Prices of raw materials have become between 20% and 50% more expensive compared to the beginning of 2021. These are some keys to understand the situation.
Stop of production during lockdown
At the beginning of the pandemic, non-essential activity was halted for several months and in early 2020, paper and polymer producers faced constant force majeure shutdowns across Europe.
At the same time, large producers of raw materials located in Asia, the Middle East and the United States, reduce exports to Europe as a result of the restrictions, and the main European manufacturers become suppliers to Asian countries, who monopolize a large part of the European production. Asia stops being a supplier to be a customer.
The combination of reduced supply and growing demand is causing prices to rise at an unprecedented rate.
Increased demand for packaging during the pandemic
The need to pack all kinds of items to avoid possible contamination is growing exponentially. In addition, hundreds of millions of masks are beginning to be produced around the world and hygiene products such as hydroalcoholic gel sachets which need to be packaged.
The pandemic has made that any packed product looks safer, and items that could be sold in bulk are being sold packaged.
Elimination of single-use plastics
The obligation established by the United Nations to achieve the Sustainable Development Goals (SDG) marked by the 2030 Agenda and the European Green Deal, as well as the recent ban on single-use plastics, has meant the end of plastic bags of commerce, which has caused paper to be the new protagonist in sectors that are not the traditional ones, such as agriculture and commerce.
The price of oil continues to rise and European transport companies are facing a shortage of drivers.
The container sector is suffering from a logistics crisis as a result of fierce competition between the Danish company Maersk and other Chinese companies, which caused the price of the container to be below the profitability threshold, with the result that no investment was made for years while ships were overloaded. The exceptional typhoon season this summer in Asia, the blockage generated in March in the Suez Channel by the cargo ship Ever Given and the lack of containers in the ports of origin mean that a 40-foot container from Spain to the US is now 5 times more expensive than 18 months ago.
The increase in the price of electricity for producers of paper or plastic polymers represents a high cost since all the treatments applied to these raw materials require high electrical consumption.
In the midst of the conflict between Russia and Ukraine, we find ourselves with the added problem that many European countries are highly dependent on Russian energy, particularly gas through various vital gas pipelines. Although a complete suspension of Russian gas flows is unlikely at the moment, even small interruptions will have a significant impact.
Global gas reserves are tight due to the pandemic and energy prices are already rising sharply, impacting consumers and industry.
The conflict between Russia and Ukraine will put the plastic industry in check
The conflict between Russia and Ukraine, which has resulted in a fall in the main global stock markets and a rise in the price of oil, will put the performance of the country’s plastic industry in trouble, said the National Association of Plastic Industries (Anipac).
In a conference, Aldimir Torres, president of the organization, said that this issue will be added to other challenges that the sector has faced, such as the ban on the use of single-use plastic, the shortage of some raw materials and the increase in logistics costs for this and other industries.
The price of a barrel of Brent had an increase of around 5 percent, related to a fear on the part of investors towards ruptures in the Russian supply of energy, in a context in which the commercial sanctions on Russia derived from the attack on Ukraine , continue.
In the expectation that the price will rise again, buyers increase their purchases and store, generating even more tension for producers.
How far will prices go?
The forecasts of the main agents in the supply chain of paper and plastic polymers such as polypropylene, polyester, polyethylene or polyamide, predicted that prices would peak in the spring-summer of 2022.
The factors that put pressure on prices would gradually stabilize, but the war in Ukraine could easily change this forecast and leaves an even more unstable market, if possible.