The Cardboard Box Economy Is Breaking Down

0:00Okay, I'm Ryan DeSember. I am a reporter for the Wall Street Journal. That's a great name. You have there, Ryan. Yeah, it is. Good one for you too. Two Ryan's in two different studios here to talk about one cardboard box. You're holding one in your hand right now. Yeah, I grabbed one because they're everywhere these days. The technical term is a corrugated packaging. Cardboard is actually worth like your paper cup, but we don't have to quibble about that. We won't. Cardboard, container board, you know what I'm talking about. The brown shipping box is maybe the least exotic object in the world. The stuff is everywhere, crammed in recycling bins on doorsteps, stacked inside e-commerce warehouses. Yet if you thought we were living in the era of peak cardboard, you'd actually be wrong.

1:05So you probably wouldn't guess it, but we're actually on a per capita basis America's using a lot less cardboard than we used to. Really? Yeah. When you break it down a box as per person, we peaked in 1999, which is sort of hard to believe. I'm surprised that there's less container board being used now in an era of like online shopping than there was 20 years ago. Think about like when you used to get a delivery from Amazon and you'd open it, it'd be like a box inside another box with another little box with the small thing you ordered. Technology and like a lot of sort of work on their end has gotten rid of that, right? Not only did the box inside the box inside the box start disappearing, but boxes themselves have also gotten smaller and lighter. More stuff started showing up in plastic mailers, and more boxes are getting made from old recycled ones. So I mean like overall like this sounds good, there's less waste, there's more recycling, but there obviously must be a downside here to somebody,

2:05otherwise we wouldn't be talking. Yes, the downside is if you were selling trees. Specifically, pulpwood. That's a type of wood used to make cardboard. And recently in the pulpwood market, like a poorly taped box, the bottom fell out. It varies highly by market, but some markets you might have gotten $16 a ton, $15 a ton, and now you might get zero. $0 a ton? Yeah. So basically you're saying this stuff is worthless. Yes. What does this mean for the tree growers, the people whose livelihoods depend on selling these trees? It's an existential crisis. Welcome to the journal, our show about money, business, and power. I'm Ryan Knudsen, it's Thursday, September 3rd. Coming up on the show, little trees? Big problems.

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4:23cut through the chaos, this is a job for Indeed Sponsored Jobs. And listeners of this show will get a $75 Sponsored Job Credit to help get your job the premium status it deserves at Indeed.com slash podcast. Disco to Indeed.com slash podcast right now and support the show by saying you heard about Indeed here. Indeed.com slash podcast, terms and conditions apply. Hiring now, then this is a job for Indeed Sponsored Jobs. In many parts of the American South, a forest isn't just a place where towering pine trees grow wild. Trees are a crop. Ryan, December has a way of visualizing this. Go to your Google Earth or your online map, set it into satellite mode, zero in on the south, find something that's green, not like a wildlife refuge or a national park, but any other stretch that's green. And as you zoom in, more likely than not, you're going to find

5:25that the trees are all planted in neat rows. Nete rows have carefully planted loblolly pines, tree farms. In the timber industry, the big money is in lumber. That's a process where they come from mature 20 or 30 year old trunks that eventually turn into two by fours and telephone poles. And like any crop, there's a tried and true way to get the best harvest. They say plant them thick and cut them quick. The goal is to get tall pines with few branches. So you plant the trees really close together and that forces them to sort of compete and race up to the sky to the sun. The idea is that the trees chasing sunlight will shoot straight up and shed their lower branches in the process, which means fewer nuts in the wood and taller trunks. The problem is that eventually the trees get overcrowded and tree farmers have to do some thinning. After a while, the soil only supports so many mature trees. So you have to go in and kind of select the ones that are the worst

6:27specimens or misshapen trees or maybe just every other one or whatever your plan is and you have to take those out to make room for the best specimens to keep growing into lumber. So if you were to go to one of these pine plantations and look around, you might see trees that are pretty unremarkable. Maybe they're crooked or otherwise not the best specimens and you can't really envision them becoming a big utility pole. But they're very important to the whole system. Important to the system because those dinky crooked trees can still be sold as popwood and turned into paper and cardboard boxes. And they basically make it into a mashed, almost like an oatmeal and that becomes pulp and then they roll it out in flat sheets and basically dry it and it becomes paper. In other words, if the farmer's main goal was lumber, pulp wood was basically a profitable byproduct. In a business where farmers had to wait decades for big trees to mature,

7:31pulp would provide the first financial return and a steady trickle of income. And then you let the trees remain in growth for another 25, 30 years and they become lumber and that's your big payday. For almost a century, that was how it worked. But now, as we mentioned earlier, the system is breaking down. Americans are using less paper. Cardboard demand is falling. And tree farmers are getting hit from another direction. Cheap foreign competition. A flood of cheap eucalyptus pulp from South America. The eucalyptus tree grows faster in the labors cheaper. And then the paper mills that buy pulp wood started shutting down. International paper is closing its facilities. Very recently, just last year, we had a big rash of pulp mill closings across the south. Georgia's kind of ground zero, the big mill in Savannah, another one in a crossroads out in the country called rice burrow. These mills started closing. Well, communities are rot after

8:35learning international paper facilities in Savannah and rice burrow will soon shut down permanently. The impact is cutting even deeper on businesses that depend on the timber industry. All of these forces have helped drive down the value of pulp wood. The price for those little trees is now so low that instead of selling them, some farmers are now paying to have them hauled away. You still need to make room so you go and take out every third tree, right? And those go to the pulp mill. And you used to be able to make money off of that. Yeah, that used to be a big payday. Now for some, it's a big bill. That changes the economics for a lot of southern pine farmers. Because if pulp would no longer pays, what are you supposed to do? That's the question confronting Bill Howard. He's a fourth generation sawmill owner in statesboro, Georgia. It shares the way of living down here. Bill's family has been in timber for more than 130 years. Now, he worries that his way of life

9:37is in jeopardy. It's scary. It's a scary moment. Something we depend on all of our life. Something we just thought would always be here. Without a market, people won't be planting trees. But if growing trees stops making sense, what happens to the farmers and the forests that they depend on? That's next. Amazon Health AI presents painful thoughts. Why did I search the internet for answers to my cold sore problem? Now I'm stuck down a rabbit hole filled with images of alarmingly graphic source in various stages of ooze. I can clear my search history, but I can never unsee that. Don't go down the rabbit hole. Amazon Health AI gets you the right care fast. Health care just got less painful. This episode is brought to you by SnapDragon. Take the leash off your laptop with

10:43the processor that gives you long battery life. Work on the go. Jump between back-to-back calls. Stay locked in for morning to midnight. Get maximum performance even when unplugged. Finally, the freedom to move across the room or across the world is here. SnapDragon. That's how. Go to snapdragon.com slash laptops. SnapDragon brand new products, products of Qualcomm Technologies and ords obsidianaries. Not long ago, my colleague Ryan Dezember went down to Georgia. He wanted to see what the collapse of the pulp would market looks like for people growing the trees. That's where he met Bill. Bill Howard's family is very indicative of this whole crisis. Yeah, Bill Howard takes for Georgia for generations, Saul Miller. As I say, we turn around, thanked him to square things. Bill can't imagine doing anything else. The old saying is it gets sold us in your veins. You can't ever get out of it.

11:48His great-grandfather turned up around statesboro, Georgia in 1898 with seven brothers. In 1898, my great-granddad moved into statesboro. How the portable Saul Mill. And they showed up and started sawing and eventually the next generation built a permanent mill in town. And then in 45, we moved to right now and we have bought a mill. And they've expanded into a contractor yard, a builder supply business. All of a sudden, they've got 300-some employees. For years, the Howard's could count on the first thinning of the forest as a payday. Now it's a burden. The mills that make newsprint in boxes are buying less and less of Bill's pulpit. And then those paper mills started closing. When he saw that happening, Bill started worrying about what it meant for his business, both as a farmer and the owner of a local sawmill. Well, we still have paper mills in our area. So what keeps me up at night is that we lose another

12:54one. That fear is already changing the way Bill is planning his forests. So we used to plant 650 trees, Breaker. We've gone to 550. And then here recently, we've gone to 450, just trying to avoid having more pup wood to take out. Across the south, farmers may already be planting fewer trees. One of the region's biggest suppliers of pine seedlings reported that over its last two fiscal years, sales of lobbolly seedlings have fallen 20%. So it's bad for him as a tree grower, and I'm guessing it's also not great for a sawmill business. You know, when I talk to him, he said, look, if people don't plant trees, I won't have anything to cut. Pulpit is the first step. If we don't have a manufacturing base to sell our trees into, we will have a forest. Some farmers are considering a much bigger change, not planting trees at all. You know, they have alternatives. They could turn it into

13:57an egg land. They could turn it into solar farms. They could develop it. They're going to, they're going to do something with that land for best use. We want it to be growing trees. One grower in the region told Ryan that instead of replanting pine trees on part of his land, he planted blueberries instead. Others are leasing their land for solar, or considering selling off parcels as little ranches. Is there a chance there could be a new market for the pulp wood? Like, they use it for something else? Yes. There's a lot of things happening and a lot of efforts like OSB. It's called Oriented Strandboard. It's basically like the floor or the roof of your house, manufactured panels. And then there's more sort of interesting new things people are trying to develop like sustainable aviation fuel jet fuel made from cellulose. There's fabrics. If you go through your shirts, if you have a silky one, it might be made out of something called liosel, which is made from cellulose or modal is basically a member of the rayon family, which is made

15:01from pulp. You know, smokeless gunpowder for the military is made at a plant down in Georgia out of wood pulp. So there's all sorts of new things. If you're a timber farmer though, these are a lot of really interesting ideas that, you know, it's hard to say at this point if they're going to pay off, but you need to make a decision you're going to be beholden to for decades. Exactly. And that's sort of the conundrum. It's like, do you bet on that or something like that happening? Or do you do something else? Emotionally, it's sort of on a human level for these farmers. Like, what do you think is going through their mind is they're trying to make a decision about whether or not to plant a tree or even staying in this business at all? I mean, I was thinking about that. Like, you know, I live in the city. So like, my assets are in stocks and bonds. I have zero emotional attachment to those. I don't wake up and go look at them out my window. I don't take a walk through them. I don't hear the birds chirping in them. I don't have my family over for like, you know, a turkey hunt or whatever. And that's what these people do. We hunt fish and camp out. We

16:05manage it to grow salt timber, but along the ways, you know, it you see that every age. So, there's like an aesthetic attachment to the land and to the trees and the forest itself. It is. It is beautiful. I think that makes it a lot harder than if say, you or I had some need for money. And we said, Oh, well, we'll just sell those bonds or sell those stocks. But if you take my thousand acres of pine trees, that's going to materially probably change my life. And how I live it. Bill isn't ready to pull the plug on the family business yet. He now has two sons that have joined the company, a fifth generation of tree farmers. And they have kids too, meaning there's already a sixth generation running around the family timberlands. Bill hubs, they'll join the family business too when they grow up. And one day harvest the trees he planted this year. He like a lot of other people down there. These are very hardworking people. They have a lot of

17:08faith. They tend to be optimistic. Right now, it feels like the sky has fallen a little bit, but in the end, I think, will prevail. And so he like a lot of other people I talk to, we're kind of like something's going to turn around here for us if we can just kind of wait it out. We've been in this going on 130 years, saw milling, say, you know, it's not going to end on my watch. We're going to we're going to figure it out and keep going. That's all for today, Thursday, September 3rd. The journal is a co-production of Spotify and the Wall Street Journal. If you like our show, buy the Wall Street Journal newspaper made from Polwood and follows on Spotify, around every weekday afternoon.

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