Polymer price hikes set to push packing costs even higher

By Ahmed ElAmin

- Last updated on GMT

Related tags: Cost, Plastics

Amcor, the world's largest producer of PET, is pushing for a third
round of price increases this year, while a report forecasts
polymer prices are set to hit new highs next month.

Plastic is made from hydrocarbons derived from petroleum or natural gas. With the rising prices for both inputs, plastic producers have slowly been passing on the costs to packers.

The price hikes will continue to translate into higher costs for food processors' packaging operations and hit their bottom lines. Some polyolefins prices have already risen by 20 per cent thismonth, with more hikes expected, according to European Plastics News.

The proposed price hikes were confirmed by Amcor, whose chief executive told shareholders yesterday that the company has instructed its global sales force to seek price increases.

PET is widely used in soft drink bottles. Amcor chief executive Ken MacKenzie said in a statement that the company was "determined to get 100 per cent (cost) recovery"​ and wasprepared to sacrifice volumes.

This year has been one of the most difficult years ever experienced by the packaging industry, he said.

"In many respects it was the perfect storm, with large cost increases on the supply side and slowing economic conditions on the demand side,"​ he stated.

In a similar fashion, PET resin costs have also experienced substantial increases due mainly to a shortage of feedstock components, resulting from the hurricane damage in the US, he noted.

The packaging industry is not in a position to absorb the cost increases of resins, energy and transport costs, he said.

"This is the third wave of cost increases over the past twelve months and it will be imperative that costs are fully recovered in a timely fashion,"​ he stated.

Meanwhile European Plastics News reported that in October, prices were settled without much discussion with plastic producers and suppliers adopting a 'take it or leave it' attitude. Converterswere keeping stock levels low with prices at such unprecedented levels.

The price hikes will continue to translate into higher costs for food processors' packaging operations and hit their bottom lines. Some polyolefins prices have already risen by 20 per cent thismonth, with more hikes expected, according to a report this week by European Plastics News.

"Supply tightness and rising feedstock costs sent Western European standard thermoplastic prices soaring this month,"​ the journal reported. "There were shortages for bothmonomers and polymers in most sectors, while the price of plastic additives also moved up sharply."

Polyolefins registered the largest gains, with L-LDPE (linear low-density polyethylene) and HDPE ((high density polyethylene) prices rising by 20 per cent over September levels.

LDPE is used to make bottles that require flexibility. To take advantage of its strength and toughness in film form, it is also used for shrink and stretch film and as coating for milk cartons.HDPE is used in milk, juice and water containers in order to take advantage of its protective barrier properties. Most five gallon food buckets are made from HDPE.

PP (polypropylene) prices also had similar gains. These price hikes were underpinned by increases of €185/tonne and €170/tonne for the Q4 ethylene and propylene contract prices, the journalreported.

PP is used for making caps and lids. Because of its high melting point, PP can be hot-filled with products designed to cool in bottles, including ketchup and syrup. It is also used for productsthat need to be incubated, such as yogurt.

PVC (polyvinyl chloride) prices rose by about 10 per cent. As a film, PVC is used for packaging fresh meats that require oxygen.

Polystyrene prices rose by up to three per cent. The plastic is used for making packaging such as meat trays and egg cartons.

In November, plastic producers will be asking for price increases in the order of €50-100/tonne, the journal forecasts.

"They maintain that further price increases are necessary to make up for unsatisfactory margins earlier in the year,"​ according to the report.

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