Prices soar as oil costs hit

Amcor, Chesapeake and RPC Group were among at least 13 companies to announce they would be raising, or trying to raise, their prices to mitigate the acute pressure of escalating costs currently facing the sector.

Companies announcing the rises came from all disciplines of packaging, including converters, cartonboard producers and plastics firms (see box).

“The simple fact is it is just not possible for packaging manufacturers to absorb rising input costs indefinitely,” said Nicholas Mockett, packaging specialist at Europa Partners. “Raw materials for all packaging have gone up.”

The inflation-busting increases of up to 15% have been made even more pressing by the recent hike in transport costs. Ron Marsh, chief executive of RPC Group, highlighted a 16% rise in logistics costs since the start of 2008 alone as a key driver for the rises.

The main driver behind the input cost rise has been the soaring price of oil, which has reached record levels of over $130 (£65) a barrel, affecting both energy and, crucially for plastics firms, resin prices.

Mike Arrowsmith, chief executive of Linpac, said a continued increase in polymer prices would leave the plastic packaging group “no option” other than to pass these on to customers. “No supplier likes to increase prices,” he said. “We work closely with our customers to lessen the impact.”

Bob Houghton, UK marketing manager for cartonboard manufacturer Chesapeake, said the UK packaging market was being “squeezed from all sides”. “Sterling has weakened against the euro, meaning firms have had to pay surcharges on imported materials to recover exchange rate differences,” he said.

The disparity between energy costs in the UK and elsewhere in Europe is also a concern. Packaging Federation chief executive Dick Searle said premiums in this country could lead to firms moving overseas.

“You’ll get the situation where the UK becomes uncompetitive, and could lead to a reduction in jobs and an increase in imported manufactured products,” he said.

Prices: going up…
Amcor Undisclosed price increases from 1 August
BASF Styrolux prices up by €150 (£120)/tonne
Chesapeake Around 10% rise on sales prices
Dow Emulsion Polymers €120/tonne rise on styrene butadiene and styrene acrylate latex
Graphic Packaging $50 (£25)/tonne hike on recycled board
Iggesund Paperboard $100/tonne increase on Incada and Invercote
M-real “Definite need to increase prices”
MWV “Going after price increases”
Pregis Further increases planned for September
Rock Tenn $50/tonne increase on recycled paperboard
RPC Group Up to 15% rise on full selling prices
Smurfit Stone Containerboard and box prices up by $55/tonne
Sonoco $40/tonne surcharge on uncoated recycled paperboard

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