Raw material price increases threaten smaller packaging companies

By Katie Nichol

- Last updated on GMT

Related tags: Material

Smaller cosmetics packaging companies are being particularly hard hit by rising raw materials costs due to climbing oil prices and high demand for certain materials.

Indeed, the continuing pricing pressures could prove fatal for these businesses unless they choose strategies to fight back, according to Euromonitor International's head of global packaging research, Benjamin Punchard.

“Raw material prices for plastics have risen due to increasing oil prices and oil supply instabilities, high demand for metals has driven up prices, and the high energy use in producing containers makes this packaging material sensitive to energy prices,” ​Punchard told CosmeticsDesign-Europe.com.

In some cases, packaging companies have agreed to indexed pricing, enabling them to pass the costs directly onto their customers, said Punchard, and in other cases, they attempt to absorb the costs in order to remain competitive.

Recycled materials also increasing in price

The packaging supplier Promens has said that all raw materials are rising in price, even the price of recycled materials, which follows the market demand.

The company says it is committed to integrating sustainability into product development, and in 2007 introduced the Green 3 program, which centres around three areas: product design, responsible manufacturing and recycling.

In this way, Promens looks to develop products that use less material or less energy-intensive manufacturing processes, which can lower production costs and in turn help to compensate for rising raw material costs.

“We fight against raw material price increases by developing low CO2 emissions products (lighter products, choice of materials, using PCR)”​ a Promens spokesperson said.

RPC passes on polymer increases

The French plastics and flexible packaging manufacturers’ association Elipso has noted that European PET prices (per tonne) increased 25 per cent between January 2010 and January 2011, while PP prices increased 32 per cent.

One of several companies to have passed price increases onto its customers is RPC Group, a supplier of rigid packaging to the personal care market, which has increased the price of its polymers.

In its interim management statement of 31 January 2011, the group noted that in the third quarter of 2010-2011, increased polymer prices, together with higher sales volumes than in the prior year period, resulted in improved revenues.

“It is pleasing to note that whilst trading conditions continue to be affected by the uncertain economic environment and rising polymer prices, the group is able to improve its performance, benefiting from an increase in activity levels and a more efficient cost base”​ said RPC’s CEO Ron Marsh.

Related topics: Packaging & Design

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