In July 2008, Flexible Packaging Europe said soaring raw material prices, including hikes in polymer costs, as well as rising transport and energy tariffs were “threatening the financial backbone” of the industry.
Changing economic headwinds
Now, 12 months on, the organisation, which represents 75 per cent of European flexible packing production, has said that while the nature of the economic headwinds have changed, the severity of those difficulties remain as acute.
Last year, flexible packing companies were struggling to come to terms with record high polymer prices, a slow-down in supply caused by production maintenance programmes at many polymer production plants, as well as climbing energy and transport charges.
A subsequent steep drop in polymer prices and oil may have eased those cost pressures but they have been replaced by the fallout from one of the severest global economic downturns in recent memory.
One industry insider told FoodProductionDaily.com: “The pressures caused by raw material price increases in the third quarter of 2008 have eased with polymer prices dropping on average by around 40 per cent. However, 12 months on pressures continue and, while they are different pressures, there is still concern within the industry.”
While not as severely affected as other industries, the financial crisis has partly arrived in the food sector, said the expert.
The worldwide recession and the resulting insecurity means that companies all along the supply chain – polymer producers, packaging suppliers and food producers- are keeping stock levels low, said FPE. Consequently, orders received by flexible packaging firms are tending to be smaller in volume with shorter lead-in times. This in turn is making it more difficult for companies to plan, he added.
“The global economic recession has created uncertainty throughout the flexible packaging industry resulting in lower stock levels all along the supply chain, reduced order volumes and shorter run-in times,” he told FoodProductionDaily.com. “In general and depending on the various markets served by the flexible packing industry we see lower growth rates.”