Skyrocketing oil prices are leading raw-materials suppliers to apply similar dramatic increases to their products. On the 1st of July, polyethylene prices reached EUR 1375 per ton, an increase of EUR 200 compared to the previous month (+15%). In parallel, the price of polyethylene terephthalate reached EUR 1570 per ton (+10%). According to the CSEMP as polymer producers will intensify efforts to restore margins, price increases are likely to carry on, in particular for ethylene and polypropylene.
These price increases appear much above the average profitably of the industry. “Should manufacturers of plastic packaging absorb the entire cost increase, the industry’s profitability would become negative and fall to -1.5% in 2008, against +2.5% in 2007,” states the CSEMP.
As energy and transport costs are on the same uptrend, it is no surprise that the cash flow of some companies is harshly impacted.