Plastics trade body sceptical over rash of force majeure declarations as raw material prices soar

The Industrievereinigung Kunststoffverpackungen (IK) has highlighted price leaps of up to 30% in the cost of materials such as polyethylene (PE) and polypropylene (PP) since the start of the year.

It forecast that no end to the upward spiral was in sight, with further raw material price hike of around €150 per tonne for materials such as PE already announced for April.

More than 80% of its 300 members taking part in a recent poll said they expected raw material tariffs to increase in Q2.

The association warned member companies had reported tightening of supply - with a lack of availability of low density polyethylene (LDPE) flagged up to FoodProductionDaily.com as one example by the association’s Inga Kelkenberg.

Force majeure suspicion​

IK has also expressed scepticism over the legitimacy of a slew of force majeure declarations issued by a number of upstream suppliers – with 43% of its companies being hit by one or several announcements.

Force majeure a common clause in contracts that essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, strike, riot, crime, or an event described by the legal termact of God prevents one or both parties from fulfilling their obligations under the contract.

Association managing director Ulf Kelterborn said there was “definitely some doubt about whether all of these force majeure announcements are legally sound”.​

He added in some cases they referred to “technical outages where an unexpected outside influence is not visible”.​

Kelkenberg confirmed there was growing concern that some suppliers could be holding back material to force prices up further in the hope of boosting their profit margins.

Such actions could have negative price consequences that would ripple across Europe, she cautioned.

The association said it could not comment on whether these conditions would lead to its members putting up their own prices in a bid to pass on the raised overhead costs.