trajectory, sources say. "It slows down this expected boost to the RFID industry, but I don't think it shuts it down," said Kirsten Newquist, CEO at Identiv, a digital security and Internet of Things technology company. "My understanding is the FDA is still committed to these regulations. They're just pushing it out to give everyone the time they need to be able to set up the systems accordingly." Although implementation could decelerate in the near term, the sector ultimately is poised for growth, experts say. Tech and packaging companies continue to advance RFID design to overcome known challenges, such as functioning in various temperatures, and to ensure recyclability. While RFID has had a place in transportation logistics for some time, it's still on the early end of adoption in food, observers say. "This is technology that really allows companies to be able to be compliant with these regulations, and in a way that's way more efficient and cost effective, we believe, than traditional bar codes or QR codes," Newquist said. During the last decade, certain retailers and food companies moved forward with RFID for packaging due to factors outside of the FDA. Walmart is considered a major force driving businesses to adopt the technology. Over two decades ago, it launched a mandate that some suppliers use RFID on certain products the retailer carries, which it has since expanded to cover nearly every product. Grocery giants Albertsons and Kroger also have traceability programs in place. The former was an early adopter more than 20 years ago, and the latter announced in October that it would roll out Avery Dennison's RFID inventory automation technology across fresh foods departments. Chipotle introduced RFID nationwide after a 200-restaurant pilot in the Chicago area and asked its suppliers to tag their products. It's the first restaurant chain to make use of this type of inventory management system, according to the company. In the packaging and labels space, Avery Dennison often is heralded as an RFID leader. While early work involved incorporating smart labels on soft goods, such as clothing, the company has expanded its reach into other packaging markets, including food. "We're adding the inlay into the actual packaging materials. And we use a lot of our material science roots to make that as seamless as possible," said Julie Vargas, vice president and general manager of identification solutions at Avery Dennison. "When you do have a food safety event, you know exactly what those serial numbers are and you can isolate those for a recall event." Companies continue to identify new markets to introduce the technology. For instance, it's gaining popularity for inventory management of high-value products to prevent counterfeiting, such as for wine, watches and jewelry, Newquist said. Before scaling RFID, Identiv customers are typically interested in pilot projects — an especially important step for new applications, Newquist said. "They want to make sure that their assumptions around the return on investment are valid, but also just the practical implementation: tagging, read rates, kind of all the assumptions that go into planning and launching a new RFID system," she said. RFID can improve efficiency by slashing the time needed for labor-intensive inventory tasks. "When you're counting boxes, you don't have to actually scan 100 bar codes. You're taking a wireless scan of 100 things, and it's picking up 100 numbers," Vargas said. "Supply chains have never been more complex than they have in the past four to five years, so it's ... really valuable for businesses to optimize these types of scenarios." Still, there's room for additional improvement when it comes to incorporating the technology in packages. "Physics gets in the way of certain types of packaging," Gartner's Unni said. Radio frequency "doesn't play nicely with things like metals and liquids, so we've done a lot to innovate to overcome that," Vargas said. She described how specialty inlays or antennas that are inserted into the packaging itself, instead of in a surface label, alleviate some of those challenges. Although radio-frequency technology hasn't traditionally performed well in temperatures or humidity levels outside typical ambient range, that's changing, too. Modern systems now allow real-time location tracking and temperature monitoring in cold-chain settings, including for pharmaceuticals, Newquist said. Concerns remain about heating metal smart tag components, such as in a microwave if a frozen meal has a tracker on the packaging, but design evolutions are making headway. Although technology improvements are solving some of these challenges, "the reality is that in those types of environments, broader adoption still lags," Unni said. For all of RFID's potential benefits, there are also concerns about impacts to a package's sustainability profile, namely whether and how the smart tags' metal wires, plastics and other materials affect packaging recyclability. Research and testing generally points to RFID devices not impairing recyclability, sources say. "Our mission is to make it the least intrusive as possible," Vargas said. "We've done a lot of work with different MRFs and recycling facilities to make sure that it does not impact the recyclability work stream." Last year, Smurfit Westrock released a report on the topic, based on a study conducted in partnership with Western Michigan University on corrugated boxes with smart tags, including RFID versions. The researchers examined what happened to tag materials during box repulping. Upon testing paper samples made from the repulped boxes, no residual metals were detected by a metal detector. The researchers concluded that smart tags do not have a notable impact on corrugated box recyclability. "All of the materials were removed during the grinding process," said John Dwyer, director of business development at Smurfit Westrock, during a 2024 interview. "We're able to easily separate the corrugate material from the waste product, so there was zero negative impact on fiber recovery." Although smart tags can be separated from recyclable packaging materials, the tracking components are not recycled, Dwyer said. That material is disposed as waste, similar to tapes or staples that are separated from corrugated boxes during recycling. "It's such a small amount of material; it's negligible," he said, pointing out that the silicon chips inside the tags are smaller than a grain of sand. Smurfit Westrock already observes a considerable amount of smart tags traveling through its recycling facilities and expects that volume to balloon. At just one mill, the company recently saw more than 1 million RFID labels over the course of just a few months, Dwyer said. "So we know that this is happening. We know that it's growing." The company believed it was important to conduct new research on RFID and box recyclability because the last notable study on the topic occurred nearly 20 years earlier, prior to many technological advancements that could impact modern recycling practices. Smurfit Westrock wanted to draw conclusions before the technology reaches critical mass and it would be too onerous to reverse course. "We didn't want to tell people on the front end that it's good to put tags on packaging and not be a source of truth," Dwyer said. "So on the back end, we did the work. And now we can, with confidence, recommend that you can use them." Even if RFID implementation experiences a temporary slowdown stemming from the FDA's extended compliance deadline, sources predict significant growth for the next few years. Avery Dennison reported a 15% compound annual growth rate for sales of its intelligent labels between 2018 and 2024, and it's targeting that same percentage for long-term organic sales growth going forward. The company sees considerable opportunities to grow in markets such as food, according to a newly released investor presentation. RFID early adopters "are providing a leadership space that will actually create a real flywheel around this," Avery Dennison's Vargas said of the traceability trend. But other wireless tracking technologies, such as bluetooth low energy and near-field communication, are entering the space and putting pressure on RFID's market foothold. Even so, RFID use in packaging won't wane anytime soon, sources say. "RFID is still very much relevant," said Gartner's Unni, noting that he is "cautiously bullish" on its future. "Those that have leaned in on RFID earlier ... I think this is the natural extension to scale this tech into their supply chain and realize the additional benefits, as well as compliance." Observers believe that RFID not only will maintain its role in packaging and product traceability, but in fact will expand — both organically and driven by regulation. Phenix Label announced in January that it had doubled its production capacity for RFID-enabled packaging for hard-to-tag retail items, including some liquids. Describing a newly announced deal between RFID tech solutions provider Radar and retailer Old Navy, Michael Roxland, Truist Securities senior paper and packaging analyst, said in a March note to investors that the project signals retailers' "continued interest in the technology." Economic uncertainty resulting from tariffs could dampen traceability investments, but the impact likely will be short-lived, sources say. For instance, most of Avery Dennison's cross-border trade in North America, including for RFID technologies, is compliant with the United States-Mexico-Canada Agreement, Roxland noted in April. RFID for packaging isn't only about ensuring food safety and quality. But food traceability very well could be what pushes the technology toward mainstream adoption in the coming years. "This is going to be the rails that the industry runs on. And we're just getting started," Vargas said. Recommended Reading Kroger rolls out Avery Dennison RFID tech
Yahoo
02-06-2025
- Business
- Yahoo
Packaging manufacturers worried by 50% tariffs on steel, aluminum
This story was originally published on Packaging Dive. To receive daily news and insights, subscribe to our free daily Packaging Dive newsletter. Packaging manufacturing and metals trade groups so far are not in favor of the steel and aluminum tariff increases that President Donald Trump announced Friday. Trump unveiled plans to raise tariffs on steel and aluminum imports to 50%, up from the 25% that took effect in March. The doubled rates are slated to be implemented Wednesday. These tariffs, which are not affected by last week's court ruling blocking many levies, are intended to further protect the U.S. steel industry, Trump said Friday during a visit to a Pittsburgh steel factory to recognize Japan-based Nippon Steel's pending acquisition of U.S. Steel. But some groups say other U.S. businesses in metals supply chains wil be harmed, with these businesses — and consumers — likely suffering consequences such as increased costs. Association members 'strongly oppose any action' that would raise steel and aluminum tariffs to 50%, said Can Manufacturers Institute President Robert Budway, in a statement. 'Doubling the steel tariff will further increase the cost of canned goods at the grocery store. This cost is levied upon millions of American families relying on canned foods picked and packed by U.S. farmers, food producers, and can makers.' Following the 25% tariff announcement earlier this year, several metal packaging manufacturers, including Ball and Crown, expressed concern about increased costs from the duties and passing the hikes down to already price-stressed consumers. The duties also affect other metal packaging manufacturers, such as for caps and closures, foils and industrial steel drums. The Aluminum Association also said in an emailed statement Monday that it appreciates Trump's 'continued focus on strengthening the U.S. aluminum industry,' but these tariffs could have unintended consequences. Association members will continue working with the Trump administration to increase domestic production, said Matt Meenan, vice president of external affairs at the Aluminum Association. 'However, aluminum and steel are different.' 'Tariffs alone will not increase U.S. primary aluminum production nor support the $10 billion invested by the mid-and-downstream industry over the past decade,' Meenan said. 'We need significant new sources of reliable, low-cost electricity and an all-of-the-above policy approach to keep and collect more domestic aluminum scrap.' AA is in touch with the Trump administration to better understand the details of the levies, Meenan said. 'We urge the administration to take a tailored approach that reserves high tariffs for bad actors — such as China — that flood the market and includes carve outs for proven partners — such as Canada. Doing so will ensure the U.S. economy has the access to the aluminum it needs to grow while we work with the administration to increase domestic production.' CMI similarly seeks a more tailored approach, with Budway saying the stated plan 'plays into the hands of China and other foreign canned food producers, which are more than happy to undercut American farmers and food producers.' This risks U.S. food security, Budway said. 'We are asking President Trump for targeted tariff relief, on tin mill steel and aluminum produced by our allies and used in the production of cans that are made in America.' Budway further explained that domestic tin mill steel producers made a 'series of unfortunate decisions over the past eight years' that resulted in 'dramatic cuts that have decreased U.S. production of the specialized steel used in can making by 75%.' Therefore, domestic can makers and canned food producers now import nearly 80% of tin mill steel from foreign trade partners, he said. Meanwhile, foreign leaders are examining whether to implement countertariffs or other measures. The European Commission 'strongly' regrets the surprise doubling of tariffs, BBC reported. The commission said Monday that it will make a case this week for the United States to reduce or eliminate all announced tariffs, including those on steel and aluminum, Reuters reports. The EU previously imposed, and then suspended, countertariffs on $24 billion of U.S. imports due to the earlier metal duties. Recommended Reading Trump to increase steel, aluminum tariffs to 50% Sign in to access your portfolio
Yahoo
29-05-2025
- Business
- Yahoo
5 questions about tariff impacts on the packaging industry
This story was originally published on Packaging Dive. To receive daily news and insights, subscribe to our free daily Packaging Dive newsletter. Hammont Premier Packaging didn't wait until the Trump administration's tariff announcements this year to rethink its supply chain. The small New Jersey-based company, which sells clear boxes, bags and more, started diversifying sourcing and onboarding additional suppliers in North America and Europe more than 18 months ago. Hammont realized that 'substrates imported from Asia, especially China, tend to be more susceptible to tariffs and logistical slowdowns,' CEO Isaac Link explained. In some instances, the company invested in local suppliers or redesigned products to reduce reliance on materials made only in China. 'The current climate demands flexibility,' Link said. Shifting trade policy, frequent changes to tariffs and evolving legal challenges have created uncertainty for packaging companies, along with their customers and suppliers. Earlier this month, the U.S. and China agreed to a 90-day pause on higher tariffs, but relations remain uncertain. Meanwhile, tariffs on key trading partners such as Canada and Mexico have shaken supply chains, especially for businesses that started to diversify away from Asia to North America during the pandemic. Although certain increased tariffs have only been in place a few months, 'the impact is already showing up in subtle but serious ways,' said Jennifer Dochstader, co-founder of LPC Inc., a marketing and research consultancy specializing in the global printing and packaging industry. One example would be a brand that delays its product launch or rebrand because of tariff-related price hikes, she said. 'The ripple effect hits the flexible packaging printer, the label printer, the folding carton producer, the co-packer,' Dochstader said. Tariffs and their effects on packaging supply chains have caused widespread uncertainty. Here are five questions packaging businesses face while navigating next steps. The most immediate impact is cost. Adam Peek, founder of Golden Rule Consulting and the People of Packaging Podcast, said a commercial printer that buys paper from Canada suddenly experienced skyrocketing costs for the largest item it sources. But the tariffs could be rolled back as quickly as they were enacted, Peek said, making it challenging for the packaging company to decide how to mitigate cost increases. 'The uncertainty in tariffs is creating a lot of stress and tension in the supply chain,' Peek said. During spring earnings calls, Smurfit Westrock noted shifting some production among sites in Canada and the U.S., and Packaging Corporation of America noted that trade uncertainty led it to adjust some exports. But many large packaging companies reported minimal anticipated effect from tariffs due to low exposure and domestic supply chains. In early May, Sealed Air noted most of its products aren't affected by tariffs because of an exemption for goods covered by the U.S.-Mexico-Canada Agreement. And O-I Glass said just 4.5% of its global sales volume is exposed to new tariffs, mostly related to imports of filled containers from Europe. Ardagh Metal Packaging's North America can-making operations are all in the U.S., and its 'suppliers, customers and end consumers are all mostly local to the region,' CEO Oliver Graham said. Even in domestic packaging supply chains, knock-on effects of tariffs are still a possibility, said Anish Thanatil, North America lead for Boston Consulting Group's forestry, pulp, paper and packaging work. If consumer demand shrinks due to higher prices, packaging producers will feel the ripple effects up the supply chain. Or if companies need to purchase equipment to add more paper manufacturing capacity, machinery and parts may be subject to tariffs. 'Everything that's made in the U.S., in some way, is going to be impacted by tariffs,' Peek said. 'We've built a global economy.' Packaging leaders have managed their supply chains through disruptive times over the last decade. Tariffs enacted during the first Trump administration pushed many businesses across industries to diversify their sources of supply. Then, the COVID-19 pandemic imparted similar lessons about diversification and holding buffer inventory. 'We learned a lot during the COVID pandemic on how to navigate through the unknown and the chaos,' Peek said. 'Being single-sourced as a company for critical packaging components is maybe not the best idea.' Many companies started to more actively understand the risks in their supply chain during that time, according to Thanatil. He added that many firms have a playbook so they can refer back to how they managed supply chains during COVID and use those same strategies today. But the current tariff situation bears some key differences. 'In COVID, you knew that you had to plan for at least a year or two. Here, we don't know the timeline,' Thanatil said. 'People are more prepared than they were during the pandemic, but there's also more uncertainty.' Multiple companies have discussed the potential to alter packaging substrates or formats in light of tariff-driven supply chain changes. P&G plans to look 'for every opportunity to mitigate the impact, including sourcing flexibility and productivity improvements,' along with price hikes for consumers, CFO Andre Schulten said on an April earnings call, before the 90-day tariff pause with China began. Schulten said P&G's largest tariff impacts come from raw materials, as well as packaging materials and finished products sourced from China. Last month, Hammont switched the color of one of its paper bags from a medium brown shade made in China to a darker shade available in India, Link said. But for the most part, packaging manufacturers are holding off on major changes to materials and formats until they have a better sense of the longevity of the tariff situation. 'There's a lot of wait-and-see energy right now,' Dochstader said. Transitioning substrates is not a quick and easy choice for packaging firms nor their customers, Thanatil said. He gave the example of a company that's considering switching from a tin can to paper, because most tinplate is sourced globally while paper for food cans is produced domestically. A CPG would need to test the material and possibly install new manufacturing lines to fill the new can type – none of which can happen in the short time frame in which the U.S. is imposing tariffs. For that reason, Thanatil projects that major shifts in substrates or formats are 'on a back burner' for two to three months as businesses await the possibility of greater clarity. Metal is among the packaging materials most vulnerable to geopolitical shifts. Two-thirds of metal for food packaging in the U.S. is imported, and most tinplate capacity has been shut down in the U.S., Thanatil said. Conversely, flexible and rigid plastics, along with paper, are at an advantage because of their domestic supply chains, Thanatil said. In many cases, products are manufactured in one place but packaged in another, exposing the goods to tariffs. Many CPGs import raw materials and then manufacture or package domestically, Dochstader said. In the case of electronics, products are manufactured overseas, so the packaging is produced in the same region. 'We're not going to make packaging here for iPhones and then ship it to China. That would be ridiculous,' Peek said. Clorox noted its tariff exposure is 'relatively limited' because 'we tend to manufacture closely to where we sell our products,' CFO Luc Bellet said on a May earnings call. But he added that most of the tariff impact is on packaging and raw supplies. Because the tariff situation remains fluid, experts advised working to make supply chains more resilient, while focusing on long-term packaging trends. For example, younger generations show preferences toward sustainable packaging and healthier eating, Thanatil said. Making a packaging change that results in lower exposure to tariffs but doesn't align with sustainability goals may not be a worthwhile tradeoff. Diversifying suppliers, reshoring production and reengineering designs are all possibilities to make the supply chain better able to absorb shocks. 'If you're a procurement person, you have to be willing to entertain new potential opportunities,' Peek said. He emphasized that doesn't mean moving all orders over to the vendor with the least tariff exposure. In fact, now is the time to strengthen long-term vendor relationships, not abandon suppliers if they raise prices, sources said. 'They're reacting to cost pressures of their own,' Dochstader said. She advised that companies ask their vendors questions to clarify what's driving pricing and to consider design tweaks or lower minimum order quantities. Link said that when Hammont rolls out 'unavoidable price hikes,' it does so with advanced warning. And it will honor old pricing until the company and its customer agree on a date for the new pricing, even if it comes at a cost to Hammont. 'Everyone is in the same boat here just waiting for this to pass,' Link said. Open communication is important on the customer side, too. Packaging companies sometimes keep supplier information close to the vest with vague specifications so customers can't seek alternative quotes. 'That veil has to be ripped to just create ultimate transparency and communication with your customers,' Peek said. 'That's how you'll navigate through everything in a world that's hard to navigate right now.' Peek advised packaging executives to stay informed on changing trade policies, but cut through the noise by focusing on what they know is true — and use that to guide decision-making. 'You're not going to disrupt your entire supply chain just because there's a tariff policy in place this week that could change next week,' Peek said. Recommended Reading Are tariff-era changes to fiber supply chains here to stay?
Yahoo
17-05-2025
- Business
- Yahoo
CNG, Elopak, Hotpack, IP expanding US operations
This story was originally published on Packaging Dive. To receive daily news and insights, subscribe to our free daily Packaging Dive newsletter. Packaging manufacturers continue to invest in greenfield sites as well as expansion projects. In the past month, numerous companies have announced growth plans for film production, paper packaging and more: Charter Next Generation announced a $106 million investment in facilities and advanced equipment to expand its operations in Northeast Ohio, adding 125 new jobs across sites in Lexington and Ontario that already staffed more than 1,200 people. CNG will add 12 new film packaging lines in Lexington as part of a 157,000-square-foot expansion, while also adding four extrusion lines in Ontario 'to meet growing demand in the consumer goods space.' The project will receive state tax credit assistance. Elopak opened its first U.S. carton converting plant in Little Rock, Arkansas. The $100 million factory will make Pure-Pak cartons for liquid dairy products, juices, plant-based drinks and liquid eggs, the Norwegian company said. A second production line, which Elopak projects will contribute an additional $110 million in annual revenue, is expected to be up and running in 2026. Hotpack, a food packaging company based in Dubai, announced plans to expand manufacturing and distribution in the U.S. with a $100 million investment in Edison, New Jersey. This will be the company's initial North American production base. The 70,000-square-foot facility is expected to begin operations in June, bringing 200 jobs over the next five years. International Paper broke ground in May on a box plant in Waterloo, Iowa, that's expected to become operational in Q4 2026. 'Located in the heart of the Midwest, the new facility will primarily focus on serving the protein segment, providing tailored packaging solutions and meeting the growing demand for high-quality, sustainable packaging,' the company said. The expansion is projected to add 65 jobs. Elsewhere, IP is adding 40 jobs at a container plant in McAllen, Texas, as it consolidates its manufacturing footprint along the U.S.-Mexico border. Malnove, a paperboard packaging solutions company, received a local permit to expand its plant in Jacksonville, Florida, the Jacksonville Daily Record reported. The project cost is about $12.2 million. Nelipak, a Rhode Island-based thermoformed packaging company specializing in healthcare and medical device packaging, announced it will open a new production site in Grecia, Alajuela, Costa Rica, in mid-2026. Nelipak has operated in the country since 2012. Pregis is expanding its blown film operations at its Anderson, South Carolina, facility. Specifically, it's adding capacity for ethylene vinyl alcohol — or EVOH — barrier film options. 'As brands seek packaging that delivers both barrier properties and recyclability, Pregis is investing in the infrastructure needed to stay ahead of that demand,' Bob Gargione, president of Pregis Performance Flexibles, said in a statement. UFP Industries previewed plans for a new corrugated facility in the western United States. 'This is the third corrugated facility for UFP Packaging's protective packaging business unit and second announced within the last 12 months,' intended to serve e-commerce and retail customers, the Michigan-based company said. Recommended Reading Morris Packaging, Karat Packaging, Nefab, Saica announce expansions Sign in to access your portfolio
Yahoo
14-05-2025
- Business
- Yahoo
Amid industry frustration about fiber price indexes, Bloomberg presents alternative
This story was originally published on Packaging Dive. To receive daily news and insights, subscribe to our free daily Packaging Dive newsletter. Bloomberg Index Services Ltd. is accepting customers for its recently launched commodity pricing index for corrugated boxes. The Bloomberg Corrugated Box Cost Index is designed to be a transparent tool for both box buyers and sellers. This index relies on an algorithm that considers eight inputs used in manufacturing and shipping boxes, including OCC costs, hourly wages and maintenance rates. Half of those inputs also have their own futures markets, said Ryan Fox, corrugated packaging market analyst at Bloomberg Intelligence, during a webinar Tuesday. 'You can therefore use this as a calculator, of sorts, and create future scenarios.' This model serves as an alternative to existing fiber pricing indexes, such as a widely used 42-pound kraft linerboard index. 'Bloomberg is presenting this as a neutral third party,' said Doug Larsen, corrugated market analyst at Green Markets, a Bloomberg company. 'This concept provides a more holistic cost representation.' Fiber manufacturing and sales have changed over the last several decades, Bloomberg representatives said during the webinar, but most pricing indexes haven't kept up with the transformations. This new box pricing index accounts for such changes, they said. Historically, many contracts in the fiber industry were tied to the price of 42-pound linerboard — weighing 42 pounds per 1,000 square feet — 'but today, 42-pound is a very minor part of what's used,' Larsen said. In addition, previous contracts were tied to pricing guidance from various trade publications. Those are among the many elements that have changed since the 1970s and 1980s, he said, also pointing to evolving methodologies for calculating box price movement. Another change is that industry consolidation has altered individual companies' market shares and business strategies. Now, 'the industry as we know it is roughly 90% vertically integrated,' Fox said. Vertically integrated producers transfer paper materials manufactured at their own mills to their own converting facilities. Only about 5% to 10% of containerboard produced in the modern era heads into the open market, speakers said, and that proportion continues to shrink. However, commonly used fiber pricing indexes, such as Fastmarkets RISI's, still are linked to the open market. 'It's a dilemma today in that if you're only considering open market, you're not considering 90% of the market,' Larsen said, adding that it 'doesn't seem like the right thing to do.' The pricing index debate gained steam in 2024 when all the major producers announced price increases for linerboard and other grades to start the year, but the monthly pricing in Fastmarkets RISI's weekly report, Pulp and Paper Week, showed no price movement in January and only partial recognition of the increases in February. Producers then launched another round of increases during the summer to make up for it. A similar scenario played out earlier this year, when the index only reflected a partial price increase following price hikes announced to take effect Jan. 1. Executives at numerous fiber producers, including International Paper and Packaging Corporation of America, have expressed discontent with leading pricing index methodologies. Several have indicated they would abandon third-party pricing indexes altogether. Graphic Packaging International was the first to announce it would make the move, when executives disclosed in October that the company would shift away from these indexes in early 2025. They reported good progress on the transition in February, and as of this month's earnings call, 'We have our new index model, which will inflect positive on pricing,' said CFO Stephen Scherger. 'What we're hearing from both producers and buyers is something needs to change. And we're offering an alternative,' Green Markets' Larsen said. Another industry transformation is that 'the percentage of boxes that are actually sold on contract has gone up dramatically,' he noted. Fox agreed, saying he was shocked to hear on PCA's recent earnings call that 70% of the company's box sales were tied to a contract. Contracts often contain 'triggers' that are linked to commonly used indexes. Bloomberg isn't suggesting its index should be used for such purposes, but rather it intends to present data in a way that could change pre-existing ideas about box pricing in supply contracts. 'How buyers and sellers use this is up to them,' Larsen said. 'We're not trying to tell people how to use it. We're trying to say this is the data, and you can choose to review your prices monthly or quarterly or semi-annually or whatever fits your business model.' Bloomberg Index Services is developing other fiber indexes, too. A tool for folding cartons is expected to be released publicly in the next few weeks. Recommended Reading February's partial price increase for containerboard again raises index questions Sign in to access your portfolio
