Label and Packaging Market Watch

              1st Quarter 2021

                                                                                                                        By: Chris Doerr

This is a report of current market trends in labeling and related industries such

as shrink sleeves and flexible film. There are many ingredients involved

in the manufacture of labels including paper, polypropylene, acrylic acid,

silicone, pigments, and bleaching agents.

 

• There is no index or prescribed method to determine raw material costing.
• There are only a handful of suppliers that control the market.
• Inflation is almost always present across all raw material inputs.

Prices are currently going up 3-8% due to the following quoted factors:

• Global supply of polypropylene, acrylic acid, and related adhesive chemical feedstocks.
• Demand for packaging materials is growing and supply has not kept pace with demand.
• Transportation costs have increased due to increasing wages and shipyard loading dock worker shortages due to COVID quarantines.
• The Texas power outage took major chemical refineries off-line; however, the electrical outage created numerous maintenance and re-fire issues that have led to weeks of delays in a market that was already at full capacity.
• The Suez Canal blockage has global shipping freight sitting at sea and slowing down the supply chain.

Factor #1:    The BIG 6 raw material suppliers.    All have raised prices from approximately 3% – 8%.   2 have claimed Force Majeure:

Factor #2:     Paper costs.     NBSK Paper was $875 per ton in 2017.   It is now $1,220 per ton as of  March 17, 2021.

Source:  PaperFirst.

Factor #3      Plastic resin costs have increased substantially

due to global demand for smart phones,

flat-screen tv’s and monitors, and the TX

power outage created for long shut-downs

affecting 80% of the USA market.

Source:  Plastics Today

 Factor #4:   Platinum costs in the manufacture of silicone for release agents.

Currently trading around $1,200 per ounce vs. around $950 just 2 years ago at the time of the last major increases.

Source:  Kitco Metals

Factor #5:  Acrylic Acid and adhesive feedstock chemicals.   Global acrylic acid market share is dominated by BASF, Arkema, Dow Chemical and Nippon who accounted for over 45% in 2014. The industry is moderately consolidated in nature and moving towards developing acrylic acid from bio-based feedstock.

Source:  Grandview Research- Acrylic Acid Market Size Worth $22.55 Billion By 2022

                                                                                                             Source:  Echemi March 31, 2021

Factor #6:   US Dollar exchange rates against the Chinese Yuan and Euro dollar.   A weak dollar buys less in the global market and thus contributes to higher prices.    In 2017, one US dollar bought 1.179 Euros, today one US dollar only buys .85 Euros.     The US dollar has weakened compared to both Chinese and European currencies.   Source:  X-Rates.com

Factor #7:  Overall inflation.  This is a critical factor!   The cost of all goods and services continues to steadily rise year over year.   The Bureau of Labor Statistics shows that the Consumer Price Index is at an all-time high of 263.014.   This means that the same basket of goods that was at $100 in 1982-1984,  is 2.63X higher.

Source:  Consumer Price Index – Bureau of Labor Statistics  data.bls.gov

 Factor #7 continued. More inflation.  The Producer Price Index for papers and packaging has increased over the last 18 months:

 Factor #8  Rising freight rates.  It’s not just the cost of freight to ship to you, it’s the cumulative freight costs within the entire supply chain from the chemical factory; to the paper mill; to the coating facility; to the converter.   Ground freight costs are up 12% vs. a year ago according to FreightWaves.com.     Container costs have increased from $2,200 to $4,000 in the past year.    Sources:  www.freightwaves.com and The Economist.

 The above information is helpful in gaining an overall understanding of the many cost-factors involved in the layers of the pressure-sensitive adhesive “sandwich”.    Each of the 7 layers outlined below has its own supply chain.  There is no index that captures the complete cost variables within each.    We do our best to stay on top of the trends to be at the forefront of appraising you of forecasts.    Please call us at 317-627-4894 if questions.

 

Sources:

• Kitco Metals
• Paper First
• Plastics Today
• Grandview Research
• X-Rates.com
• Bureau of Labor Statistics
• Freight Waves
• The Economist
• Echemi
• StLouisFed.org