Resin - Uncertain Market Correction
After a couple decreases while there was still plenty of global turmoil and the Strait of Hormuz was still more or less closed, it was starting to feel safe to say we were in market correction territory. And I still think we are.
That said, August will likely close flat. Producers were trying to push a PE $0.05/lb increase but that will likely not stick meaning pricing will be flat. Of course, there is still plenty of global turmoil and that seems to be ticking upwards the last several days. All to say - it’s 50/50 if we get another increase before continued market correction
Supply & Demand - Supply and demand balanced out last month but inventory still remains high (7-8% higher than this time last year).
Gulf Hurricane Season - The weather community forecasts a below-normal Atlantic hurricane season. Encouraging news that hurricanes might/should not affect pricing this year.
Geopolitics - Middle East tensions appear to be ticking upwards but the biggest unknown might be Canada. While it could change tomorrow, an extended trade war with our northern neighbor could flood domestic PE (driving it down) but push PP and PET pricing upwards.
What does this mean for packaging prices?
Poly bags and stretch film have come down…or will in the near future. No other real movement to note at this time. If we do see an increase, it will be implemented later this month or into October
Corrugated - waiting for the other shoe to drop
The above image is a summary corrugated increases YTD according to FastMarkets RISI - who manages the industry pulp & paper index. Just to give a summary of what has happened so far this year.
Looking forward, the big corrugators are pushing more increases. I touched on this and the reasons behind it in last month’s market update. August was flat but the possibility of another increase is still very much there.
The one thing that is changing is lead times — They are extending. Excluding overly large and heavy duty corrugated items which have had a wider range, it has typically been fair to assume 2 weeks (or even less) on a custom run. Some plants are still running at 2 weeks but by and large, it’s extending to 3 or even 4 weeks.
Plan accordingly….or partner with a company like FlexPAC to warehouse, minimize your exposure, and increase cash flow.
Great Time to Audit your Products, Processes, & Supply Chain!
Gif by thevoiceau on Giphy
With some level of calm (though we’d all like more downward movement), everything should have leveled off by now. Perhaps it felt overwhelming earlier this year to compare pricing, varying increase dates, and dodging short-notice price hikes.
Well, everything is flat now.
But that shouldn’t take away from what I’ve preached in nearly every one of these posts. The biggest gains aren’t from shopping prices but rather from auditing your processes and products.
Do you need a box or could you use SIOC packaging?
Could a different stretch film not only show a material savings but also increase throughput?
Maybe there isn’t a material cost savings but changing your in-the-box packaging could get you ahead of incoming EPR fees.
Is eliminating your lead time and freeing up cash worth more than saving 2% on an item but buying 4-8 weeks of inventory at a time?
Just some thoughts. Packaging can be a commodity but it can also be a competitive advantage.
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