A few months ago, we warned you that the corrugated industry was attempting to push through their third price increase of this calendar year. The market softened, and enough customers complained that the third increase planned for 2010 was “postponed indefinitely.” Now we have a similar situation developing on most plastic packaging products.
The “Plastics Are Made From Foreign Oil” Myth
According to industry experts, more than 70% of plastic packaging products are made of resin that is made from domestic, natural gas, and NOT from foreign oil as many believe. Having said that, a little surge in winter resin pricing is considered normal, but this has been a steady, year-long climb. What is happening here is not related to the seasonal fluctuations of the same natural gas product used for heating many of our businesses and homes during the winter. To the contrary, in 2010 we have seen several increases on almost every plastic packaging product with no price downturn at all.
The several increases we have seen this year appear to be related to “high feedstock prices, strong resin exports and unplanned outages.” Translated into simple English, much like the paper and other industries, there is too little raw/base material manufacturing competition, creating an environment where price can be controlled by a handful of very large corporations. There is nothing illegal or perhaps even unethical about that; it is basic business 101 – control the supply and you control the price.
What Products Are Affected?
Some are fairly obvious, such as pallet wrap film, poly films for bagging and shrinking, as well as pre-manufactured poly bags. Others are impacted less by resin prices but eventually will rise as well. These include items like plastic box sealing tape, plastic strapping, shrink film and plastic void fill and cushioning products.
What Can You Do About it?
At times of fast rising prices, the best you can do sometimes is to simply use less of the product that is now costing you more. A good application review by a knowledgeable, experienced supplier will usually result in some cost saving recommendations. Examples:
- If you have been using the same pallet wrapping stretch film for more than two years, you are probably NOT using the best film for your application. Film technology has advanced and high yield formulations elongate further and save money.
- The same could be true of void fill solutions. Newer and greener products are now available, but most people remain stuck using the same products and remaining at the mercy of the manufacturer’s price demands.
- Right sizing – Over time, many companies have consolidated sizes in an effort to reduce packaging SKU’s, but needs change and what was a low volume use product just a few months ago and easily eliminated may now be costing you big bucks.
- Order volume makes a BIG difference. Just as companies buy the same old product, they tend to buy it the same old way. Your supplier has order processing and shipping costs to cover, so, for example, increasing your purchase quantity of stretch film from 20 rolls to a full pallet of 40 rolls may dramatically reduce your price per roll.
There is ALWAYS a way to reduce costs, and a good packaging supplier should always be eager to help you identify those ways, especially in a continuous, fast rising market like we are currently witnessing in plastic products.
Please contact us for a no cost, no obligation evaluation.