With the holiday shopping season coming, many merchants start to prepare the goods to meet the arrival of various holidays in the second half of the year. But facing the complicated current affairs and unfinished COYID-19 pandemic, Why do merchants have to buy packaging as fast as possible?
Rising prices of packaging raw materials
Since the beginning of 2022, the pulp market has been in short supply due to unplanned plant shutdowns, low inventories, strikes and logistical constraints, leading to continued price increases. Although demand from the Chinese market has weakened, demand from paper manufacturers in Europe and the United States is still very strong, as the growing demand for paper has led to a shortage of pulp supply and paper prices have repeatedly hit record highs.
In terms of market prices, Bleached Eucalyptus Kraft Pulp (BEKP) prices from Latin America to China have risen from $600/t in December 2021 to $860/t in May 2022. However, increased supply from Latin American producers and potentially weaker demand from paper companies due to profit pressures could lead to lower pulp prices towards the end of 2022. The average price for Fitch’s 2022 BEKP is $700/t, compared to $677/t last year. Sales continued to be strong due to insufficient supply for spot transactions. The upward price trend is not over yet and another round of global price increases is expected to take effect soon. Mainly affected by the fundamentals of the supply market, BEK suppliers in Latin America announced a new price increase in June, with a price increase of $30/ton in China, a price increase of $50 in Europe, and a price increase of $60 in North America. The uptick has set new target prices for BEK pulp in Europe and North America at $1,350 a tonne and $1,580 a tonne, respectively.
Judging from the news, Susano Paper and Pulp Company, the world’s largest pulp producer headquartered in Brazil, recently warned that global pulp stocks have been falling sharply and supplies are facing shortages, which may lead to the shortage of essential products such as paper towels and toilet paper. The price will rise in the future.
For this “pulp supply shortage” news, the market generally believes that this may be the main reason for the recent sharp rise in the paper sector.
All in all, The rise in raw materials will also put more pressure on the supply chain, and it is a wise choice to prepare early.
The dropping of Shipping cost
With the gradual improvement of the epidemic situation since June, the freight rates of sea containers and road transportation have shown a downward trend.
Recently, a number of international freight forwarders (hereinafter referred to as “forwarders”) said that the latest quotations obtained from shipping companies show that the current freight rate of 40-foot-high containers on the US-Western route is around US$7,000, which is directly halved compared to the freight rate at the beginning of the year. , the price of this route has gradually decreased by 500-1000 US dollars in the past six months. The freight rate of 40-foot-high containers on the US-East route is around US$11,000, a drop of nearly 40% compared with the beginning of the year. The freight rate of 40-foot-high containers on European basic port routes is around US$9,800, which is about 20% lower than that in April and May. Affected by factors such as inflation, freight rates on European and American routes continued to decline
Since the beginning of this year, the freight rate of the US east route has started to decline, and the freight rate has dropped significantly since May and June. Taking a 40-foot-high container as an example, the latest quotation in July basically dropped by nearly 40% compared with the beginning of the year.
In preparation for major festivals such as Thanksgiving, Black Friday and Christmas, the company’s export volume will increase significantly after July, and it will be shipped to the US company and then sold to customers. At present, several large shipowners have a tendency to reduce freight rates , it is expected that there will be a more obvious decline in the freight rate of the east line of the United States from the end of July to the beginning of August.
According to the global shipping market dynamics released by the logistics company Dexun on July 20, the inflation rate in North America continued to rise, the purchasing power of the people declined, and the unsalable inventory led to a decline in North American import demand. There will be an increase in blank sailings on North American routes in the next two weeks. The market freight rate will be basically maintained until the end of July, showing a slight downward trend.
Containerized imports are expected to fall 6% in August from May, according to the latest data from the National Retail Federation. With signs of lower demand and a significant advance in peak season orders, the NRF forecasts September and October Containerized imports will fall even more. Despite some cooling in the month, current monthly peak season volumes will still be 13% to 15% higher than in 2019.
To sum up, the freight price has dropped, but the order volume is still on the rise. Prepare the order as soon as possible, take advantage of the trend of price reduction, and transport the goods earlier to avoid the risk of congestion.
Shortage of supply chain
Since the COVID-19 outbreak in 2020, the supply chains of various countries have been severely impacted. Factors such as rising energy and raw material prices, transportation difficulties, declining consumption power, inflation and other factors have put the supply chain into crisis for a time.
Known as a “new global factory”, Vietnam has closed more than 70,000 factories in just half a year, and this year has ushered in a wave of unemployment. while China, a major manufacturing and production country, has closed down more than 460,000 factories from the start of the new crown epidemic in 2020 to the first half of this year. This year factories are facing holidays and layoffs. Nearly 3,000 factories in Brazil have closed down.
For the packaging industry,on the one hand,the upstream pulp mills are affected by the price of raw materials, but the prices are higher than those of the midstream paper mills, resulting in a price inversion.
On the other hand, as the impact of price increases has not been transmitted to most end consumers,midstream companies are under pressure to increase prices. Upside down prices and a lack of downstream orders have led to paper mills and printing plants closing down or shutting down production, the number of factories reducing, while the number of orders in the purchasing season has increased rapidly. Under the situation of shortage of manpower and material resources, large-scale factories have accumulated orders. At this time, it is a race against time.
Whoever orders early, the goods will be delivered quickly, catch up with the wind of falling freight, and deliver the goods to the warehouse as soon as possible to prepare for the arrival of the holiday.
Whether it is the impact of raw material prices on the supply chain or the trend of lower shipping cost. Order early, make early, ship early, and get goods early.
