Increased demand for boxes of all kinds is causing prices to rise. Tim Woods of Industry Edge considers market conditions driving the hike in the latest issue of PKN magazine.
Whether corrugated boxes or folding boxes like those used for cereal or pharmaceuticals and other goods, the price of boxes is increasing.
While rising prices are an international experience, box prices are rising in Australia mainly because demand has grown strongly over the last year. In fact, demand has been growing strongly for the last three years.
The role of growth in domestic demand in moving box prices higher is supported by stronger global conditions, rising input prices and domestic capacity constraints.
The result is that the prices of corrugated and folding boxes are already rising, and are expected to rise further over 2018-19.
Why demand for boxes has risen sharply
Box consumption is driven by growth in shipments of food (especially fresh fruit, vegetables and meat) and beverages. Demand is also fuelled by business-to-business transfers of completed and partially completed goods. In short, box consumption is typically driven by general economic conditions.
Australia’s general economic growth and activity levels of the last three years certainly support some of the growth
in box consumption, but not all.
More recently, disruption in the retail sector appears to have fuelled demand for corrugated boxes. E-tailing and internet purchases that are delivered to the home have caused a significant spike in box demand.
In the short-term, industry consensus is that this activity is quite inefficient, implying that future growth may be softer than the experience of the last three years.
Read the full analysis here