Page 5: Adding value
You will have noticed that in every step of the entire process outlined above – from waste paper collection and recycling and the timber forest, all the way through to the box which reaches the final consumer – value is constantly being added to input materials. When timber and waste paper are pulped, value is added. When this pulp is converted into paper, more value is added. Likewise, as the paper is converted into board, the board into corrugated cases and cartons, value is added to what came before at each and every step.
The value chain doesn’t stop there, however, because the business of producing corrugated cases and cartons is a business based on recycling. When the consumer is finished with the carton, the carton becomes waste material which is needed at the very beginning of the value chain – to produce more boxes.
Supply and demand
Because more than half the cost of producing a box is the expense of the paper involved and because the raw materials used in the manufacture of paper are traded globally, global market conditions influence more than 50 percent of the cost of box manufacture. When there is too much capacity in the industry – too many suppliers producing more paper products than the market requires – prices fall. On the other hand, rising demand – which stretches production capacity – will cause prices to increase. Rising demand, however, is usually good news, because the demand for packaging is a good indicator of how the world economy is faring. Manufacturers of goods need more cases and cartons when their businesses are expanding, and so if demand for packaging is up, this indicates that the economy in general is doing well.