The Cardboard Boxpocalypse and the State of the US Economy

SPEAKER_2 (0:02)

Bloomberg Audio Studios, Podcasts, Radio, News.

Tracy Alloway (0:18)

Hello and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:22)

And I'm Joe Weisenthal.

Tracy Alloway (0:24)

Joe, I am gonna put something on the table, and you tell me what it is, okay?

Joe Weisenthal (0:29)

Go on.

Tracy Alloway (0:30)

All right, here I go.

Joe Weisenthal (0:32)

Oh. It is a, so this is a corrugated, I believe, cardboard box, and it has tape that says fragile. And I would guess it's about, I don't know, I'm not good at measurements. It'd be 18 inches by 36 inches, something like that.

Tracy Alloway (0:52)

That is a very good physical description of a box.

Joe Weisenthal (0:55)

It's a cardboard box.

Tracy Alloway (0:56)

However, I'm going to say you're wrong. It is in fact a macro economic indicator. The other acceptable answer is it's part of the Odd Lots logo.

Joe Weisenthal (1:06)

That's right. That's right. It's a box and that is core to Odd Lots. But you know, now we're going to talk about literally, when you think box, you don't often first think Magic Money Box Ponzi scheme. And when you think box, you often don't necessarily think of a container ship, which is often called a box as in the book, the box. But I think when people think about a box, they think about a cardboard box corrugated or not.

Tracy Alloway (1:30)

Now is a very good time to be thinking about boxes, by the way, because there's been some commentary about this, but we basically had a sort of boxpocalypse in the States.

Joe Weisenthal (1:39)

Are we still having one?

Tracy Alloway (1:41)

Jury is kind of out, and we'll get into that in the discussion, but US box shipments, so boxes of boxes, which I find funny, short of boxception. Anyway, US box shipments have fallen to the lowest second quarter reading since 2015 That's according to the Fiber Box Association.

Joe Weisenthal (1:59)

So these are probably like they're folded up.

Tracy Alloway (2:02)

Yeah, flat packed.

Joe Weisenthal (2:03)

Yeah, so a bunch of them, they're maybe wrapped in plastic or something like that. So shipments of those lowest since like 2015

Tracy Alloway (2:10)

Yeah, and I think there are some other numbers we can get into that are like the worst since the financial crisis and things like that. And obviously, the concern is boxes tend to contain products that people are buying, right? So if no one's buying boxes, what does that say about retail spending, the health of the consumer and the direction of the broader economy? That's when you get into the macro indicator stuff.

Joe Weisenthal (2:33)

You know, I love e-commerce, but I hate breaking down boxes.

Tracy Alloway (2:37)

I know.

Joe Weisenthal (2:37)

I hate it so much. And then you like rip it up. There's no, it's never quick. I would like to see some innovation on the ease of collapsibility of the boxes.

Tracy Alloway (2:46)

You know what I did? Because I buy a lot. I trained my dog to rip apart Amazon boxes.

Joe Weisenthal (2:51)

Oh, that's amazing.

Tracy Alloway (2:52)

But then he kind of went on strike and stopped doing it.

Joe Weisenthal (2:54)

Oh, that would have been cool.

Tracy Alloway (2:55)

Get your kids to do it.

Joe Weisenthal (2:56)

Yeah.

Tracy Alloway (2:57)

Put them to work.

SPEAKER_2 (2:58)

Okay.

Tracy Alloway (2:58)

Well, I am happy to say we do in fact have the perfect guest. We're going to be speaking with Ryan Fox. He is a containers and packaging analyst for Bloomberg Intelligence. So, Ryan, thanks so much for coming on Odd Lots.

Ryan Fox (3:10)

Thanks for having me.

Tracy Alloway (3:12)

It's so nice to actually meet you in person because we've been I.B.ing for a while talking about boxes. I don't know how this became so interesting to me, but probably because of the decline that we've been seeing. Walk us through the numbers. Like how bad is the actual fall in boxes of boxes, shipments of boxes?

Ryan Fox (3:30)

Yes. So when we think about box shipments, they are shipped, like you said, knocked down flat or KDF for short.

Joe Weisenthal (3:37)

KDF stands for, oh, knocked down flat. Amazing. I already learned something.

Ryan Fox (3:41)

And so they're shipped sometimes on pallets, but they're going to, in the US, end markets like food manufacturers, beverage manufacturers, people who make industrial products. About 50% of the boxes that we consume in the US are going to go through a grocery store. So that's a really good way to think about it. What we've seen, box shipments have fallen in the first half about 2.3% and this is largely due to uncertainties that are stemming from tariffs. We saw a big ramp up during the pandemic where box shipments grew the first year of the pandemic by about 3.5%, actually 2.4%, then 3.5% the following year. When we think about it in concrete terms, we talk about box shipments in terms of billions of square feet. And when we talk about billions of square feet, like 400 billion square feet would wrap around the earth like 30 times or something like that. It's a very big number.