Middle East Tensions Squeeze Already Fragile Packaging Industry

Key Details Packaging producers face mounting pressure as the Strait of Hormuz blockade drives up energy and transportation costs. The box-making industry was already struggling from weakened consumer demand caused by inflation and tariffs, but geopolitical tensions have added another layer of financial strain. Why It Matters Higher input costs are hitting companies when they can least afford it. Smurfit Westrock now expects energy costs to impact earnings by $270-290 million annually, up sharply from initial projections. Sonoco Products projects an additional $8-10 million in second-quarter costs, primarily from freight expenses. Market Pressure Despite rising costs, packaging companies struggle to pass expenses to customers amid weak demand. First-quarter corrugated shipments hit a 10-year low, forcing industry-wide plant closures. CEO Andy Silvernail of International Paper noted consumers remain hesitant due to economic uncertainty fueled by trade disputes and the Middle East conflict. The Road Ahead Benchmark prices for linerboard, the outer layer of corrugated cardboard, increased in both March and April - the first back-to-back hikes in five years. However, sustained demand weakness means price increases alone won't offset the cost burden for most producers.