Hello, and welcome to another episode of the All Thoughts podcast. I'm Tracy Alloway and I'm Joe Weisenthal.

I'm Joe Weisenthal. Joe, I am going to put something on the table and you tell me what it is.

Okay. Go on. All right, here I go. 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 macro economic indicator.

The other acceptable answer is it's part of the Atlas logo. That's right, that's right. It's a it's a box. And that is core to Adelaide's. 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 is 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 Pocalypse.

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 and, anyway, US box shipments have fallen to the lowest second quarter reading since 2015.

That's according to the fiber box. So so these are quite like, probably like they're like folded up. Yeah. Yeah. So you have a bunch of them, they're maybe wrapped in plastic or something like that. So shipments of those lowest it's like 2015. 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 indicators stuff.

I you know, I love e-commerce, but I hate breaking down box. 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 collapse ability.

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

Oh that's amazing.

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

Well, that would have been cool. Get your kids to do it.

Yeah, put them to work.

Okay. 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 our thoughts.

Thanks for having me.

It's so nice to actually meet you in person because we've been I being 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? Yes.

So when we think about box shipments, they are shipped, like you said, knocked down flat or CDF for sure. CDF stands for oh knocked off right now. Anything. I already learned something.

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. They're stemming from tariffs. We saw a big ramp up during the during the pandemic where box shipments grew. The first year, the pandemic by about 3.5%, actually 2.4%, then 3.5% the following year. When we think about it in 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 400,000,000,000ft² would wrap around the Earth like 30 times or something like that. It's a very big.

So what's great? 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 it mean. It's not corrugated?

No. This is corrugated. So let's 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 office. 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 I talk about. No, you don't have to wait. So if we were 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. Right. 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 two 20ft². 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. The, 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 corrugated. And that's a machine that takes different kinds of paper and it laminates together. They stick together with typically corn starch or some other starch product. And so one of the mechanisms is called the corrugated 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 like that in they're called flutes, but you can't play them. They don't make any music.

Why does it 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 do beat up a box?

Absolutely. Yeah. And so for a lot of companies, they have to go through the Ista 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 before we go into what what's happening right now? Everyone has their favorite box. I mean, I know as adults we 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

collapse is is one way, no, 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. Oh, yeah. 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. 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 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 for that 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 mil or X year or like, 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. Okay. There are around 1100 facilities in the U.S 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. And in my kit. 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 before this was a 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 the 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 a corrugated box. It actually goes back, funny New York story. The Dumbo area is home to, the garage building and garage was one of the early pioneers of paper packaging. And he kind of discovered by accident that you could score paper and 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 Dr. Smith out of it was one named Crown. Brown 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, and.

All right, very brief devil. And anyway, keep going. Yeah.

So, International Paper recently bought Dr. 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 come 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 20 tens 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 ten 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 liner board and we're the medium. So it's this big term.

So everyone's shipping flour for their like sour dough 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 416,000,000,000ft². The first half was right around half of that. So like about 208. Yeah. It was really bad. Quick math with 190,000,000,000ft² 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 the pricing discussion is one that, is sure full of controversy. So what drives pricing is it 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 it.

Five weeks is a lot of inventory. Historical averages are around four weeks. To 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 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 will 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 roles.

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 for Bloomberg terminal class A box pricing algo. Yeah.

So BK, BCI I index for people who are on the terminal. Yeah, Pull this up right I c keep going.

Well bk b wait, what is it BCI yeah. Do you see BCI stands for Bloomberg corrugated box cost index. And up until this year, when we did our the last multiple regression analysis, it had a 93% r-square. So it was really good, right. Well, pricing in the industry diverted from our index this year where prices went up even though costs are going down. And that's actually not a complete anomaly. We did see this in our index a few years back in 2017, 2018. But it wasn't quite as pronounced.

Oh, sorry. Just to be clear, because I want to get this right. And the index that I'm looking at is the box cost index. So it's not so much that it's measuring the cost of box like, so box prices can go up even though this line on the chart is rolling.

Correct. This is important. Yeah.

And some might call this, kind of organic margin expansion. Others have more colorful words for it. But in the US, 90% of the industry is vertically integrated. And what that means is they have their own paper mills. They move that paper to their own box plants and sell it to their own customers. And so there really isn't much of an open market the way there is in other regions. In other regions, like in Europe, they don't have that vertical integration level. So there is a much more robust open market, and it drives prices down because of normal supply demand fundamentals. If you do have just an absolute glut of inventory, prices are going to fall. Our best data says globally, we have around 50 million tons of oversupply of containerboard. Now we don't have that just in the US. That's a global number, but that does kind of alter your frame of consciousness.

Tricia, by the way, this is just so fantastic. Everyone should go to Bloomberg Terminal because now I'm reading the PDF that describes how the methodology, the weights, by the way, are the cost of diesel, the cost of caustic soda, natural gas price use, recycled fiber price, corn price index, repair and maintenance, average truck rate, U.S. average hourly earnings. And this is how they derive the cost of what a box and it looks are all the methodology. It's really fantastic.

It's so funny to think that corn is an input. It's a 7% weight. According to the methodology, the biggest weight is the U.S. recycled fiber price of 37%. Makes sense.

Just on the inventory. See how much of the decline, this year in terms of box shipments is just an inventory glut. Do we have like a good read on that versus demand from a box standpoint?

We don't have a good read on that. Okay. If we're thinking about the grocery store, those boxes turn over very quickly. Having worked in the industry, the box is going to get made at the box plant. It's going to go to a customer. We're going to think like General Mills and Kellogg's and Hershey's and all of the big brand names that we know. It's not going to necessarily sit in their facility for very long. It will maybe get back into the system within 30 days in fact, I've been to the grocery store and my kids hate it when we go to the grocery store. I'm always turning over boxes to see who made them, but sometimes they will date stamp the boxes as to when they were produced. Oh, and I've seen as quick as 30 days in the store. And oftentimes when Smurfit Kappa bought or bought WestRock, I was able to see a brand new Smurfit WestRock BMC within 90 days of that transaction. So it's just an interesting little like tidbit. And if you find yourself turning boxes over from now on,

I'm going to start doing that. How stable is the relationship between square footage of boxes and the actual goods sold in boxes? And the reason I ask this is that, you know, I remember the first several times that I ordered groceries, for example, online, and I would get these deliveries. I was like, this was really an efficiently unpacked, like, you get a box and there's two tomatoes in there. And it's like, was this really did they really need to just have this? Or Amazon is a classic example, but I imagine the Amazon doesn't love this either. I imagine they're always trying to optimize for a box capacity such that, you know, you buy a new, remote control for your Kindle Fire or whatever. It doesn't come in a big box, do they? Is there progress always being made on the efficient use of the cubic footage? Space within these boxes? Yes.

All right, so let's talk about two things. First. First, we're going to talk about who the consumer is. The second we'll talk about right sizing. So first when we think about consumers Walmarts targets Amazon Home Depot, they are consumers. And the majority of boxes that are made are intended for them, not for us. In fact, that's why they call them big box stores, right? Right. So, we can get into this later, but this old box actually has its own aftermarket, in which probably 80% of the stuff that we recover comes from those stores, not from our doorsteps. Okay. So when we think about consumers, we really need to think about the big stores first, because that's who the main consumers of these boxes are. And so when you think about the changes that we're seeing, if we're seeing significant changes at those stores, we may be thinking about things like Shrinkflation or companies altering the size of their products and then having to alter the size of the boxes that hold them.

So I think while it's an important idea, it's probably less significant than what we get at our homes and Amazon. For instance, let's let's talk about traditional e-commerce, or I think I may start referring to this as cart to cart and commerce.

Oh very good. Yeah, that's good because e-commerce today or digital sales is some people talk about it can can also include things like Uber Eats or Instacart. It could also include a buy online pick up at the store. So a cart to cart and commerce might be a yeah, better, better way to think about or like a you know, maybe you can come up with a new term. I'll I'll think about it.

So Amazon, from our best guesses represents about 8% of all of the boxes made in the US, at least in 2024. And what we're seeing from a lot of these companies who do that kind of traditional e-commerce or the cart to carton, we're seeing a right sizing. So you may have gotten an Amazon box that looks a little bit weird, right? It's lightweight, real paper. It's folded in on itself. It's got that zipper pull on it, and it just doesn't quite look like this box on the table that's been taped up. And it's sort of a regular slotted carton. You may have seen that, or you may have gotten a paper mailer. And Amazon is really been forging the way in mailers and in packaging technology.

Wait, what's the paper mailer?

A paper mailer is a bag. Oh, there's made from paper.

Oh, I've only ever gotten the plastic ones of those from Amazon. I don't think I've gotten. Oh, wait, no, I probably have with the bubble wrap inside,

some of them don't even have bubble wrap anymore.

I haven't gotten one of those. Okay, but this reminds me, if I am working in the procurement department of an Amazon or, I don't know, a Walmart or someone like that, what are the factors that go into me deciding what boxes I actually want for the business?

That's going to be a reflection of what your product is, and every product has its own specification, what kind of box it needs. So if you're making a widget, you will determine how many of those widgets are going to go into a box. And that's going to be a function of its weight and fragility. And what kind of other internal packaging you might need.

Let me ask this question in a different way. Why does Amazon, at least historically, seem to like big boxes?

Well, I don't know that I can answer for Amazon on that one, but it does seem to be maybe at the discretion of people who are packaging at their packing stations and what their available inventory of boxes might be like. I've, I've seen some of these things in action. It's a package. It's just a small packaging, desk of sorts, with some overhead bins that have knock down flat boxes in them.

This must be an interesting sort of engineering problem, because I might, at the end consumer level, say, look at this inefficient use of, box space. I got a box and all has a little remote control. On the other hand, maybe the optimization occurred because the packer has four boxes to choose from, and if they had more choices, maybe they could have had a more efficient, space to, good ratio, but then that would have taken up more warehouse space and made that whole process less efficient. So try all kinds of algorithms that I'm not even thinking about as the end consumer here.

There are lots of algorithms. And when you think about boxes and packaging in traditional e-commerce, they are looking to optimize not just from a packaging standpoint, from like from a pricing position, but really from a cube in the shipments. Right? So we have to think that Amazon is going to process all these orders or chewy or whatever the e-commerce platform is. They process the orders, they're going to go through their distribution centers. And if you're Amazon, you have your own trucks. You want to make sure that you can put as many of those things on a truck as possible. There's all kinds of different points at which the optimization could occur for including packing the truck.

You know, when we're talking about broader macroeconomic data these days, in particular, there are a lot of questions about the degree to which the aggregates are missing part of the story, and specifically in a lot of commerce these days, anytime there's some retail CEO that like things are holding up well, but it's really being driven by the high end. The high end is keeping it afloat. The middle consumer is getting squeezed, lower income is getting squeezed. You know, all kinds of things are there different. You know, we're talking in aggregate when you when you talk about box square footage having been shipped. But is there more granular data that one could look at in terms of the quality of cardboard, etc., that could tell us different things about what's strong within the economy, even if the big numbers are declining.

The fancy boxes, the fancy box is not really there. So one of the problems that our industry faces is that we don't have great data. Having worked in the industry and having provided that data, it it's a chore that no one really double checks. You've brought on a new customer, right? And you're submitting all your paperwork for the new customer. One of those things is a classification of their NAICs code. The North American industry could well, no one ever checks to make sure that's proper, right? You just kind of wing it you know, look it up and see if they've maybe filed it with the Secretary of Commerce or something like that. And and that's it. So the the granular data is murky at best, but it is insightful and it is consistent because there is a cost to changing your supplier. Like we we do see it happen. And for very big box customers they don't like change. And you have a long standing relationship typically many, many years. You have lots of SKUs. And if you're a really big company and you have operating facilities all over the place, you don't want to go through that. So the data, while murky, might be consistent. And we do see some of those things, like in 2024, for instance, we saw that manufactured food felt like by 3.7%. So if you combine that with beverage, it was a little over of a 4% decline in box usage. Now how do we describe that? Did did those companies see similar falls in their volume? I think I think the data would suggest that that's probably very close.

Corrugated packaging does have some known trade offs. One of those things is a returnable plastic container. That is mainly being pushed right now towards produce. Walmart specifically Sprouts market, have been pushing some of their people to adopt returnable plastic containers as a viable option. It reduces waste. They're building supply chains around these things to help carry them around. So that is one of the things that we've seen kind of cut into box consumption. We don't know that it's a big thing yet, but it is out there and it is a thing. The other thing that we've seen is a movement to larger format boxes, some that are the size of a pallet, you know, 48in long, 40in wide and maybe 40in tall. A great playhouse for your young kids.

I remember doing that with huge boxes, turning them into houses. Why would anyone invest in this space currently? Because when you describe this enormous glut in supply and then the fact that demand is going down, maybe it's because of the tariffs. Maybe if the U.S. starts manufacturing more goods, it'll domestically it'll start to pick up again. But it seems like most of the lines are kind of trending in the wrong way. What what exactly is like the allure of this industry?

That's a great question, and I wish I knew the answer, other than they do have dividends that they have been been paying and and consistently paying. So, so it's considered like a fairly like stable state, very stable dividend. I think it's a pretty safe investment. We do see I mean, it's very popular from, from a terminal standpoint, I get bluer clients at retail all the time. They're looking to figure out if this is still a good investment. And while we don't do buy, sell, hold recommendations, we still see a lot of traffic in these in these lanes.

Does it just depend on how big your company actually is and how much pricing power you have in the market?

Well, see, I think that's a myth. I think I think there really isn't pricing power. If there were pricing power, we wouldn't see some of the actions that we're seeing in the world today. And what I mean by that is there are some mills that make a really robust paper. It performs really, really well. And there are scientific properties to that paper that set it apart from anything else. And yet they aren't getting the premium that they should be getting because there is an alternative. And and it's it's like wanting a Ferrari and selling for a mustang. They're both great, but one obviously has the allure and one has its client base too. And when you can buy a mustang and it works, you're not always going to want to buy that Ferrari.

Well, actually, this sort of gets me to where I want to go. First of all, what what would be the name of the biggest box or packaging expo in the United States like that? Get it together somewhere? Yeah.

In in big round terms for packaging pack expo.

Where's that Vegas.

That's going to be in Vegas this year. Maybe we'll go one day.

All right. So setting aside the volume and pricing trends which we take for granted, everyone is curious about what would be the hot topics right now that would be discussed at Pac Expo.

Ooh, sustainability has been a really big topic for a long time, and it's matched with extended producer responsibility laws. So this is a state by state initiative to basically shift the burden of recycling away from its residents and onto the companies who are creating the waste.

How does that work exactly?

So right now, we have a handful of states who've actually passed legislation. Oregon's the first one that that is really kind of enacting this, and they've set up a fee schedule. They've measured how much waste their state produces in a month or in a year, and they've allocated a certain number of dollars per pound or cents per pound for each one of those commodities. And if you're selling something into the state, they are essentially placing a fee on the waste that you're sending in their state. And you have to pay a check to them.

Mike, can you talk a little bit more about the economics of recycling? Because I put a lot of the cardboard I used into the problem, into the proper bin, the economics, the recycling. Like, yeah, but like I'm always in this goes with any recycling really, which is that when I think about the labor that actually when I think about a, the degree of diligence that people and I would say, and probably higher than average diligence about been, proper been allocation. But I know I'm not perfect, but when I think about the degree of diligence and the inefficiency and then the labor and all of this stuff and then talk to a guy, what? When is it, actually economical and when is it just sort of some sort of cargo cult type, behavior that people engage in where there's no real purpose?

Well, so most, most of the time the recycling fees are paid by taxes. My street, for instance, that was not the case. And I had to pay $25 a quarter for a bin. Not not terrible, but I had to pay for it. The economics in big round numbers work like this. It costs anywhere from about $400 a ton upwards to $700 a ton to go out and do the collections and processing for recovered materials, all of that stuff. So you'll see a a truck come and pick up your recyclables. It goes to a facility called a Murph, a municipal recovery facility. And there it's process. And they have lots of lines that sort things out plastics and metals and papers and all that stuff. And then they produce bales. So a a compact cube of sorts of these materials, and then they get sold. So if we were to just use a big round number and say $500 a ton, the net ton that comes out of the Murph only has a street value between 100 to $140 a ton.

Very little getting that right. That's just terrible. That's terrible. And the craziest thing is the corrugated box. Yeah. Is what really makes household recycling even work. Because, we know from from data. And this is something which I challenged several years ago, our best data says that we recycle about 66% of of the corrugated boxes in the U.S. it's a pretty good number. The industry used to say 93% of boxes got recycled. There's no way that's possible. But we don't have the data to say it's lower than 66%. But we do have a methodology that we use to kind of get their it was actually supported by the National Renewable Energy Lab. Now you can probably shoot some holes in some of their stuff too. But big point is we know that about 60 some percent of these get recycled. And we know they have a very robust aftermarket. We process about 35 million tons of old corrugated cartons almost every year. About a third of them are going to go overseas. There are a lot of other countries that want the virgin fiber that we produce here.

Now that we've revealed the depressing truth about recycling, let me ask a slightly more positive question, which is have there been any cool technological developments when it comes to box making?

They are constantly patenting boxes, making new equipment to make them faster. Improving the the way we make the paper, we're trying to make stronger paper that's lighter and weight. So if you think about some of these, we'll go back to the EPR laws for a second. Those fees are based on the weight of what you're consuming. So if the companies can buy a lighter weight material then their fees go down. Right. So there is a push now to see if we can lightweight the paper, make it as strong but with less weight. And so these are things that we're going to see really take some some shape in the next 5 to 10 years.

You know I'm glad you mentioned export. One of the things that I've noticed whenever I am, traveling abroad, even to fairly rich countries, but I definitely notice it when I'm in poorer countries, is that the quality of packaging materials is distinctly worse than here. So and I the the example that I often notice is, you know, you buy a bottle of water in a U.S grocery store. It's nice, it's sturdy, it holds its, form very well. You buy a bottle of water at a grocery store in Guatemala where I was a couple of years ago from Mexico. It's crinkly. It smashes over easily. You could tell that it's a less durable, plastic. If we were to look at the cardboard boxes running through a developing economies such as, Guatemala, etc., we see that this is noticeably different than the quality of cardboard that we're seeing here.

The technical term is going to be furnish. Okay. So what are you using to make the boxes? The US has historically been a maker of virgin craft liner board, meaning they cut down trees. They chipped the trees. They they turn those chips in into new virgin paper that's actually been declining and reversing. We've seen more and more recycled capacity come online. And because we've still had a very good virgin base, the recycled paper here in the US has been very good. Now in other countries they may not have southern yellow pine, so they are buying rock or they're using their own oak or oaks, old corrugated cartons. So they're they're just going to rip up the stuff that they have. If they start with a low quality box, then they're going to get a low quality paper on the back end and less so sometimes they are going to have a lower grade paper. And in other areas of the world they actually have different definitions for that kind of paper. So they would have different grades of it. And so yeah, you sometimes you get the low grade paper because it's a commodity and then it'll work.

So I just have one more question. Just to wrap it all up. That's a packaging joke. Packaging joke. Okay. Wrapping it all up, summarizing what's your, prediction for the second half of the year in terms of box shipments?

We think they're still going to be very challenged. Full year, we're saying there's probably going to be down 2.5%, maybe as high as 3%. It really depends on what happens. A lot of this is stemming from tariffs and policy coming out of the, the white House. So it really depends on how much confidence some of these companies have as they look forward. We've seen the the number of containers coming into the U.S, like the cargo ships was front loaded. Right. And then and now that the tariffs are kind of here or maybe they're not here and they've been kind of tapering off a bit, it will be very curious to see what happens. But to to maybe think about it another way. You know, most Americans buy stuff when they have money and when they don't have money, they put it on credit cards. And we're seeing records, amount of credit card debt. And that's not a great sign for if people are going to spend money. So we don't really think that that's a really hot outlook for even the for the holidays. Or Americans can spend money probably. Is it going to look exactly like it did in prior years? Probably not.

All right. Ryan Fox containers and packaging analyst at Bloomberg Intelligence, thank you so much.

Thanks for having me.

You know, one thing I really like about, Ryan and people like that is when they trot out all the numbers off the top of their head.

Yeah, that was really impressive. That was no notes. And he had answers for pretty much everything.

I wouldn't if someone had asked me how I thought they would measure box shipments, I might have guessed, you know, cubic feet, red square feet. But yes, I, I wouldn't have, you know, all this covering the world stuff. Yeah. It's pretty cool. Yeah.

And I guess the question over, how useful a macroeconomic indicator boxes actually are, it still kind of lingers because we did have retail sales data, for the past two months that are available that came in, like, pretty resilient, pretty strong. Despite the decline in box shipments.

I what was the term huge cart to carton commerce? I really like that because it's true. Right. What is e-commerce that now encompasses so many different things. So there is this sort of classic e-commerce where you go on a website, you buy a thing and it comes in a box. But then there's of course, you know, buy and you pick up at the store and that's a slightly different variation. Or maybe you get, food delivered in a cardboard box, etc.. So I like the idea of, okay, e-commerce is so broad that if we want to have like for like trajectories of some of these use cases for cardboard boxes, we have to maybe get a little bit more granular.

Well, that reminds me, actually, I think one thing that's still really underappreciated about the packaging industry is how much it feeds into broader inflation. Yes, yes. And this is something I remember some economists bringing this up, during the post pandemic era. But the interesting thing is now, even though box shipments are going down, prices still seem to be kind of sticky and even going up. So what does that mean for inflation? I like to think when you buy, I always think about this and sometimes it maybe gets a little metaphysical, but when you buy a thing in a grocery store, let say you buy an avocado or you buy, what? Like what are you buying when you buy the avocado? Right. Because, okay, there is the physical avocado that you might cut open, but then you're buying the time it spent in a refrigerated space. You're paying rent to those, owners of refrigeration, transportation. You're buying the transportation, etc. it's interesting to think about any good that you buy, period ahead of lettuce, etc.. How little is the lettuce? Whatever. Even the lettuce means, because there is labor that went into the planting of the lettuce and there is the land of the lettuce, etc. so the idea of what are you buying when you're buying something? Often that include the packaging, but often it's just never really clear at all what it is except this bundle of goods and services.

I'm buying an entire slice of the economy.

You literally are okay, now that we've gotten into a metaphysical discussion about boxes, shall we leave it there?

Let's leave it there.

All right. This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway

And I'm Joe Weisenthal. You can follow me at The stalwart. And if you enjoyed this conversation then please like better yet, subscribe or leave a comment. Thanks for watching. To. Me.