Price volatility of raw materials for flexible packaging

The price volatility of raw materials for flexible packaging, particularly in Europe, has had significant impacts on the printing and flexible packaging industry. Energy and raw material prices were already at a very high level, but they increased even further after the outbreak of the war in Ukraine. These increases, along with availability issues, have serious financial implications for the flexible packaging supply chain. All major substrates used for flexible packaging, such as plastics, paper, and aluminum, are affected, as well as laminating adhesives, lacquers, and inks. The industry is facing high energy prices in the production of flexible packaging and logistics.

Although the share of logistics costs relative to other packaging sectors is lower due to the low product-to-flexible packaging ratio and efficient transportation, the absolute increase is very significant. Reports from transportation associations even indicate the risk of reduced existing logistics capacities, as companies may have to cease operations due to high diesel prices.

The executive director of flexible packaging europe comments on the situation: “Overall cost levels are rising, which this situation is not yet fully assessable for producers in the flexible packaging industry.”

The main problems for us are the high uncertainty in serious pricing for their customers, as many suppliers in this industry change their fixed rates even after confirming delivery. The refusal to accept such increases is often penalized by non-delivery or unavailability of the next order. Compared to the supplier and customer industry, our sector is in a specific position and predicament. Additionally, liquidity issues, especially for small and medium-sized enterprises, are an increasing concern. This is compounded by inadequate credit insurance lines due to high raw material prices.

Historical femand for raw materials

According to data from the overview of flexible packaging to examine price volatility of raw materials for flexible packaging, the rates of all raw materials used for flexible packaging have shown historical increases over the past six months.

Examples of these severe changes include an increase of over 130% in demand for polyethylene resins, nearly 70% for BOPP film, and 18% for aluminum foil.

Additionally, shipping rates to and from Europe and land transport within Europe have increased.

Rob Gilfillan, head of applications at Wood Mackenzie, states: “The sharp increase in all materials impacts not only the flexible packaging industry but all industries.”

Almost half of fast-moving consumer goods (FMCG) in Europe, excluding beverages, are packaged with flexible packaging. Examples include various packaged foods such as pet food, personal care products, home care products, medical supplies, and pharmaceuticals, all of which rely on flexible packaging.