"For several weeks now, manufacturers of rigid and flexible plastic packaging have been experiencing serious difficulties in obtaining their supplies of raw materials", warns Elipso, the professional association that brings together plastic packaging manufacturers in France. These problems concern the main virgin plastic resins, such as polypropylene (PP) or polyethylene (PE), but also more specific resins like certain ionomers (such as Surlyn) or ABS (acrylonitrile butadiene styrene), which are also widely used to manufacture plastic cosmetics packaging.
Price increases and shortages
According to Elipso, between May 2020 and February 2021, prices for PP and PE rose by 30%. As for ABS, its price has increased by more than 60% in one year, according to Polyvia, the French Union of Polymer Transformers.
"In practice, all plastics are concerned," confirms Florent Tronquit, VP Supply Chain at Albéa, the French beauty packaging giant. "But beyond that, almost all raw materials are under pressure, including metals," he adds.
"Our suppliers keep announcing price increases with immediate effects," also testifies Vincent Joffre, Sales Director at PRP Création.
This situation has its roots in the health crisis and the 2020 lockdown measures and the subsequent fall in global demand. "Some polymer producers, who had large stocks at the time, made the logical decision to reduce their production," explains Polyvia. But the rapid recovery of China, which was deconfined earlier than the rest of the world, led to an unexpected rebound in demand for polymers, which was associated with a sharp rise in prices.
"As a result, the flow of materials was massively redirected to Asia," observes Rémi Weidenmann, Executive Director of the PSB Industries Texen Group.
This already tense situation was compounded by the disorganisation of logistics chains, resulting in a shortage of containers and a sharp rise in transport costs and deadlines. Finally, several incidents at key sites resulted in production stoppages and declarations of "force majeure".
Cash positions under pressure
Hence, plastics converters were faced with untimely delivery cancellations and sharp price increases. "Plastic packaging manufacturers struggle every day to ensure the delivery of packaging to their clients. They must constantly reorganize their schedules and production processes according to the latest information received, or even postpone deliveries when they cannot do otherwise," indicates Françoise Andres, President of Elipso.
For the moment, in a context of still moderate demand in Europe, producers in the cosmetics sector have managed to withstand the situation. "Up to now, we were able to find the raw materials we needed, but we were on the verge of discontinuing some specific productions in January," confirms Rémi Weidenmann. "After the drop in demand in 2020 and in a context of low visibility, we had, like everyone else, very low stocks."
"We were able to satisfy orders because the PET market is a little less tight. On the other hand, the research and testing work we had carried out on alternative ecological materials was suspended due to the lack of these materials, even though they are promoted by polymer manufacturers," adds Vincent Joffre.
These raw material disruptions come at the worst possible time for European packaging manufacturers, who are already heavily impacted by the collapse in demand in 2020.
"Securing production means raising stock levels, which has a significant cost at a time when cash positions are under pressure," stresses Florent Tronquit. "This crisis comes at the wrong time," adds Rémi Weidenmann.
A need for visibility
In this context, both trade associations, Elipso and Polyvia, are asking polymer manufacturers to show full transparency to guarantee the visibility that packaging producers need on the availability and supply of resins. With a major understatement: the destabilisation of the markets must not be exacerbated by players eager to increase their margins. For Polyvia, the current situation recalls the precedent one, when in 2015, raw material suppliers had been blamed for taking advantage of a "momentary shortage" to impose contracts "with no possibility of negotiation."
Processors are also calling for more solidarity throughout the sector. "At Albéa, we are in constant contact with our suppliers and clients, in a context where forecasts are particularly unreliable," says Florent Tronquit. "The general trend is to not commit too much for the future; the different players are in a phase of growing awareness of what is at stake."
"Broadly speaking, we have much less visibility than before, with shorter and less precise forecasts," observes Vincent Joffre. "Our clients seem to want to narrow down their range to focus on blockbusters, which may make the recovery smoother," he adds.
"The more visibility we have on our future orders, the more manageable the situation will be," explains Rémi Weidenmann. "We are happy to have completed the reorganisation of the group and to have given Texen a global organisation that gives us a vision of the market that is crucial in the current period."
While uncertainties about the emergence of virus variants and the speed of vaccination campaigns make forecasts difficult, Polyvia expects tensions to ease in several markets, particularly as production is ramping up in Asia.
To be continued!