Packaging Industry Update

September 2021

Overview

There are some big headlines as we move towards Quarter 4.  We’ve tried to keep the text to a minimum and provide clear action points.  Here are those action points…

 

Make sure your corrugated supply is secure up until end of December and forward order where possible to avoid increase.

See new corrugated index in this report.

 

Prepare for further increases across all packaging materials of varying scale.  Plan for around 10%.  Use reports like this to demonstrate to your clients how much packaging materials have gone up.

Use this report to demonstrate to your clients and put plans in place now.  Indexes and explainers below.

 

Ask us for a report of plastic items and alternatives – we can provide samples and prices for feasibility, including a full environmental report.

The plastic tax is coming closer – full details and advise on this tax available here.

 

Progress any machinery plans quickly!  The super deduction is a great opportunity.

There is a Super Deduction you may not be aware of.

 

Material Costs

Corrugated                Fred Economic Data                                                

Affects corrugated such as cartons, layer pads and other paper-based products.

It won’t come as a surprise that the corrugated index is now rising sharply.  Peak is approaching and those that buy corrugated will remember last year when large ecommerce companies hoovered up all the paper.

An increase of 8% went in September and the spike is continuing at the same rate.

 

Verdict

Expect increases of up to 10% in Oct / Nov and make absolutely sure that your corrugated supply is secured right up to Christmas.

 

Packaging Film                      Fred Economic Data

Affects plastics such as Film, Strap, Bags and Covers

Packaging Film has followed the corrugated trend, perhaps even sharper.  This, after a short break in the spike.  Again, demand may be a feature here and it seems there will be little respite up until December.

 

Verdict

Expect increases of over 10% in October as plastic manufacturers react.  Demand may not be as much of a challenge as corrugated, but it will be worth checking that your supply of any bespoke plastic is well organised.

 

World Container Index     Drewry WCI

Affects All Imported Products, mostly Tape, Strap, Machine Film and Hand Wrap but other items apply.

The container index follows a predictable trend, but it has slowed down.  Plus Packaging have kept up with the tariff but not increased it yet to follow (it was established in March).

 

Verdict

This is not expected to change anything yet as most increases in carriage are being absorbed into product price.

 

Plastic Tax

By far and away the clearest description of the Plastic Tax is here – on the government website – Plastic Tax Information

In short, the drive is to get us all to use more recycled plastic.  Many packaging items already contain more than 30% recycled material – but some don’t.  So what will actually happen?  Items like Film and Tape will go up in price – quite sharply, by approximately 10%.  It seems likely that plastic as a rule will go up as demand for recycled plastic will go up and supply chains may not be ready for that.

 

Verdict

Find out which packaging items contain 30% and which don’t.  Request quotations and samples for alternatives of plastic reduction or replacement products – there are many available and we are very happy to help.

 

Super Deduction

On a brighter not, there is a great opportunity for packaging machinery!  This applies to all kinds of machinery from Pallet Wrappers through to Strapping Machines.  Here’s the detail:

The super-deduction offers 130 per cent first-year relief on qualifying main rate plant and machinery investments from April 1 2021 until March 31 2023 for companies. For most business equipment, there will be a super-deduction of 130 per cent of the expenditure incurred.”

Here’s the formal link:

https://www.gov.uk/government/publications/new-temporary-tax-reliefs-on-qualifying-capital-asset-investments-from-1-april-2021/new-temporary-tax-reliefs-on-qualifying-capital-asset-investments-from-1-april-2021

 

Verdict

If you are considering new machinery or a packing bench upgrade – get pricing in and progress!  This is an ideal opportunity if such plans are in place.

 

Summary

Here’s the headlines and action points.  We can make it as easy as possible for each one:

  • Make sure your corrugated supply is secure up until end of December and forward order where possible to avoid increase.
  • Prepare for further increases across all packaging materials of varying scale. Plan for around 10%.  Use reports like this to demonstrate to your clients how much packaging materials have gone up.
  • Ask us for a report of plastic items and alternatives – we can provide samples and prices for feasibility, including a full environmental report.
  • Progress any machinery plans quickly! The super deduction is a great opportunity.

 

As always, we will only increase items to the degree that material has been affected, avoiding broad brush price hikes.  We all know material increase cannot be ignored but are committed to making this as easy as possible for you and ensuring all options are available to your packing team.

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Packaging Industry Update

August 2021

Overview

Here’s the headlines:

  • Stock up or pre-order corrugated now, before peak disrupts availability still further and prices increase.
  • An increase on corrugated between 6% – 10% will happen during August.
  • It is likely tariffs will increase as the container pricing continues to rise.
  • Plastic indexes are increasing but not as sharply as they were.

The June numbers have been keenly awaited – it was hoped that pricing might level, and the industry would start to see some stability in material cost.

Somebody has to say it – that’s not happened. Whilst there is a sign of relief on plastics, corrugated prices continue to rise sharply. On the shipping front, there was a short dip, but containers are now nearly double the cost that they were when we first introduced a tariff as a temporary measure.

For a couple of months there were pockets of stock in packaging merchants at old rates. These seem to be drying up now as everybody is forced to adjust their prices to accommodate both material and import costs.

If you are considering your price structure based on what material costs will do – all the evidence says to act now, don’t wait out the increases.

Full overview follows…

Material Costs

Corrugated – Fred Economic Data

Affects corrugated such as cartons, layer pads and other paper-based products.

Most mills have now been in contact advising of 6 – 10% increases based on the above indexes or similar information. There is no sign of leveling off yet and with the bigger e-commerce companies planning their peak and placing orders it seems unlikely that we’ll see any relief here.

Packaging Film – Fred Economic Data
Affects plastics such as film, strap, bags and covers.

Whilst the index continues to rise, the level of increase has tailed off a little. This one is more of a hold your breath and see what happens!

World Container Index – Drewry WCI
Affects all imported products, mostly tape, strap, machine film and hand wrap but other items apply.

The container price seems intent on a non-stop increase. We introduced a tariff in March, predicting a spike and the price did indeed come down a little.

However, we are now paying double the amount we were then.

Other Factors

Covid-19

Some of the lack of supply in materials like paper and plastic is down to the lack of available staff. This could be due to isolating – or simply down to companies not being able to set up quickly enough after having many off or on furlough.

This should steady over time.

Brexit

The effect of Brexit seems to be reducing – it doesn’t come up much in packaging sourcing.

Summary

Those headlines again:

  • Stock up or pre-order corrugated now, before peak disrupts availability still further and prices increase.
  • An increase on corrugated between 6% – 10% will happen during August.
  • It is likely tariffs will increase as the container pricing continues to rise.
  • If packaging is included in your own product costing, forecast for a continued rise over 2021.

We’ll keep you updated!

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Packaging Industry Update

25.06.2021

Overview

Packaging is not the only industry to have its supply chain and cost prices drastically change over the last few months. There are factors that apply to all materials. There have been some very specific events that have directly applied to packaging material though.

This deliberately short report explains how Packaging has been affected – and what will likely happen over the next few months. We look at material costs, import prices and other key factors, providing links to the data.

Material Costs

Corrugated – EUWID

Affects corrugated such as cartons, layer pads and other paper-based products.

It’s very nice to see a flat line on these charts!

However, corrugated carton pricing for made up boxes will trail by a couple of months. This means that corrugated is likely to continue to rise through July and August by around 10%.
Our sourcing is strong with many options for standard corrugated and we have generally managed to stay beneath the curve with increases for Plus. That is good news for customers so far, but it does mean that we are likely following the red line, which is going up steeper than the blue.

The conclusion for the second half? Expect increases of up to 15% I’m afraid.

Packaging Film – Fred Economic Data
Affects plastics such as film, strap, bags and covers.

There was talk of a level off on this index, but it has not happened yet. This affects tapes, machine and hand films and all general plastic items. Again, import prices will follow a couple of months after.

Without wishing to pile it on – we are looking at pricing going up by 7 – 11%.

World Container Index – Drewry WCI
Affects all imported products, mostly tape, strap, machine film and hand wrap but other items apply.

Whilst we are on the topic of indexes going up…yes, this one has too. The price of importing a container did drop very slightly and we were hoping to remove the current 6.6% tariff. That has quickly turned into a conversation about whether it should be increased.

It is unlikely to increase – if it does, it will not be by much. This is because some of the increase will have found its way into product costs and has been covered.

The sooner we lose the tariff the better! It’s likely to be around September.

Other Factors

Covid-19

There are now two effects of Covid-19. The UK’s fast vaccination programme means  that demand has not only come back quickly, it’s quicker than some of the countries that make the goods own pandemic response is going. That decreases supply chain ability. Increased demand – decreased supply only means one thing for material pricing.

Effect number two is buying on-line. Large material producers are already clearing production space for Peak Season – Christmas. It is a good sign that this planning is in place, but it will mean that demand stays high and is being planned for earlier than ever.

Brexit

Most suppliers have settled down after a minor ‘Brexit-Panic’ where confidence was low, and prices were over compensated. As trade deals take place at a quick pace, it seems likely that it will be a good thing for packaging pricing on imported goods long term.

Summary

The question from Account Managers has very much been, what is the best thing for customers to do? Here are three important actions we think our customers could do:
·         Tell your customers. Use this report as back up. Its better for all of us to know a couple of months.

·         If you use our stock and serve, speak to your account manager as soon as possible to make sure your stock is safely on order for peak.

·         Make sure your account manager has shown you all the alternative products – cost savers, plastic reduction, and value engineering. They are on your side!

We’ll keep you updated!

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Packaging Industry Update

20.04.2021

Overview

Packaging is not the only industry to have its supply chain and cost prices drastically change over the last few months. There are factors that apply to all materials. There have been some very specific events that have directly applied to packaging material though.

This deliberately short report explains how Packaging has been affected – and what will likely happen over the next few months. We look at material costs, import prices and other key factors, providing links to the data.

Material Costs

Corrugated – Fred Economic Data

Affects corrugated such as cartons, layer pads and other paper-based products.

The Corrugated and Solid Fiber Box index has seen the sharpest increase of all, rising rapidly since Dec 2020 / Jan 2021. This is still set to rise further and whilst most companies have already increased prices late Jan / Feb as the impact set in, its likely that prices will go up again as the steady increase is absorbed.

Packaging Film – Fred Economic Data

Affects plastics such as film, strap, bags and covers.

Increases in packaging film are even more striking than those on corrugated. Many packaging prices will have gone up Jan / Feb as pricing has been going up since August 2020. It is inevitable that there will be further sharp increases as the effect of Feb / Mar pricing sets in and stock at old prices is used up. These are likely to set in Early May.

World Container Index  – Drewry WCI

Affects all imported products, mostly tape, strap, machine film and hand wrap but other items apply.

Increases in the cost of importing a container are on top of the material increases already covered in this report. As the World Container Index is set to come back down, Plus Packaging have applied a tariff that will rise or fall with the above index.

Other Factors

Covid

The main effect of the pandemic on packaging has been in consumer buying habits. A huge surge in buy on-line for a wider variety of products, this applying largely to Amazon has increased demand far beyond current supply chains could cope with. This led inevitably to material scarcity and the increase in costs that always follows.

Covid also slowed down raw material production. This happened along with the surge in demand for on-line items.

Brexit

Brexit has had a short-term effect in confidence, disruption at port with new legislation requirements and uncertainty in supply. There have been cases of over-compensating on prices for perceived disruption which contribute to costs going up.

Summary

Short Term

Many increases will have already been implemented and absorbed, not only on packaging but materials across the board. What we see in the indexes above is an inevitable further round of increases, likely to start Early May on-wards. Whilst the timing and exact percentage may differ across products the fact that the costs have gone up cannot be avoided.

Mid Term

By mid-year, the stock coming into Packaging companies will be at its peak of cost – all stock bought in at old rates will have gone. Price reviews in catalogues, on-line and with customer order books are likely as companies try to offer firm, reliable pricing for the rest of the year.

Long Term

Long term predictions in our current circumstances are at best hopeful! Even if the various spikes in material costs start to come down, the stock in the industries warehouses is likely to last until the end of the year. It is worth monitoring the indexes to see how that pans out.

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11/4 Delivery Service Expanded!

Order items from our catalogue before 11am and receive your delivery before 4pm the same day.

Order items from our catalogue before 4pm and receive your delivery before 11am the next working day!

Applies to L,  M17, WA & CH41-CH66 postcodes.

Roll out to continue throughout 2021.

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11/4 Delivery Service Launched!

Order items from our catalogue before 11am and receive your delivery before 4pm the same day.

Order items from our catalogue before 4pm and receive your delivery before 11am the next working day!

Applies to L, WA & CH41-CH66 postcodes.

Roll out to continue throughout 2021.

Watch the below video with our Ops Director to find out more about our promise.

 

ORDER NOW

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Check out our latest Special Offers here!

      

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