On top of supply chain disruption, rising raw material costs, shipping woes and a lack of inventory, now the promotional products industry faces another challenge: growing demand for cardboard boxes.

As e-commerce has exploded during the COVID-19 pandemic due to government-mandated shutdowns and stay-at-home orders, Americans have relied upon cardboard boxes for their deliveries. In 2020, U.S. producers churned out a record 407 billion square feet of corrugated product, such as boxes and crates, according to the Fibre Box Association. The year-over-year rise was 3.4%, the largest annual increase since 1994.

The demand for cardboard boxes has prompted manufacturers to raise prices. In the fall, manufacturers instituted a $50-a-ton increase for containerboard – the material used to make corrugated boxes – raising the benchmark grade to an average of about $765 a ton, The Wall Street Journal reported. Additional increases have followed, with PPI Pulp & Paper Week, a trade publication that surveys buyers and sellers, pegging the March price at an average of $785 a ton.

A banner year for e-commerce has created a run on shipping boxes, adding the equivalent of about 477 square miles of corrugated board to U.S. consumption, enough to cover New York City and then some. https://t.co/pEon3VQM1d via @WSJ

— Paul Page (@PaulPage) March 31, 2021

It’s another potential hurdle for the promo industry during its recovery from the pandemic. Like many distributors, Minneapolis-based Liquid Screen Design (LSD, asi/254663) doubled down on kitting last year, sending custom swag boxes to clients’ doorsteps for virtual events. That pivot turned business around in a major way – at the beginning of Q3, sales for the company were up 50% for the year.

But now the distributor is seeing the price of raw materials for boxes go up. “The last increase was 10% in January, and it's going to go up again by 6% effective this week,” says Benji Bearman, co-owner of LSD. “It hasn't affected our business yet, but we're going to have to explain more to customers as we move forward.”

On the supplier side, Chicago-based Lion Circle (asi/67620) has also seen an increase in the cost of materials. “Our industry is experiencing challenging times and we don’t feel we could pass this on to our customers,” says Joelle Tedford, vice president of sales and marketing at Lion Circle. “We’ve been able to hold our 2020 pricing, for now.”