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Manufacturing Technology Insights | Monday, September 05, 2022
Europe's flexible packaging supply chain has been hit with challenges. Energy and raw material prices were already high but surged even further after the beginning of the war in Ukraine. Those increases, combined with availability issues, have severe financial impacts on Europe's flexible packaging supply chain.
FREMONT, CA: After the start of the war in Ukraine, prices for energy and raw materials, which were already high, skyrocketed even higher. Challenges with availability have significantly adverse financial effects on Europe's flexible packaging supply chain. At Flexible Packaging Europe, the industry represents the interests of 80 companies and manufacturers. Aside from the common flexible packaging materials like plastic, paper, and aluminium, adhesives, lacquers, and inks are also an issue. High energy costs affect the sector's direct activities, including the production of flexible packaging and logistics.
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Due to the low product-to-packaging ratio of flexible packaging and highly efficient transportation, the cost share for logistics is lower than in other packaging sectors. The rise is significant in absolute terms. There is even a possibility that the amount of logistical capacity may decrease due to businesses discontinuing their operating activities due to high diesel prices.
With the exception of beverages, nearly half of Europe's fast-moving consumer goods (FMCG) are packaged in flexible packaging. Examples include all varieties of packaged meals, including pet food, personal care items, home goods, and pharmaceuticals and medical supplies, all of which rely on flexible packaging. Although it is still too early to estimate the full extent of cost rises brought on by this situation for producers in the flexible packaging sector, they are confident that the peak has not yet been achieved.
Global demand for all raw materials has surged due to the COVID-19 economic recovery, according to PackagingInsights, across all industries. However, the value chain is facing difficulties because of problems with the availability of polymers. Ongoing issues with raw material availability, according to Flexible Packaging Europe (FPE), could endanger the steady supply of goods, including food, medicine, and pharmaceuticals.
The situation for polymers has become more difficult due to several force majeure and maintenance notifications. A general material shortfall has been established in the aluminium industry as a result of the global recovery of production in the automotive and other transportation, construction, and rigid packaging sectors mixed with decreased primary capacity. The challenges are made worse by the shortages in both international and European transport logistics. The continuous lack of raw materials and the escalating cost of plastics have also been warned about by IVK Europe (the European Plastic Sheets and Films Association).
Historic Demand for Raw Materials
Over the last six months, rates for all raw materials used in flexible packaging have increased historically. Examples of these abrupt changes include a spike in demand for polyethene resins of more than 130 per cent, approximately 70 per cent for BOPP film, and 18 per cent for aluminium foil.
In addition, shipping costs to and from Europe by water as well as for land transportation within Europe skyrocketed. All industries are affected by the significant increase in prices across all materials, not just the flexible packaging sector. The primary cause is the immediate and simultaneous recovery that occurred in all countries and most industries at the conclusion of the pandemic. The precarious condition could be promptly exacerbated by any unanticipated event, such as seaway obstructions, production outages, and other adverse events.
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