What is the 'Cardboard Box Index'?

The cardboard box index is used by investors to gauge industrial production The output of cardboard boxes is an indicator of future purchases of non-durable consumer goods.

BREAKING DOWN 'Cardboard Box Index'

The cardboard box index is considered a reliable measure of manufacturing by investors because it reflects the business cycle. It is estimated that close to 75 to 80% of all non-durable goods are shipped in corrugated containers. Therefore, the greater the amount of cardboard boxes produced, the greater the amount of cash invested by companies to produce goods.

Growth in gross domestic product (GDP) is the most common indicator used to measure economic growth, but it is published on a quarterly basis only and can be a lagging indicator that takes months to calculate and is often revised. Because GDP estimates can be unreliable, other measures are often used by investors such as cardboard-box production, freight tonnage, metal production, urban area mass transit usage, entertainment expenditure and household waste production. Because companies need cardboard to package and ship goods, the production of cardboard boxes is a leading indicator of manufacturing activity.

The Corrugated Market and Box Prices

Dan Binkoski, head of sourcing for the packaging manufacturer Lumi, predicted in 2017 that the pricing of corrugated packaging products was set to increase industry-wide. These price increases are a result of growing demand, changes in the supply chain and economic inflation. 

Binkoski states that most corrugated boxes are made out of recycled material, and almost 50% of the average corrugate box is composed of recycled material. Old boxes called old corrugated containers (OCC) are broken down and converted to linerboard, which is the paper used to produce corrugated board and boxes. The price of linerboard was predicted to increase from $665 in October 2016 to $715 in April 2017.

OCC costs will rise when there is a higher demand for boxes. Binkoski predicts that, because of e-commerce and consumer online shopping, box use will increase by 10% per year through 2020. At the same time, OCC is being exported to China with an increase in the Chinese paper and linerboard industry of 10% year over year. 

Juriong, a Chinese food packaging firm predicted in June 2018 that a cardboard box shortage is imminent before the country's annual Singles' Day shopping spree in November. The largest cardboard maker in China, Nine Dragons Paper Holdings, raised prices in mid-September four times within two months.

According to Juriong citing According to industry officials, cardboard prices reached 5,000 yuan (U.S.$759) per ton in September, up from around 3,000 yuan in July 2017. E-commerce services from Alibaba Group Holding have increased markedly, and over 30 billion parcels were delivered to homes in 2016, six times the amount delivered in the year 2000.

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