3 Reasons Why Packaging Prices Are Rising

Manufacturers around the world have increased packaging prices in recent months. With the COVID-19 pandemic, consumers are spending more on e-commerce, take-out food, and grocery store products, and as businesses begin opening up, retail spending is also expected to increase.
While global demand remains steady, a volatile combination of external forces is driving packaging prices upwards by 30-50%. The price of SBS paperboard has doubled from $1,000 per ton to $2,000 per ton since October. Kraft paper is up by 43% at $1,000 per ton, and corrugated cardboard jumped from $650 to $1,000, an increase of 53%.
Global shipping prices have also increased by up to 80 percent since last November due to the pandemic. During this period of high demand, packaging prices are about three times higher than normal because of delays in container shipments and increasing air freight prices.
Unfortunately, manufacturers must pass these costs on to companies that need premium and luxury product packaging.

The Chinese Paper Monopoly

Recently, China’s largest paper manufacturer, APP-China, merged with another large conglomerate, resulting in 51% control of the market. The Chinese government has yet to indicate whether it will break up this monopoly.

It also occurs at a time when manufacturing capacity has been reduced in Southeast Asia, Europe and the United States, especially after the Coronavirus pandemic. China's manufacturing sector has been resilient throughout COVID-19, causing businesses around the world to increasingly rely on their capabilities.

APP-China is using their newfound market control and international demand to raise prices, forcing smaller manufacturers to do the same.

China’s Waste Paper Bans

China shocked the recycling industry with its ban on plastic and mixed paper imports in 2018. The world's garbage would no longer be accepted in China, and countries like the United States would have to send their plastic elsewhere.

Beginning in January 2021, the Chinese government will ban all recycled fibers. Paper manufacturers rely on recycled cardboard to create paper pulp, which becomes packaging materials like molded pulp, SBS paperboard, kraft paper and cardboard. The Chinese are subverting the recycled paper ban by importing paper pulp, which is not covered by the restrictions, and investing heavily in their own waste paper recycling facilities and paper mills.

Problems With Global Logistics

As consumer demand soars, sea and air cargo companies are seizing the opportunity to raise shipping costs even while major global logistics problems frustrate businesses. With the Evergreen cargo ship freed after blocking the Suez Canal nearly a week, the world is getting a rare glimpse below the deck, revealing a weakened global shipping network and a supply chain still struggling to cope with the Coronavirus Pandemic.

Overwhelming inbound deliveries and land-side logistics have caused major ports throughout the United States, especially on the West Coast, to become clogged with ships waiting to unload and receive goods. In February, dozens of container ships anchored in San Pedro Bay for upwards of 11 days before being unloaded at the Port of Los Angeles. COVID continues to impact every level of the supply chain, including labor. The International Longshore and Warehouse Union (ILWU) reported that a thousand of their members tested positive at the end of January.

A lot of companies are turning to the skies to solve their shipping problems. According to the online logistics marketplace Freightos, “Healthy demand has pushed global air cargo volumes back to pre-COVID levels.” Space on passenger jets is still limited though. Even though the products may arrive on time, companies should expect to pay more than they expected since airlines keep prices high in such a high-demand market.
As society emerges from the pandemic, the hope is that manufacturing expands and demand stabilizes.

While the waste paper ban will likely stay in place for the foreseeable future, major Chinese paper companies like APP-China and Nine Dragons are investing billions of dollars in material processing technology. This updated infrastructure will likely reduce the impact of raw material restrictions.

As ports address traffic jams and airlines increase daily flights, global shipping prices will eventually stabilize as well.
However, planning ahead is more critical than ever. Stay in close contact with your freight forwarder and set realistic deadlines with your packaging manufacturer. Choosing a provider that implements efficient packaging logistics solutions is also important.

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