The paper is devoted to a new heuristic packing compaction algorithm for the rectangular cutting and orthogonal packing problems. This algorithm is based on the idea of iterative local replacement of some objects placed in a container. Six selection rules for deleting placed objects and subsequent redistribution of them with the aim to obtain a packing with a better density are proposed. The effectiveness of the packing compaction algorithm has been investigated on the standard test instances of the rectangular cutting problem.