Lindum continuously monitors the factors that affect the costs of corrugated cases. There has been an unprecedented course of increases, both in raw material and manufacturing costs, coupled with environmental issues. These increases & challenges have severely impacted cost prices on cardboard items including cartons and sheet. The following information sets out the reasons for the increases and provides information on the influencing factors.
Pollution in China
In December, due to environmental issues and pollution controls, the Chinese government closed down around 1200 factories in China. These manufacturers included some paper mills leaving China with less paper than it required, forcing them to import.
On top of this, the government have also placed restrictions on coal usage which is forcing production prices upwards.
Explosion in USA
On the evening of the 22nd of January, there was an explosion at International Paper’s Pensacola Mill. (The largest manufacturer of kraft paper in the United States.) This has put the pulp digestor out of action, leaving the United States also requiring imports to maintain production.
In the UK…
Whilst in the UK, the three major players in the market have access to paper from their own mills. Challenges related to rising energy, raw materials, exchange rate variations and the implementation of a living wage have led to falling profits at these plants. This has left them with an appetite for increasing margin at this time of shortage.
To complete the perfect storm, independent UK corrugated board manufacturers are now competing against the Chinese and American buyers for paper, often unsuccessfully. So, expect shortages of supply caused by forward ordering to beat the increases, coupled with the lack of paper.
The current situation can be seen in this EUWID graph.
Current Markit PMI information shows both the spike in price and the supply shortages.
We are seeing UK producers of cartons implementing 9% – 12% increases with immediate effect.
The graph below shows the current paper price situation.
The EUWID graph below shows the current paper price situation.
If you require any further information or would like to speak to us regarding this current situation please email email@example.com or call us on 01469 574480.