There are rumblings in the cardboard industry, and they’re sending signals about the economy. Cardboard prices are a bellwether for the packaging industry, and in turn consumer demand — and prices are on the rise.
It’s the first time cardboard prices have risen since the Federal Reserve’s latest cycle of interest rate hikes started, reflecting a significant shift in post-pandemic market dynamics.
Repackaging the Economy
The price of linerboard, typically used for cardboard boxes, has risen by as much as $70 to $75 per ton. Prices for fluted medium cardboard — those wavey liners you sometimes find in packaging, have climbed even more, as much as $100 to $110 per ton. Major cardboard producers such as International Paper (IP), WestRock (WRK), and Packaging Corporation of America (PKG) are expected to raise prices in the new year.
These price increases come at an unusual time, given demand typically falls after the holiday period, which is a high time for deliveries. But producers say the adjustments are warranted. You guessed it, the culprit is inflation once again, at least in part. The cardboard makers point at input costs, as well as rising demand, for the price increase.
The Cardboard Indicator
The soaring costs of cardboard tells us that changes in the economy might be afoot. Higher demand for packaging implies higher shipping volumes for retailers, a departure from the inventory hoarding we’ve seen in previous holiday seasons and during the pandemic.
In terms of the U.S. consumer, it also suggests that demand continues to be strong, which is important for overall economic growth, and closely watched by economists.Historically, rising cardboard prices have indeed preceded economic growth. Let’s see if they stick.
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