As goes the humble cardboard box, so goes the economy
Box factories are folding, a worrying sign for the outlook.
As the astute economic observers of the Gray Lady recently noted, the recessionary impact of President Trump’s tariff blitz is everywhere — except the actual economic data. Recent numbers on consumption, unemployment, and corporate spending have all held up pretty well.
But many seem to think it’s coming. Data out today on industrial production as well as retail sales were a bit weak. And for one industry traditionally considered a leading indicator worth watching, the trade-related downturn seems to be clearly here.
Privately held Georgia-Pacific, a subsidiary of Koch Industries, announced yesterday that it would be closing a cardboard box factory near Atlanta, costing 535 people their jobs. That announcement followed late April news from publicly traded box maker Smurfit Westrock that it was closing box factories in St. Paul, Minnesota, and Forney, Texas, along with some mills in Germany, resulting in 650 jobs lost. International Paper and Grief, two other big box makers, have recently announced mill closures in Red River, Louisiana, and Fitchburg, Maine, respectively.
“With the closure of Cedar Springs, the industry is set to shutter 5.4% of total US capacity in an effort to match supply with weak, but stable demand in the face of the volatile global trade environment,” Jefferies analyst Philip Ng wrote.
It’s no secret where that global weakness is coming from, either.
Speaking to analysts after reporting earnings in late April, International Paper CEO Andrew Silvernail spotlighted “a tick down in demand when the tariff conversation first started.”
“After the trade discussions escalated a week later, we saw another negative shift in demand,” he added.
Boxes may seem boring. But they’ve long been considered something of a leading indicator for the economy, considering their ubiquity both in shipments of materials needed for industrial activity and their centrality to online retail sales.
And right now, box companies are scrambling to quickly to cut production to offset soft demand.
“We did see a lot of weakness in March and the first two weeks of April,” Smurfit Westrock CEO Anthony Smurfit told analysts after reporting earnings on April 23.
He added that while order bookings seemed to steady in the end of April, things remain uncertain.
“We’ll be very happy if demand comes back in the corrugated and container sector,” he said. “But we’re not... banking on a very strong recovery.”
