Demand for kraft and corrugated paper is falling and that is driving down prices, TheStreet's Jim Cramer, co-manager of the Action Alerts PLUS portfolio, said on CNBC's "Stop Trading" segment.
That drop in prices is one reason for the downgrade, he added.
Shares of International Paper have not fared well this year, down 10% in 2016, and 37% over the past 12 months. While most commodity prices have been under pressure, it's a great concern to see demand fall for kraft and corrugated paper, Cramer said.
Investors who use commodities as a way to measure the health of the global economy could interpret the demand drop as a signal for a worldwide recession or, at the very least, a massive slowdown, he explained.
If investors start listening to this quarter's conference calls -- such as Union Pacific's (UNP) - Get Report -- they would start asking when the Federal Reserve will begin easing, not tightening monetary policy, Cramer said. That conference call did little to ease concerns about the economy, he added.
At the time of publication, Cramer's Action Alerts PLUS had no position in companies mentioned.