There's encouraging news for producers of corrugated and paper boxes in a newly released research report which forecasts that demand for these products will increase 2.6% per year to $39.4 billion in 2018.

The report, published by The Freedonia Group, says that the momentum will come in general fromcontinued expansion of the overall economy and in particular from heightened demand for value-added box types such as those that feature high-quality graphics and printing or are constructed in display-ready form. Additionally,the trend of "reshoring" or "onshoring" some manufacturing activity back to the U.S. will counter the outsourcing of box production to low labor-cost regions—a restraint on growth for the box industry in recent decades.

Growth will be driven by the recovery in the manufacturing sector, especially in the output of food and beverages, pharmaceuticals, and other nondurables. Other factors include an improved outlook for consumer spending, a rebound in construction activity, and continued rapid growth for online shopping. Box production volume will rebound from declines of the past decade but will be moderated by the increased presence of lighter-weight containerboard and pressures to reduce excess packaging.

The report projects that folding carton demand will increase 1.4% per year to $9.9 billion in 2018. Although this is an improvement over the category's 2008-2013 performance, growth will be held back by competition from other packaging formats—particularly flexible packaging. Nevertheless, box producers should benefit from the rebound in nondurable goods output; expanded opportunities in carryout food applications; and paper-based packaging's appeal as part of sustainability efforts.

Set-up box demand will also see relatively slow increases based on competition from less costly alternatives such as folding cartons and plastic containers. Ongoing demand will be helped by an improved outlook for discretionary spending and set-up boxes' entrenched position as upscale packaging for premium confectionery products and fragrances.

Food and beverages represent the largest single market for corrugated and paperboard boxes, accounting for 50% of total demand in 2013. Segments that are expected to post above average gains include produce, meat, poultry and seafood, dairy, and beverage. Sugar and confectionery, baked goods, and grain mill product uses are expected to grow more slowly.