Pay up or shut up

24 June 2002

Materials prices up. Availability down. If you have been in this industry for a decade or so I can hear you saying: "Here we go again?" Nothing seems to stop the cyclical nature of polymer and paper prices. On each occasion they eventually tumble – for first timers, the one ray of hope is that they always do – and on each occasion converters breathe a sigh of relief, say "never again" and then forget about it all until the next time round.

It certainly does seem to be happening again. UK associations Plastics and Industrial Films Association (PIFA) and more recently the Flexible Packaging Association (FPA) both report being hit by supply shortages, extended deliveries and price increases. Polymer producers have been sending price increase notices out since the turn of the year and more recently news of increases in kraft liner prices have been filtering through. I'm told that the main areas for concern in films – the converter's stock - are all grades of OPP, PE and polyester. In the UK, PE and PP resin rose by around 30 per cent between January and the beginning of last month. More is forecast for this month.

In each past cycle – certainly the last couple, the main cry from converters is their lack of clout when it comes to passing on the problem – in other words, to increase their own prices. Meat in a sandwich might offer the quality, but when it comes to being squashed by the bread producer and user it is not a pleasant position to hold.

Could this time be different? There is no question of the position of Amcor Flexibles, one of the globe's leading producers. During Interpack just a few weeks ago, I listened with interest to chief executive Graham James as he made it quite clear that unprofitable plants in the rapidly expanding empire would be closed, not sold. Clearly low cost production is one of the goals. But there is an element of 'if customers do not pay up, their suppliers might shut up' in the philosophy too.

Take it to the end game and you have the position of large users suffering shortages and price hikes.

A pipe dream? We'll see next time round.

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