September 1, 2021

 

To our valued Customers:

 

6-months ago, March 1, 2021, I thought we saw light at the end of a long 2020 tunnel and shared a recap of our industry over the prior 12-months.  You could read that summary HERE if you missed the first letter.  Unfortunately, our industry remains in a sort of flux, capacity remains less than demand, causing increased lead-times, price increases and challenges in every category.

 

For nearly 3-Decades, Packaging HERO has taken a pro-active approach making communication with our customers and supplier/partners our highest priority. We believe that by sharing our industry information, we will be better positioned to provide you with both guidance and assurance, leveraging our expertise to help us all get through what we must call the ‘NEW’ normal, at least for now.

 

Corrugated/Paper Update:

 

Since the writing of the March 1, 2021 recap, we have lived through 2-additional increases, both announced through PPW (Pulp & Paper Weekly).  The 1st in March at just $ 20 per ton, then another in April at a substantial $ 40 per ton.  Depending on the manufacturer, and what contracts were in place, this hit the market for some within 30-days of the publishing date and at rates upwards of 12% when combined.

 

This past Friday, August 20, 2021, PPW announced another increase, this one at $ 50 to $ 60 per ton.  With most manufacturers wanting to implement this adjustment 30-days following the published date, and lead-times at 3+ weeks, the real increase comes with about a 1-week notice.  This is the 3rd increase over a 10-month period.  The 3-increases combined equal a $ 160 per ton and 22.4% raw materials increase since October 2020.  It is unprecedented.

 

WHY?

 

  • Demand because of a market shift in consumer buying habits. A substantial uptick in consumers purchasing goods online combined with traditional brick & mortar stores having to close their doors due to the pandemic.
  • $4.9 Billion in stimulus checks issued over the past 12-month, creating higher demand and online purchases resulting in 2020 and 2021 record box shipments.
  • Supply Chain challenges remain, causing some manufacturers to 'shut down' for a day or more at a time due to raw material shortages. Lead-times in many instances are 1-month, reaching up to 2-months in different parts of the country.
  • Shutdowns occurred for maintenance during the 2nd quarter, lowering capacity by 4-5%, with just 3-companies (West Rock, Packaging Corporation of America and International Paper) managing 65% of North American Mil capacity.
  • Non-paper expenses continue to rise, including labor, transportation, energy, and other materials.

 

 Lead-Times:

  • Custom Corrugated cartons and ‘other’ converted papers remain at 3-5 weeks, depending on the item, supplier, complexity, and order frequency.
  • Stock Corrugated cartons and ‘other’ converted papers, which would normally be available ‘next day’, are still in short supply, and expected to tighten over the next several weeks and months.

 

Price-Increases: Non-Corrugated

  • All items, from tape to stretch-film, shrink film, corner-board, and polybags are affected. The increased demand and supply chain challenges have resulted in price increase across all categories.

There will be opportunists, as there are in every crisis, that will ‘promise’ solutions to open-doors that were otherwise shut. The reality today is that “there is no magic wand” to fix an entire industry, and PLANNING AHEAD is our best defense.

  • FORECAST for your next 3-months and consider lead-times when placing your orders. 

Talk to Packaging HERO about the potential to warehouse your inventory or help to manage your orders with lead-time updates. We’re here for you – it’s that simple, and together we’ll be more successful over the long-term.

 

Sincerely,

Donald Esbjornson
Donald Esbjornson
President

  
Make you the HERO