The size of China's cardboard box market: the increasing demand year by year expands its market size

As an important part of the packaging industry, the cardboard box market plays a crucial role in China's economic development. With the steady growth of China's packaging industry in 2023 and the gradual increase in demand for paper products, the cardboard box market has shown considerable development prospects.

Compared to other leading indicators of economic growth in the United States, such as the Advisory Council's leading economic activity indicator, non manufacturing PMI, unemployment rate, and inverted yield curve, the indicative role of cardboard box demand in economic recession is more easily overlooked. However, this does not affect its reference value for experts and scholars to judge when the economy enters a recession.

The concept of "Cardboard Box Recession" is derived from this, which is defined as the continuous decline in demand for cardboard boxes for several quarters. Throughout the recent economic recessions in the United States, the phenomenon of "cardboard box recession" has almost always been the first to "light up the red light" before the economy enters a recession.

Packaging Corp of America, the third-largest cardboard box manufacturer in the United States, announced this week that cardboard box sales in the second quarter decreased by 9.8% year-on-year, following a record decline of 12.7% in the first quarter. According to data compiled by supply chain intelligence firm FreightWaves Research, the cumulative decline in cardboard box sales for US packaging companies in the past two quarters has been the largest since early 2009.

The rapid interest rate hike by the Federal Reserve has suppressed demand for cardboard boxes, and demand may enter a long-term downturn. On the 26th local time, as widely expected by the market, the Federal Reserve raised its benchmark interest rate target by 25 basis points at its July meeting, to a 22 year high of 5.25% -5.5%. Since the start of this round of interest rate hikes in March 2022, the Federal Reserve has raised interest rates a total of 11 times, marking the fastest pace of rate hikes since the 1980s.

The decline in cardboard box shipments is a sign of a broader economic problem. "Where did the recession come from?" Danielle DiMartino Booth, CEO of QI Research, satirized on social media that the problems exposed by the performance of American packaging companies were being ignored.

The United States is currently experiencing a cardboard box recession, which may lead to a weakened job market and greater profit pressure on businesses. However, it may also lead to a significant slowdown in inflation by the end of this year.

Kleintop stated in a report on Monday that although recessions typically lead to contraction in all sectors of the economy, only the manufacturing and trading industries are currently experiencing significant contraction. According to the Fiber Box Association, this has led to a decrease in demand for cardboard boxes - a neglected indicator of economic recession that had occurred before the previous recessions in the US economy.

Although the US government has not yet announced an economic recession, Kleintop stated that the US economy is currently in a "cardboard box recession", which may lead to a weakened job market and greater profit pressure on businesses. Investors may also see sluggish stock market returns, especially if the weak trend spreads to other industries such as the service industry.

But an economic downturn may also bring a glimmer of hope for a slowdown in inflation, as manufacturing prices, including cardboard box prices, in US PMI data are typically about 6 months ahead of inflation.

Data shows that the price of old corrugated cardboard boxes (OCC) in the United States rose for the second consecutive month in the first week of May in most parts of North America, thereby pushing up the average price of OCC this month. Overall, since January, the average price of OCC in the United States has increased by $12.

Among the 9 regions tracked by RISI's P&PW, 7 regions reported an increase in OCC prices in early May. In the Southeast, Northeast, Midwest, Southwest, and Pacific Northwest of the United States, FOB seller's terminal prices have increased by $5.

For domestic paper mill businesses in the United States, OCC prices for all bulk grades in the Los Angeles and San Francisco regions have declined. It is said that this is the only region where supply exceeds demand. It is reported that production of bulk grades for OCC and new DLK is still stagnant, reaching up to 25% in the United States.

In 2023, the market size of China's cardboard box industry reached tens of billions of yuan, an increase of nearly 10% compared to the previous year. The expansion of this market size is mainly due to the steady growth of the Chinese economy, the vigorous development of the e-commerce industry, and the continuous growth of the logistics industry. These factors have jointly driven the annual growth in demand for cardboard boxes, further expanding the market size.

The raw materials used in the production process of household paper include chemical additives and packaging materials. Among them, pulp accounts for 50% -70% of production costs, and the pulp manufacturing industry is the main and most important upstream industry in the household paper industry.

China's paper industry products can be divided into "paper products" and "cardboard products" based on their uses. Paper products include familiar newsprint, packaging paper, and household paper. Cardboard products include cardboard boxes and white cardboard.

The positive signals reflecting the data of China's cardboard industry are the following two:

Firstly, in terms of production and consumption, the total production and consumption of cardboard in China reached new highs in 2021. In 2021, the production of cardboard boxes reached 28.05 million tons, an increase of 14.96% compared to the previous year; Consumption of 31.96 million tons, an increase of 12.65% compared to the previous year

Secondly, in recent years, there has been an opposite trend in China's cardboard import and export data - a decrease in export volume and a rapid increase in import volume. Behind this, there are impacts such as rising production costs and reduced import tax rates related to cardboard in China. At the same time, it also reflects to some extent the boost of the domestic consumer market - cardboard boxes are a typical demand driven industry, with downstream applications in consumer sectors such as household appliances, food, and daily necessities. The increase in import volume and the decrease in export volume can indirectly prove the consumption growth in downstream areas, as "domestic cardboard boxes are not enough".

In 2023, the Chinese cardboard box market has shown good development prospects, but there are also fierce market competition and environmental pressure challenges. Therefore, cardboard box enterprises should strengthen technological innovation, improve product and service quality, focus on environmentally friendly production and cost reduction, in order to adapt to market changes and development. At the same time, the government and all sectors of society should also increase their support and attention to the cardboard box industry, promoting its healthy and sustainable development. (Source of this article: Carton Net)

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