According to independent researchers IBISWorld the price of wood pulp is forecast to rise by 5.1% year on year, for the next couple of years. For manufacturers that rely on the product as an input cost, that likely means higher prices to pass on to purchasers.
An increase in demand for paper based packaging will allow producers and suppliers to pass some increased cost onto their customers. They will also have ways to offset rising costs though, meaning increases should not be passed on in full.
So what’s driving this demand?
Well, there are a number of factors at play. The global industrial production index is rising, as is consumer spending. Both of these increases will lead to a growth in demand for more packaging products. As production increases, more goods need to be packed and shipped around the world and as consumer spending rises, so too does the demand for consumer and delivery packaging.
There are also a number of other factors at play in this market
According to Print Week, the cost of uncoated paper rose by between 5% and 7% at the end of May. According to the merchants responsible for raising prices, a perfect storm of strong demand, rising input prices and a weak pound made such an outcome inevitable.
High demand in the Far East has meant manufacturers there have been selling locally, where prices are strong and they don’t need to incur the high costs of shipping to Europe.
Pulp wood prices have actually risen by at least 10% in the UK since the beginning of the year and there have been other factors too; mills use plenty of chemicals and the prices of these have also been on the rise. Increased transport costs have also applied pressure and lead times have almost doubled with some manufacturers recently.
It’s clear that the increased demand has not translated to reduced prices. Many are waiting longer for their product as well as paying more.
Paper merchants may still be nervous, since historically when a price increase collapses, prices often return to pre-crash levels. Prices have been relatively low in this sector for a number of years, but the future could easily
go either way.
Not just paper packaging – Plastics too
The two most commonly used polymer based Packaging grades are LLDPE (Pallet Stretch Wrap) and LDPE (Shrink Wrap). But increases in HDPE, PP and PVC will affect high density materials such as yoghurt pots and other food packaging and increases in PP and PVC will affect consumable items such as tapes. Overall, other film based products will be affected too.
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Article by: The Packaging Team