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Paperboard market to grow, exiting 'packaging recession': BofA

Bank of America has expressed bullish optimism towards the paper and forest products sector, with analysts raising their rating to Buy across the industry. This positive sentiment stems from an improved outlook and favorable industry trends. BofA Securities George Staphos joins Market Domination to share his outlook on the paperboard markets.

Staphos highlights the significance of wholesale cardboard boxes to the market, stating, "80% of the economy moves through corrugated boxes." He notes that since the second half of 2022, packaging markets have been in a recession. However, following their survey, they observed "a very large pickup in the growth expectations for the next two quarters" among independent box makers surveyed.

Shares of packaging companies Greif (GEF), Graphic Packaging (GPK), and Packaging Corp. of America (PKG) ticked up in Monday's session.

With growth expected to materialize, Staphos notes it's not "all black and white positive," though he also sees continued growth thanks to e-commerce tailwinds.


For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Angel Smith

Video transcript

Paper and for products getting a bullish outlook on Wall Street.

Bank of America raising its forecast across the sector and lifting grif to a buy signing a better outlook and corrugated trends here with Moore's B a security senior paper and packaging analyst George ST George is good to see you.

So, uh, you cover a lot of interesting names, George, you know, you got some consumer.

It looks like so some industrial.

You do also cover these areas like container board.

Uh, like corrugated.

Um, maybe just start there, George.

What are the trends you're seeing in those areas?

Just in terms of growth backlog pricing?


And first of all, thanks for having me.

It's a pleasure being here.

So why should anyone care about the corrugated box market?

Basically, 80% of the economy moves through corrugated boxes.

And even though the economy is progressing, we've been going through a packaging recession as you've been destocking for other reasons.


Since the second half of 2022 we've been doing a survey of the independent box makers to get a check on the packaging markets and the publicly traded companies for the last 20 years.

And that data, both our survey and coming out of industry data has been pretty negative, really since the second half of 22.

Even through the first quarter of this year, vines were relatively flat off a very easy comparison.

Last year, first quarter box shipments were down 8%.

So that's your set up.

In our survey, we saw a very large pick up in the growth expectation for the next two quarters.

Out of the independent box makers that we survey, we went from a 0.6% growth outlook to over 3% which in my world that's significant.

Additionally, what we're hearing from the respondents is an overwhelming sense that prices would continue to move higher.

It's mostly driven by cost, a lot of inflation, the cost structure, but nonetheless the view that prices would continue to head higher.

And then also in some of the data that we look at, there is some encouraging things.

Not to say it's all black and white positive.

But among other things, we saw a little bit of an uptick in the outlook for E commerce for the survey, based on what we're getting from an independent.

As a result, we raised our forecasts 2 to 4% on pricing and on earnings as well.

And we talked about the companies that are affected.

Uh, Packaging Corp is rated to buy.

It's been probably the best performing container board company over the last two decades.

But grif, uh, which is part industrial packaging, part paper board and within their container board, they've been lagging.

They're down 20% year to date versus the market.

Uh, we think the trends are getting better.

We think there's 30% upside and and hence the upgrade today.