In the latest International Paper (NYSE:) news, the company’s stock is taking a hit as the demand for cardboard boxes has stagnated.
The Memphis, Tenn.-based company is among the cardboard stocks that are taking a hit today because the demand for boxes is not going up. The cardboard industry sees a few producers responsible for making most of the boxes, with International Paper claiming to be the leading producer of counterboard across the world–counterboards is what later becomes cardboard boxes.
When there are only a few competitors in the industry, the business should be booming as there are less companies controlling supply. This means there’s less of a chance of the supply-demand balance being negatively impacted by the matter.
However, the demand for cardboard boxes has stagnated, with box shipments falling roughly 3% year-over-year in March. Plus, box inventories were sliding less than expected, and more inventory often means less demand for new box production in the future.
“We view [International Paper] as well-managed in its industry,” Bank of America Merrill Lynch analyst George Staphos wrote in a research report yesterday. “Recent containerboard and box data suggests producers are having challenges managing excess inventory and production, and pricing could remain subdued for the foreseeable time.”
A decline in commodity prices often negatively impacts basic materials businesses such as International Paper.
IP stock is sliding roughly 4.6% on Tuesday following the news.
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