Factories that produce cardboard are reducing production around the world, and this is an alarming signal that global trade is slowing down, Bloomberg and Agerpres write.

According to Bloomberg Intelligence analyst Ryan Fox, North American companies that produce the raw material used to make corrugated boxes closed nearly one million tons of production capacity in the third quarter, and a similar scenario is forecast for the fourth quarter.

Also, for the first time since 2020, prices for corrugated cardboard have decreased.

“Increasing weakness in global demand for boxes is a signal of the difficult situation in which several parts of the world economy have found themselves. Recent history shows that it will take a significant amount of economic stimulus to stimulate significant demand for boxes, and we don’t see that happening right now,” said KeyBanc analyst Adam Josephson.

Investors are watching closely for any potential clues about the future amid growing concern that many of the world’s major economies will enter recession next year. Cardboard boxes are present at almost every point of a product’s journey along the supply chain, making demand for cardboard an important indicator of the state of the economy. And the signals are not comforting.

An important indicator of the state of the economy

Global demand for packaging paper is showing signs of slowing for the first time since 2020 as economies recover from the initial shock of the Covid-19 pandemic. U.S. prices fell for the first time in two years, and the U.S., the biggest exporter, reported a 21% drop in volumes shipped overseas in October this year compared to last October.

Much of the decline in demand for cardboard is due to the impact of inflation on consumers’ wallets. Consumer goods companies are preparing for a reduction in consumer spending. For example, Procter & Gamble Co. raised prices on a wide range of products, from Pampers diapers to Tide laundry detergent, several times to counter rising costs, causing its first quarterly sales decline since 2016.

US retailers held Black Friday sales in hopes of getting rid of excess inventory, but shoppers responded with modest traffic, so sales fell in November. In addition, the rapid growth of the e-commerce sector, the main consumer of cardboard boxes, has begun to fade.

The modest demand for cardboard also affects the demand for pulp, the raw material for paper. Suzano, the world’s largest exporter, recently announced a price cut for eucalyptus pulp in China, the first since late 2021. Demand from Europe is falling, and the expected recovery in China has not yet materialized. Gabriel Fernandez Azzato, director of the TTOBMA consulting firm.