
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.