Packaging market update

Global supply chains have faced the most turbulent and testing of times over the last two years. With all the challenges faced in the spill out from the pandemic, 2022 is causing even further disruption and uncertainty.

Before given the chance to fully recover following the impact of factors including Brexit and the pandemic, supply chains have been hit hard again in the wake of geopolitical unrest, high energy prices and inflation.

What is the impact when it comes to packaging?

The packaging market has faced its fair share of problems over the last two years. And 2022 is providing further challenges across the two main areas that Lindum specialise in – paper and plastic packaging.

The production of paper packaging is both labour and energy intensive. The situation in Europe, with soaring energy costs faced, has created an incredibly uncertain outlook for paper producers across the continent. Not only is the price of energy a factor, but the access to it is also a possible cause for concern. Back in July, Smurfit Kappa – the largest producer of paper packaging in Europe – raised the alarm of the possibility of paper shortage. Should the gas supply have to be rationed, which is still very uncertain, then paper production will undoubtedly be affected too.

The plastics market has been faced with its own set of challenges. Going back to 2021, raw materials shortages caused problems for plastic production. Now facing a huge rise in energy prices, on top of a rising oil price over the course of 2022 means a rise in the price of plastic.

With economic sanctions imposed on Russia, global oil production was affected – which has a knock-on effect across global supply chains. In addition to plastic production, the main area where a rising oil price is felt for consumers and businesses alike is at the pumps. The rising cost of fuel has seen transportation costs rise too, which is another factor in the packaging market outlook.

Inflation

Due to the size and speed of these price rises, resulting from the uncertainty caused by the pandemic and the geopolitical situation of the war in Ukraine, inflation is at levels not seen for decades.

Price rises have been absorbed by many businesses over the last two years, but the situation we find ourselves in now means prices will have to be raised. The cost of living for consumers is widely talked about, but the impact on businesses is also problematic.

Although no one is certain of what is on the horizon, inflation is expected to fall towards the end of the year and into 2023.

Plastic Packaging Tax

Since our last market update, the first quarterly return for the Plastic Packaging Tax (PPT) was due back at the end of July.

Just this week, The Times reported that the amount of companies that have registered for the tax was much lower than anticipated; with only one in twenty eligible companies registering in the first month. Out of HMRC’s estimated 20,000 eligible businesses, that’s only 992 who registered. Read the full article here.

From the conversations we have had (and continue to have), there is still plenty of confusion around PPT, and what exactly constitutes plastic packaging that is within scope of the tax.

With the first quarter now passed since the introduction of the tax, if you have any questions, we are happy to answer any queries you may have – speak to one of our team today.

Industrial action affecting UK ports

This week, the port of Felixstowe – the UK’s biggest container port- is seeing a walk out of almost 2,000 staff and industrial action commence for eight days, until Monday 29th August.

the impact is likely to be significant in itself, with port disruption affecting supply chains in the run up to Christmas. But looking ahead into September, disruption on a larger scale is likely to be seen with industrial action taking place in Liverpool too.

With shipping and supply chains affected for the last two years following the pandemic, and with the backdrop of high inflation, these strikes are going to have an impact on supply chains in the run up to the festive period. As it is a situation that is evolving, we have been pro-active and already have a plan in place to minimise any impact this could have to our stock and supplies.

How can Lindum help?

If your packaging supply has been affected by any of these challenging circumstances or you’re worried about future disruptions get in touch with our team to find out how Lindum can help you with our packaging solutions.