Plastic price hikes to be passed down packaging supply chain

By Rory Harrington

- Last updated on GMT

Related tags Raw material Cost

UK plastic processors have warned that soaring raw material costs will lead to significant price increases for the their products, while a leading packaging body said higher costs will inevitably be passed down the supply chain.

The British Plastics Federation (BPF) served clear notice yesterday that increases of up to 80 per cent for some plastics over the last two years would mean that sectors such as packaging should expect to be hit by further price rises this year.

''Some grades of polyethylene and polypropylene have increased by 70 per cent and 80 per cent respectively since January 2009,”​ said BPF director-general Peter Davis.

He added that in the last 12 months alone polypropylene registered a 40 per cent increase, while polystyrene prices had almost doubled since January 2009.

''All product sectors, be they plastics building products for construction and infrastructure projects, packaging for food distribution or technical components for the automotive and aerospace industries, have been hit and desperately need to pass the increases on to maintain viability''​, said the trade body chief.

Dick Searle chief executive of The Packaging Federation, in the UK, said packaging manufacturers have been faced with unprecedented raw material costs across the industry.

“When you have rises in the tens of per cent, that’s not a level of increase our industry can afford or absorb, particularly as raw material purchases can represent up to 50 per cent of the cost of the product,”​ he added.

Searle indicated that faced with such raw material hikes packaging producers would also have no option but to pass such cost increases on in order to stay in business.

Macro factors

The BPF said rising oil costs and “a long-term, structural, rising trend in commodity prices”​ globally were the underlying causes of price rises.

''We have seen considerable press coverage devoted to food price increases and the cost of metals but less obvious are the changing economics of plastics''​ added Davis. “We use almost five million tonnes annually in the UK and plastics underpin our daily life. Some lighter crude oils are now trading at over US$100 / barrel and this increase will feed its way through to all petrochemical-using industries of which plastics is one''.

He added that supply had tightened further in the face of some declarations of ‘force majeure’ by raw material producers facing technical problems in ramping up output after production cutbacks introduced during the recession.

Another factor was the lack of European-based cracker facilities in the face of the concentration of new investment in the Far East and Middle East where growth and demand is higher.

''We have pointed out to the UK government the implications of this for the long term security of supply of strategically important industrial raw materials​”, said Davis.

Related topics Processing & Packaging

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