High on demand, low on availability. Reason under packaging price hike.

Prices of polymers have been hitting all-time records recently. At first, severe blow numerous industries and economies following the initial lockdown caused a drastic fall in basic raw materials’ prices. But then, starting spring 2020 the trend bounced pushing the price towards highest marks ever reached.

There’re several reasons that led to this situation:

·        growing transportation costs,

·        disruptions in supply chains

·        even entire economical industries.

Manufacturing of plastics

The surge in prices happened after demand for fuels (mainly aircraft) dropped significantly, which forced refineries to cut the production scale. This, in turn, ended up with lower production of sub-products used for plastic production. Demand for plastic wares, however, remained unchanged, and moreover keeps growing since autumn 2020.

The drama gets even worse, so that the European Plastics Converters (EuPC), an association of plastic manufacturers, even had to come up with a public dispatch towards the chief of Euro Commission and the chairman of Home Market affairs, to publicize the problem of low accessibility of raw and processed plastics, and non-stop extending supply deficit.

Around 90% of plastic packaging manufacturers a facing severe trouble in plastic supplies – PET, PE and PP. The same problem hits ABP, PVC and PS users.

The price of plastic packaging by 75% consists of the initial raw material cost, so any change in the costs directly reflects upon the amount paid by the final user.

We’re doing everything we can to keep the prices in our stores as low as possible, but in this situation the market force is just too big to stand against, and, unfortunately, some growth in prices got inevitable.

Higher transportation costs - reasons

 Equipment

As if the blow in raw material prices wasn’t enough, a huge disruption in logistic chains led to a surge in shipping costs and a manyfold lead time stretching. The first and biggest problem came out of a deficit of shipping containers that leave Chinese ports and then stack in the destination points.

 Covid – 19

Thtough several recent weeks, China is again facing a significant growth in new COVID-19 cases. At first the situation got worse in the country’s south, then spread to one of the key logistics hubs Jiangsu, and this week a new surge ignited in the Ningbo port. Chinese authorities use severe restrictions to mitigate further virus spread, locking gown entire terminals or even cities. As a result, seaports or even whole hubs get paralysed for weeks.

Weather

July was the time of both Europe and China suffering from heavy rains resulting in local floods. Such weather caused serious damage on railway communication on both sides ruining the well-off exchange. In China itself, lots of supply trains got either framed or detoured.

We’re always looking to assure beset possible purchase conditions for our clients and in this tough situation we’re doing all we can negotiating fair prices with, but despite all the effort prices will still go up. But nonetheless, we’re working on a way to mitigate the inconvenience and losses by developing a new supplies system aimed at minimizing the gaps in packaging supply deliveries.

Still, for maximum supply sustainability we’re urging all of out clients to plan the orders of most used packaging in several-months advance.

Below you can see the demonstration of the difference between shipping fees before and after covid restrictions: