Why the falling use of cardboard boxes is a bad sign for the global economy
- North American companies that make the raw material for corrugated boxes shut down nearly 1 million tons of capacity in the third quarter
- WestRock and Packaging Corporation of America have announced mill closures or idled machines amid falling demand
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.
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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 per cent lower volumes sent overseas in October versus the previous year.