The world is using fewer cardboard boxes. That’s a bad sign for the economy – The Economic Times*

Clipped from: https://economictimes.indiatimes.com/small-biz/trade/exports/insights/the-world-is-using-fewer-cardboard-boxes-thats-a-bad-sign-for-the-economy/articleshow/96443010.cms

Synopsis

Investors are watching closely for any harbingers of what is to come as fears mount that many of the world’s biggest economies will tip into recession next year.

Mills that churn out cardboard are slashing production worldwide, a worrying sign that global trade is slowing down.

North American companies that make the raw material for corrugated boxes shut down nearly 1 million tons of capacity in the third quarter and a similar scenario is expected for the fourth quarter, Bloomberg Intelligence analyst Ryan Fox said. Prices are falling for the first time since 2020.

Severe weakness in global box demand is an indication of how weak many parts of the global economy are,” said KeyBanc analyst Adam Josephson. “The recent history shows a significant amount of economic stimulus would be necessary to provide meaningful box demand, and we do not see that coming.”

Investors are watching closely for any harbingers of what is to come as fears mount that many of the world’s biggest economies will tip into recession next year. Paper boxes are present at nearly every step of a good’s journey through the supply chain, which makes paper a key indicator of how economies are faring. The signals are not encouraging.

394456312

Global demand for packaging paper is showing weakness for the first time since 2020, when economies reignited following the first hit of the Covid-19 pandemic. US prices fell in November for the first time in two years and the US, the world’s biggest exporter, reported 21% lower volumes sent overseas in October versus the previous year.

WestRock and Packaging Corp. have announced mill closures or idled machines. Klabin, Brazil’s biggest packaging-paper exporter, is considering cutting its exports by as many as 200,000 metric tons next year, Chief Executive Officer Cristiano Teixeira said. That’s almost half the amount exported in the twelve months ended September.

394479182

Much of the fall off in demand is attributed to the shrinking effect inflation has on consumer wallets. Companies that produce everything from consumer staples to apparel are bracing for a pullback. Procter & Gamble Co. has raised prices for products from Pampers diapers to Tide laundry detergent several times to offset higher expenses, fueling the company’s first quarterly decline in unit sales since 2016 earlier this year.

US retailers discounted heavily on Black Friday in hopes of clearing out excess inventory, but shoppers responded with only modest traffic and sales fell in November by the most in almost a year. Moreover, the meteoric growth of e-commerce — an avid user of cardboard boxes — has receded.

394456539

Sluggish demand is also hitting pulp, the raw material for paper. Top global exporter Suzano recently announced a price cut for its eucalyptus pulp in China, the first decline since late 2021. European demand is decreasing and a long-awaited recovery in China hasn’t materialised yet, said Gabriel Fernandez Azzato, a director at consultancy firm TTOBMA.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s