01 May Corrugated Price Increase on the Immediate Horizon
From our “don’t blame me, I’m only the messenger” department, it appears there is another substantial corrugated price increase headed our way. We are not in favor of an increase at a time of apparent economic recovery, but the indicators are strong enough that we feel obligated to give our customers and friends as much advance notice as possible.
$50 per ton paper pulp increase announced
Pulp and Paper announced the above increase last week and though we are getting a variety of notices and information from different suppliers, most appear to be talking about increases on boxes in the 8% to 10% range. Most also target the end of May for implementation which would immediately impact all corrugated board products at that time. However, you can count on other paper products such as void fill, paper tape and eventually mailer envelopes to also follow suit.
Justification and Recent History
“Capacity” is the usual excuse or reason most paper mills use for justifying any increase and even though capacity limitations are often times self-created, they impact the market in a way that none of us can control.
Also, this increase follows the October 2012 (8%) increase that was preceded with eighteen months of steady prices so my guess is that everyone is still playing margin and profitability “catch up” to some degree.
In addition to the obvious impact an increase has on prices and cost, it also affects lead times which ultimately can prove to be more harmful than the price increase. When very large volume corrugated users “buy in” at the lower price, that tends to extend lead time from a normal 1 to 2 weeks, to a strained 3 to 4 weeks. Perhaps even more on certain grades and types.
They only thing you can really do is make sure you have your May and early June requirements on order, ASAP, while the dust settles and this increase becomes fact or not. If the increase never happens (which we doubt) you will have a little more packaging inventory than you may need at this time. If the industry “experts” are correct, and a substantial increase happens in the next few weeks, you may be able to avoid running out of boxes.
Contact us to determine if we can help you reduce your packaging costs with greener, healthier products, even and especially at a time of fast rising prices.