Packaging Investors Just Saw $3 Billion Wiped Out in One Hour

(Bloomberg) -- Packaging investors just can’t catch a break. Containerboard data for March caught the Street by surprise and wiped off more than $3 billion in industry market-cap within an hour of the market open.

Through Monday, the S&P 500 Containers & Packaging Industry Index (S5CONP) had bounced back from its Dec. 26 low and was up about 24 percent, and was trading above all its major daily moving averages.

But in the face of disappointing March data, the index dropped as much as 4.5 percent Tuesday, and fell below its 50-day moving average for the first time since early January. It was the worst single day for the benchmark since mid-December, and trading volume was above average too.

Packaging Investors Just Saw $3 Billion Wiped Out in One Hour

Although the sector saw lower prices in March reported by the industry journal Pulp & Paper Week, that had also been flagged in dispatches last month. So hope was brewing in the sector that cuts were likely the bottom and it wouldn’t get much worse. "We expected pricing to hold at current levels," BofAML analyst George Staphos wrote in a note, citing macro/sector trends and the packagers’ efforts to manage their supply-demand.

But the shoe dropped Tuesday, when box shipment data were released for March, coming in much weaker than investors expected. A decline in box shipments is the main takeaway from the March box data and "it’s hard to spin that number as anything other than disappointing," according to Seaport Global analyst Mark Weintraub.

Packaging investors now await the next big catalyst, the latest containerboard pricing data from Pulp & Paper Week set to be released post-market on Friday. The consensus among analysts right now is that that’ll show still another price cut.

"Do prices go down next weekend? We don’t see it as a fait accompli but the risk definitely got higher," Weintraub said.

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