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Rail Freight Tells an Upbeat Story

By Ryan Fox

May 17, 2024

Corrugated box shipments, often cited as a leading indicator of economic activity, could be offering some good news for box producers. The Association of American Railroads (AAR) tracks pulp and paper products (P&PP) as a category of rail originations. This may be the most current indicator of box demand, since roughly 60% of containerboard is shipped by rail.

AAR aggregates and reports weekly data from North American rail operators. Each month, Green Markets gathers the figures to assess changes in P&PP originations. CSX, the largest volume shipper of P&PP, saw a 6.9% decrease in shipments in the segment in 2023 (Figure 1). For the corrugated packaging industry, shipments fell 5.1%.

Shipment originations, along with our assessments of sentiment among box producers, help us better understand trends in industry demand. For example, it would be odd for box demand to spike 5% without a corresponding increase in rail shipments.

In 2023, cumulative box shipments bottomed out with April’s 14% plunge (Figure 2). After Week 18, they only got better. Yet there was an 18-week lag before originations reflected the trend. P&PP rail improvements became visible starting in Week 36, when originations were down 5.8% and started climbing to finish the year at minus 3.3%.

The lag is likely due to how quickly box shipments slumped relative to a year earlier. Shipments slid nearly 10% through April, a sign that some box plants probably held more paper than desired and needed to draw down inventory. Starting in Week 13, average monthly rail shipments began to drop about 7%. In weeks 27–30, they fell 8.5% from the first four weeks of the year.

In the first quarter of 2024, P&PP rail shipments continued to trail the 2023 period’s before picking up heading into the second quarter (Figure 3). Combined with other economic reports, there’s reason to think box shipments may be rebounding, as well. The March Manufacturing Purchasing Managers’ Index came in at 50.3, and the New Order Index was at 51.4, while corrugated boxes showed up among commodities that were increasing in price. Together, the data point to a potential resumption of industry growth after 16 months of contraction.

Ryan Fox is a corrugated market analyst at Green Markets, a Bloomberg company.

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