Ongoing challenges in global supply chains are impacting the packaging industry and its clients. We look at the products most effected and how to overcome shortages:
Businesses have been dogged by operational and financial challenges in recent years, not least concerning their supply chains.
Global supply chain challenges have been slowing output and driving up prices since early 2020, caused by the combined effects of Brexit and the pandemic and, more recently, Russia’s invasion of Ukraine.
Brexit changes caused huge drops in exports and imports and continue to impact the labour market and the availability of key goods. The pandemic slowed production and manufacturing and limited consumer demand during lockdowns, all of which are still causing issues a year later. And this year the war in Ukraine has impacted energy prices, commodity prices and food production. Rising energy prices are now pushing up production costs, adding to rising costs for goods across the UK.
How this is impacting the supply of packaging products
Looking at the packaging industry specifically, each of these global issues had their own effects. The pandemic saw consumers shift to online buying, changing businesses needs for packaging to distribute goods, for example. And the collection of plastics for recycling remains insufficient to meet demand for products containing higher volumes of recycled content.
Across the board, high demand and limited supply means prices are being pushed up across the board, contributing to record-breaking levels of inflation in the UK – topping 10% in summer 2022.
Looking at just one area of the market – tapes – we can see just how challenging conditions have been. Hot melt adhesive prices increased by 40% in 2021, while BOPP films, which most tapes use as a carrier, increased in price by 30% in one month alone. And, as with almost all other paper products, paper tape prices increased.
Increased demand for paper-based products – partly contributed to by the rise in e-commerce sales also impacted the availability of corrugated boxes and cores.
In some cases, the pandemic completely changed the ability for products to be manufactured. For example, self-adhesive tapes.
One of the core components of the solvent in adhesive tapes – butyl acrylate – reached critical levels through 2021. Butyl acrylate is a by-product of aviation fuel so as demand, or accessibility, for flying dropped through 2020 and into 2021, production of this component slowed drastically.
While the packaging industry typically sees price fluctuations for this component of around 10% +/-, its price rocketed by 200% in 2021, from c.$800 per tonne, to c.$2,400 per tonne. Now flying is well on its way to back to normal, diminished stocks are able to recover.
Other challenges arose from issues entirely unrelated to the pandemic or global events. A fire at a factory in Italy took out one of the two main manufacturers or PVC films globally. As the Italian firm recovered, their German competitor struggled to keep pace with demand and markets globally faced shortages of the products.
Navigating these supply chain issues
Key to navigating ongoing market challenges, we believe, is good communication and, as much as possible, forward planning. These will ensure your customers and suppliers understand the nuances of your operations and market, and will support early decision-making and good organisation. This could allow for alternative material streams to be identified, for example.
At MorsaPack we’re working to mitigate these challenges by working closely with our network of trusted suppliers, allowing us to source products from a variety of places, and clients, to identify alternative products or optimal order volumes.