By: Nathan Dube on May 17th, 2022
Why Packaging Prices Continue To Increase
Equipment | Packaging Materials | The Business of Packaging | Investment | Fulfillment
During these days, one of the most common questions that we are receiving from customers is, "why do packaging prices continue to increase"?
And, it goes without saying; that we are living through unprecedented times.
As we all still collectively try to adapt to the world that COVID has changed for the foreseeable future, new challenges continue to press an already struggling supply chain.
And while the global supply chain had already been complicated enough from the months of shutdowns due to the pandemic, other factors are driving these cost increases.
From trucker strikes and protests to disruptions in the plastic resins market as a byproduct of the issues seen in the petroleum industry. These and other problems have led to these price increases that we are seeing now.
But, what exactly are the issues that are causing the prices of packaging materials to rise continually?
Today, we will explore why the price of packaging materials continues to climb higher as the costs of many products also continue to soar.
Packaging Prices Increase Due To Global Supply Chain issues
Global supply chain disruptions have continued to plague consumers for months on end as the prices of many things, including food, gasoline, plastic packaging, and countless other consumer goods rise.
And while many people assume that the pandemic is primarily to blame for these issues, the truth is that various other events have compounded the continued stress on the supply chain. This has resulted in further packaging price increases.
Below, we will look at some of the most significant black swan events that have led to these continued increases year over year and, in some cases, month over month.
Packaging Prices Increase Due To The Pandemic
While COVID is only one of the problems that have led to significant hikes in packaging prices, it is one of the most important events that have caused these problems.
So it is still an essential item of consideration when we look to provide a list of reasons for these often astronomical prices.
But, how exactly did the pandemic cause packaging prices to increase? Well, it's all about supply and demand.
When the COVID pandemic was in full swing starting back around February 2020, many businesses, including those who sell the raw materials to make plastic packaging, shut down.
In some cases, these shutdowns lasted for months. However, the demand for plastic packaging only increased as months of back-orders began to pile up.
While we live through the spring of 2022, the effect of those shutdowns can still be felt as companies struggled to fill orders that continued to flow in even as they were shut down.
So, even though many producers of plastic resins and the plastic packaging manufacturers who rely on them have been up and running for several months now, many still continue to struggle to fill orders that came in during the pandemic's peak.
As such, many packaging distributors are now turning to their competitors to source the materials that they cannot find for their clients elsewhere.
With demand at an all-time high and supply still not being back to normal, we will continue to see lead times for specific products ranging from 7-14 months in some cases.
With demand, this high, plastic packaging manufacturers attempt to source the resins they need to create their products. Still, they are waiting on their back-orders from the companies who produce the resins.
And while the ripple effects of the pandemic will still be felt for months, there are other contributing factors to packaging price increases as well.
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Packaging Prices Increase Due To The War In Ukraine
The war between Russia and Ukraine has compounded the problems of the pandemic, particularly for plastic-based packaging materials.
But, you are probably wondering, how is the war in Ukraine causing packaging prices to continue to climb?
The short answer is petroleum.
You see, plastic resin is a byproduct of petroleum. And because Russia is a significant player in the petroleum industry, the war has dramatically disrupted the supply of gasoline from that part of the world.
Prices continue to skyrocket on and offshore of the United States of America. And, when gas prices increase, it's only a matter of time before plastic resin prices go up.
As president Biden has placed severe sanctions on Russian oil imports, the cost of gas and, by extension, plastic resin is once again climbing to new heights.
With the logistics complications and shipping issues we see as a byproduct of the war, this trend may continue longer than expected. This is especially true as the COVID pandemic is once again tearing through China with a significant increase in Omicron cases.
It is also worth mentioning the tariffs that are in place on goods purchased from China. Many companies buy some of their components from China and are paying a 25% premium for those items due to the tariffs. This is causing many companies to look into bringing things state side again.
However, it is not just the pandemic or the war that hamper the supply chain. Worker strikes and trucking protests have added more complications to the mix, increasing costs.
Packaging Prices Increase Due To Trucker Protests And Shortages
What eventually became known as "The Freedom Convoy" was a large protest of truckers who gathered in the hundreds for 23 days in January 2022 in downtown Ottawa.
The truckers, which included both Canadian and American drivers, were protesting Justin Trudeau's (Prime Minister of Canada) vaccine mandates that the drivers felt were an affront to their personal freedoms.
Regardless of the politics of the situation, the fact remains that the event further compounded an already burdened supply chain.
About 25% percent of food and consumer goods, in addition to packaging, ingredients, and related items, are transported by truckers across the Ambassador Bridge, which was all but shut down during the days the protests occurred.
This caused additional problems for the supply chain regarding food, packaging, and automobile manufacturers who relied heavily on the route most affected by the protests.
In addition to another trucker protest thought to be inspired by the event, many truckers all over the United States of America are striking or refusing to work.
According to the American Trucking Association, in 2021 alone, trucking companies throughout the USA had to contend with a major deficit of 80,000 truckers.
However, for the drivers themselves, the deficit is due to the hardships of the job and a general sense of unappreciation from those who rely on their skills.
It would appear that unless more truckers are offered better positions and shown the respect that they are seeking and deserve, these problems will likely persist.
And if that is the case, we can likely expect continued packaging price increases associated with these events.
Packaging Prices Increase Due To The Cost Of Shipping
When the cost of gasoline goes up, so does your cost of goods. And that goes for packaging as well.
To cover the ever-increasing costs of transportation, the cost of your packaging materials will go up when the price of gasoline rises.
You will also find that the shipping costs for your packaging machinery will also get higher as the price of petroleum goes up.
Packaging Prices Increase Due To Container Ship Delays
While one of the most substantial container ship delays ever to happen was the spectacular disaster of the Ever Given container ship, which became stuck in the Suez Canal, it is but one of many ships that have caused global supply chain issues.
With the COVID pandemic being more or less of a problem at various ports worldwide, ships are sometimes delayed by issues revolving around the virus.
Other headaches associated with the ongoing effects of the virus will continue to hinder the container ship industry. To this day, ports are struggling with solving backlog issues. These issues, which stem from the pandemic, will continue to result in blank sailings and stalled container ships sitting unloaded for weeks or longer.
How Much Does The Packaging You Need Cost?
After reading this article, you probably wonder if any supply chain disruptions have or will affect the cost of the packaging materials, machinery, or services you need.
If you have any questions about the price and availability of packaging materials, machinery, and services such as primary packaging and contract packaging, please contact one of our packaging experts.
They will be able to inform you about the availability and price increases or decreases happening within the industry and can assist you in sourcing the items that you may need.
About Nathan Dube
As the Digital Marketing Specialist at Industrial Packaging, I am honored to create content for such a phenomenal company and work with one of the greatest teams in the Packaging Industry. Whether creating a video, writing blog posts or generating other pieces of content and multimedia, I am always excited to help educate and inspire our prospects and clients to reach their highest potential in regards to their packaging processes and needs.