22 Apr GIPSAC Press Release: Situation of raw materials and energy in the paper bags industry
GIPSAC (Italian Group of Large Content Paper Sack Manufacturers) has decided to inform in details about the serious issues related to raw materials costs and transformation costs of the sector which are affecting the whole industry significantly. Over the last few months, all producers have seen a real escalation of all the costs related to their production process and raw materials. In this existing very complex scenario, the ongoing conflict between Russia and Ukraine has worsen even more the situation sharpening problems especially across Europe.
The price of gas has reached an unexpected level in Europe and it is so high that is forcing numerous energy-intensive industries to stop production because they are unable to bear the costs. In particular, the cost of gas has a major impact on the paper production process. As a matter of fact, in many cases, the increases connected to the higher energy costs have already been applied to market prices of raw materials. You can collect information on the Dutch TTF gas futures on the site: https://www.theice.com/products/27996665/Dutch-TTF-Gas-Futures/.
The price of electricity continues to rise very fast. The current estimate for 2022 clearly shows that this very high cost level will remain in the market throughout the current year. All paper bag converting productions are operations based exclusively on the consumption of electricity. It’s possible to collect information on the PUN Index (Single National Price) and its trend on the site public http://www.mercatoelettrico.org/.
The recent sudden increase in oil price and the introduction of the Mobility Package by the European Commission are creating strong tensions in the logistic distribution chain of products. There is a shortage of drivers and consequently costs related to movement of goods are increasing considerably with a significant impact on the transport costs of Italian producers of paper bags.
Raw materials – Paper
The situation was already very tense in terms of raw material availability, but now it has worsened further due to the Russia-Ukraine conflict. The pre-existing significant imbalance between demand and supply of raw materials on the market has worsened further due to the closure of paper sales and distribution channels coming from paper mills located in the north of Russia. The scarcity of raw materials, significant delays in deliveries, sudden, frequent and consistent price increases are creating problems unknown until today in the world of paper sack production.
Raw materials – Plastic
All the increases in energy costs are also affecting the plastic market which has registered several price increases. It is a triggering scenario, similar to the one already seen in the first half of 2021 with weekly price increases.
Raw materials – Colours and glues
All chemicals such as inks and glues are being influenced by these scenarios and they are experiencing continuous price increases. Also natural corn starch or potato glue, both widely used for the production of sacks, has recorded a very strong price spike earlier this year.
The conflict between Russia and Ukraine is affecting the wood market and especially wood pallets that are required to transport and deliver the bags. The cost of wood is once again increasing considerably due to due to the lack of wood imports from Ukraine. You can collect information on the cost of wood index on the site: https://www.federlegnoarredo.it/it/servizi/ Osservatorio-mercato-legno/mercatoimballaggi/indice-prezzo/indice-prezzo.
A situation as explosive as the current one, never recorded in so many years of history and work, could lead to numerous problems in the supply of bags; companies in the industry will try to implement the best defensive policies by intensifying their exchange of information with their customers who in turn should try to plan their orders with a long-term approach.
[Source: GIPSAC, 4th April 2020]