What's the best box for you? Before we go into what's happening right now, everyone has their favorite box. I mean, I know as adults, you've really gotten into adulthood when you get that box and you're like, that's a really good box. Anything that's easy to collapse, anything that's easy to collapse is one way, you know, anything that's easy to open. I like the zipper, the zippers.
Hello, and welcome to another episode of the Odd Lots podcast. I'm Tracy Alloway.
Joe, I am going to put something on the table and you tell me what it is.
Okay. Oh. It is a... This is a... this is a corrugated, I believe, cardboard box, that has a tape that says fragile. And I would guess it's about, I don't know, I'm not good at measurement. Maybe 18in by 36in, something like that.
That is a very good physical description of a cardboard box. However, I'm going to say you're wrong. It is, in fact, a macroeconomic indicator. The other acceptable answer is it's part of the Odd Lots logo.
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 puzzles. 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.
Now is a very good time to be thinking about boxes, by the way, because there's been some commentary about this, but we've basically had a sort of box apocalypse.
Yeah, in the States, are we still having one?
Jury's kind of out, and we'll get into that in the discussion. But US box shipments, so boxes of boxes, which I find funny, sort of box... anyway, US box shipments have fallen to the lowest second quarter reading since 2015. That's according to the Fiber Box Association.
So these are quite like, probably like they're like folded up.
So you have a bunch of them, they're maybe wrapped in plastic or something like that.
So shipments of those lowest since like 2015.
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.
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 indicators stuff. I, you know, I love e-commerce, but I hate breaking down boxes.
I know, I hate it so much.
And then, you know, like rip it up and there's no... it's never quick. I would like to see some innovation on the ease of collapsibility.
You know what I did? Because I buy a lot. I trained my dog to rip apart Amazon boxes.
But then she kind of went on strike and stopped doing it.
Well, that would have been cool. Get your kids to do it.
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.
It's so nice to actually meet you in person because we've been emailing 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?
So when we think about box shipments, they are shipped, like you said, knocked down flat or KDF for short.
KDF stands for... knocked down flat. Oh, anything. I already learned something.
And so they're shipped sometimes on pallets. Sometimes they just stack them in. But they're going to, in the US, end markets like food manufacturers, beverage manufacturers, people who make industrial products. But 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.
So what exactly is being measured here?
Right. So if you were to take this box here and we were to tear it all apart, okay. So by the way, this is a regular slotted carton, okay. This is a double wall box.
What does that mean? It's not corrugated?
No, this is corrugated. So let's take a little quick parenthetical thought here. So cardboard is actually not this. This is a corrugated fiberboard box for all you box nerds out there, okay. This particular one is a double wall. There's five layers. The flat sheet is called liner. The wavy part in the middle is called medium.
Are you like in heaven right now?
I am so much in heaven right now. You don't even know what I talk about.
No, you don't have to wait.
So if we were to unfold this thing, separate the glue seam and lay it out flat, and you just do basic math, or you take your tape measure and you go with the length.
So that would measure it in terms of square footage. And this box right here, it's been cut down so it doesn't look as big as it really is, but it's probably somewhere around 20 square feet. We could measure it if we wanted to, but we won't. But if you were to do that for every single box, that's how they will measure it. What's really kind of important is these boxes are made on a variety of different machines. And one of the reasons why it's called a corrugated box is it's made on a corrugator. And that's a machine that takes different kinds of paper and it laminates together. They stick together with typically cornstarch or some other starch product. And so one of the mechanisms is called the corrugating roll. And it's a roll with these little wrinkles in it. They steam the paper and it forms those little arches. And that's what gives the board its strength. There are different sizes of these little things, they're called flutes, but you can't play them. They don't make any music.
Why is this so interesting?
Yeah. Super interesting. Let's just keep talking about this box. Why? What is it about the corrugation process that makes it stronger?
So from a physics standpoint, it's what gives the box its shape and substance. And there is a lot of science that goes behind this. In fact, we now have ways to predict how the box will perform in real world situations, just mathematically.
Do we do box testing where we beat up a box?
Absolutely. Yeah. And so for a lot of companies, they have to go through the ISTA, the International Safe Transit Authority. They actually test the box to make sure it will hold up against UPS or FedEx, or in some instances, they go so far as to make sure that no matter what happens, it's going to survive. And those tests can cost thousands of dollars. So it's a very robust process.
What's the best box for you? Before we go into what's happening right now, everyone has their favorite box. I mean, I know as adults, you've really gotten into adulthood when you get that box and you're like, that's a really good box. Anything that's easy to collapse, anything that's easy to collapse is one way, you know, anything that's easy to open. I like the zipper.
The zippers. Yeah. A lot of people like the zipper pulls. There are some boxes that are very elaborate, and they don't require much at all to set them up. They kind of fold and lock in on themselves.
We call those die cut boxes. They are made from a cutting die that looks like a big cookie cutter. And they will make any shape that you want to make. The most popular style is what we call a roll end box. And they can tuck on the inside. They can tuck on the outside. But this is really a nice box. It's a box that you might see if you were to buy something online. And they're really trying to go for that wow factor because they're going to get you to open the box and show off the product.
Let's talk more about this box on the table here. Like, are you learned enough in the space? You could say like, oh, I think this came from X mill or X year, or like, do you have any other inside tip here?
Okay. So this box doesn't have it, okay, that I can see. But on most boxes that are made in the USA, there is a small little stamp on the bottom of the box. It's round and it's called a box maker's certificate.
There are around 1,100 facilities in the US that make corrugated boxes, and that little stamp on the bottom will tell you what company made the box and where it's located. And more specifically, it will tell you what the stuff is made of.
Well, that's kind of a stupid detail, but it goes back over 60 years, actually goes back over 100 years to when boxes were first starting to come around. Most people don't know that corrugated boxes are only 130, 140 years old. Only implemented in the late 1890s.
I'm trying to think of a guess before this. Joe, what do you think? The first corrugated...
As if I would even begin to have a guess. Anyway, keep going.
So right after the turn of the century, in the early 1900s, companies were looking for ways to ship their product. The only mechanism they had in that time, we didn't really have 18-wheelers. We had trains. And so the rail companies, as they were making new rails, they're cutting down forests. They had lots of wood to do something with. So what did they do? They made crates. But crates were very expensive and they were very heavy. And so people were looking for alternatives and they came up with the corrugated box. It actually goes back, funny New York story. The DUMBO area is home to the Gara building, and Gara was one of the early pioneers of paper packaging. And he kind of discovered by accident that you could score paper and create these nice little boxes.
I will never look at DUMBO the same way again. Okay. Actually, that reminds me. So who are the actual big players in the paper industry? Because I don't think I could name a single one off the top of my head.
I can. Oh, International Paper and what used to be Smurfit Stone.
Oh yeah. Smurfit. Okay. Yeah. That's good.
So you're exactly right. International Paper recently got even bigger. They acquired DS Smith out of... what was it named... Crown was also... well, they're still, you know, this.
I actually, in the brief time when I was an equity analyst over about 20 years ago, I think I did a little research into this space. Box analyst, a fellow box analyst. All right, very brief detour. Anyway, keep going.
Yeah. So International Paper recently bought DS Smith. They got even bigger. They were keeping pace with Smurfit Kappa based out of Dublin, Ireland, who bought WestRock, who's here in the US. They became kind of the first global mega company. IP followed suit. So they're the two biggest in the US and the biggest in the world. Packaging Corporation of America is number three in the US, followed by Georgia-Pacific, Pratt Industries and a variety of smaller independents.
Boxes come from trees, right? Or lumber comes from trees. You know, we've talked about lumber a lot on the show. And one of the things that we learned, you know, there's been consolidation in the lumber space, but also particularly after the great financial crisis, there was a lot of reduction in mill capacity. Now that's related to housing specifically, which was ground zero. But what is the story of American mill capacity over the last 20 years, from prior to the great financial crisis to the 2010s to now? We really didn't see a whole lot of new mill capacity come along like 20 years ago.
But we did see it. There was some investment there. There were some new mills that would come along. I actually spent 10 years working in the corrugated packaging industry before coming to Bloomberg and worked for one of those integrated companies who has their own paper mills. The mills that I worked for were 100% recycled. And so some of their investment would have shown up in that last 20 years. They were actually... they've built many of the most recent mills over the last 20 years. But we really saw an explosion of growth right around the time of the pandemic. So in 2023, 2.5 million tons of new 100% recycled containerboard making capacity came online. And now containerboard is a technical term. It's the big term for the paper that goes in these boxes. So containerboard means linerboard and the medium. So it's this big term.
So everyone's shipping flour for their like sourdough or something during the pandemic or buying new ovens to remodel their houses while they can. Just going back to the idea of the box as a macroeconomic indicator. I mean, I do see people talking about like this idea of boxes as a leading indicator every once in a while. It is unconventional, but some people do it. How valuable are box shipments or tracking the box industry in terms of trying to figure out what's going on with the consumer?
Very important for the consumer. Like I said, about 50% of box consumption is going to go through a grocery store. So when you start to see box shipments slip, we probably need to be looking at grocery stores and CPG companies to see what's going on there. And we have seen a very challenged consumer environment over the last two years. My personal opinion, I would say we're in a consumer goods recession because of what we've seen. First half of 2025, box shipments were down 12% from the height of the pandemic. That's a massive fall off. So earlier we talked about how we would measure these things in billions of square feet. Well, in 2021, we had 416 billion square feet. The first half was right around half of that.
With 190 billion square feet for the first half of 2025. So pretty big fall off.
What's happening with prices? And so obviously, right. So measuring square feet is one thing. What is happening with prices?
Well, the pricing discussion is one that is sure full of controversy. So what drives pricing? Is it truly supply and demand? Is it something that's more cost-based? For many, many years in the US, it was supply-demand based where mill operating rates would hit 96%, inventories would get real low and they would raise prices. Or the opposite, mill operators would go below 90%, inventories would rise and prices would fall. But over the last year and a half, we've actually seen none of those fundamentals hold up. So mill operating rates have barely been 90%. Inventories hit five weeks at the end of the first quarter. And yet prices still went up.
Five weeks is a lot of inventory.
Historical averages are around four weeks. To kind of set the floor there, three and a half weeks gets a little dangerous. When it's a little lighter than that, we start worrying about supply chain issues. About half of the containerboard is made at a paper mill and shipped by rail to a box plant. And rail isn't quite as fast and efficient as an LTL, or actually be a full truckload. But you can carry more rolls by rail than you can by a truck. So you kind of have to have a little bit more of that time to allow for the transit for those rolls.
What's your take on why paper companies are actually increasing prices even, you know, when inventory seems to be high and demand is going down?
Well, it's funny you ask that. So four years ago, I started trying to figure out if we could read the tea leaves, sort of say. And we put together a mix of inputs. And having worked in the industry, we kind of know how the sausage is made. And what we did was we put together this series of inputs and we correlated it back to historic movements. And our algorithm explains 93% of the reasons why prices have moved.
Bloomberg Terminal class A box pricing algo.
Yeah. So BCI, BCI index for people who are on the terminal.
Yeah. Pull this up. Right. I keep going.
