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In simple terms, it's a classic case of supply and demand, as stronger demand from Europe and the Far East for OCC (old corrugated cartons) outpaces availability. OCC is the raw material for recycled paper, the key component of new corrugated boxes.
Consequently, the costs facing producers have been impossible to avoid, and hard to minimise. The cost of OCC has risen by some 409% since 2009 and this has led to paper cost increases of 87% with the knock-on effect of 49% on corrugated box prices.
There just isn't enough raw material to go round. Despite the efficiency of the recycling process in the UK and Western Europe, there are large parts of the Globe where board recycling is theory rather than practice.
And we all know what's happened to energy costs. Paper and board production is relatively energy-intensive, and the mills face the same market volatility that we all do.
Finally, even Mother Nature seems to have conspired against the industry. The supply of starch - a key ingredient in board manufacture - has suffered from climate-related crop failures, such as last year's flooding in Australia, with inevitable cost consequences.
And what are the prospects for the future? No quick and easy solutions, we're sorry to say. If global demand remains strong, availability will be tight and price pressure will remain, despite new production plants coming on-stream. Not until the world learns to recycle its brown boxes more effectively are we likely to see sustained stability in this volatile industry.
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At Macfarlane Packaging, we've been working closely with our customers ensuring we continue to do our level best to shield them from the impact of the increasing cost of corrugated boxes.
Using our many years of industry experience, we continue to support our customers by working with them to develop more cost-effective packaging solutions. This includes:
- Changing the product specification to reduce material content while maintaining the protective integrity of the box
- Replacing existing corrugate boxes with more cost effective alternative packaging
- Reviewing the packing process to minimise wastage, reduce labour and optimise storage
- Reducing inventory and improving cash flow by supplying packaging when it is needed
- Using the strength of our sourcing capability to negotiate with leading manufacturers in the industry, to provide the most competitive pricing without the need to compromise on quality or continuity of supply
- Investing in supply chain efficiency to minimise transportation and administration costs
Macfarlane Packaging is able to provide this service to our customers through our experienced sales teams located across the UK, working with over 600 suppliers to source the most cost effective solutions and supplying your needs from our 17 local distribution centres.
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