UK factors including the aftermath of Brexit and introduction of a new National Living Wage, the container board, sheet feeding and box markets look to be inevitably impacted.
There are several factors at work in the 2017 corrugated industry that are sparking predictions of future price increases. With the UK already experiencing the effects of Brexit on the Pound and the introduction of a new National Living Wage, the container board, sheet feeding and box markets will inevitably be impacted.
Most within the packaging industry have been forced to keep a watchful eye on any rising costs, whilst staying viable and remaining competitive for their customers. Here are a few of the reasons for these changes in the industry…
The aftermath of Brexit
Despite the results of the referendum, the UK’s economy is predicted to grow this year according to the Bank of England by 2%, and this growth means a demand for more boxes. As a trading nation, the UK looks like it will experience another relatively stable year of exports and therefore a steady growth in boxes sold to industrial sectors. However, the one-off inflationary shock that followed the Brexit vote caused a 17% devaluation of sterling and this will unfortunately continue to ripple through the packaging supply chain.
Rising costs for employers in the UK
The introduction of the new National Living Wage in the UK is set to cause a few ripples of its own. The wage for 25s and over will rise from £7.20 to £7.50 an hour from April 2017 following Chancellor Philip Hammond’s Autumn Statement. By 2020 this is set to rise to £9. The good news is the change will leave earners £500 better off per year, but with labour costs being forced to rise many box plants find themselves running at a loss or at best breaking even.
Recent events in the containerboard industry
The demand for containerboard in Europe is extraordinarily high for this time of year and those in the paper making industry, whose paper mills are bafflingly full, are understandably confused as to why this is happening. Rising OCC (old corrugated containers) costs, scheduled maintenance across European paper mills, the closure of significant Chinese containerboard capacity, and a major issue at a UK kraft liner which lead to a loss of 250,000 tonnes of output, are all contributing to rising costs throughout the industry.
Those paper makers that have been suffering losses need to find ways to sustain and can recognise an economic opportunity when they see one. This means hastily written price increase notifications were sent out. Of course, this rising cost then makes its way through the chain and in order to maintain supply from a stable, secure company whilst containerboard is short it may become necessary to pay more to secure it.
Concerned? Get in touch
Here at Swiftpak we are fully committed to working closely with our customers to provide the most cost effective packaging solution. Although we have thus far avoided increasing our prices, if you are concerned about the rise in packaging costs then don’t hesitate to get in touch. We can offer expert advice on reducing costs in your business and improving your current packaging operation.