March 1, 2021

To our valued Customers:

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 hope will be a short-term 'bump in the road’.

2020 Packaging Re-Cap:

• In April 2020, we saw lead-times begin to increase in all categories, but primarily custom-corrugated boxes and ‘other’ converted paper products.

o    Due to increased demand, primarily e-Commerce related shipments

o    Due to Covid shut-downs, manufacturing infections, and reduced capacity

• In October 2020, lead-times were being extended in traditionally ‘stock’ products, from 1-day to as much as 1-week, with some items being ‘sold out’ without solid lead-time data to share.

o    E-Commerce shipments continued to outpace available sources, causing custom corrugated lead-times to extend to 4+ weeks depending on supplier, item, and quantity

o    An industry-wide price increase was announced in late October

• In December 2020, rolling into January 2021, price increases had taken effect, with no slowdown in demand, further impacting capacity and lead-times.
• In January 2021, West-Rock (2nd largest producer of paper/corrugated materials in the US) publicly announced that they had been attacked with a RansomWare, which effectively reduced their capacity by 40% for nearly 3-weeks.
• In February 2021, Atlantic Paper, Schwarz and Cascade were also attacked with a cyber virus, affecting the entire paper-supply chain in the US.

o    During the week of February 15, 2021, several producers of paper/corrugated materials announced a 2nd increase, this one at $ 60/ton (up to 12%) effective with shipments as early as March 1, 2021.

o    In February 2021, the snow and temperatures impacting the South, namely Texas, effectively shut down major producers of poly-resins, affecting lead-times for pending shipments of packaging items, including stretch film, shrink film, tape, plastic bags, airbags, etc.

o    Price increases in this ‘plastic’ category had already begun but will likely cause further increases to be announced.

Lead-Times:

• Custom Corrugated cartons and ‘other’ converted papers remain at 2-4 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.
• Plastic / Petroleum Based packaging, due to the storms and damage that has hit Texas and other Southern states has affected resin producers, which may increase lead-time for raw materials and finished goods.

Price-Increases: Corrugated

• The December 2020 increase in corrugated-related products was based on a $ 50/ton announcement by the Pulp & Paper Weekly Index, resulting in a 7-10% increase in finished goods.
• In February 2021, major sources, including Packaging Corporation of America (PCA) announced a 2nd increase of $ 60/ton, with plans of a 12% increase effective with shipments as early as March 1, 2021.

o    This will further impact lead-times with ‘forward buying’ by those who have the space and cash flow to take advantage of ‘pre-increase’ pricing levels.

• Although the March 2021 Increase is not yet effective, major producers hint at a 3rd increase in the coming 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 in an effort 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