The paper and corrugated cardboard market 2021
Alex Ferguson was once famously quoted saying “Football …… Bloody Hell! “
Well, Cardboard ….. Bloody Hell!!
We thought we should keep you abreast of how the sector is shaping up now that we are well into the first quarter of 2021 and still in the midst of some of the longest raw material lead times for many, many years. You might also be interested in the three recent articles, published by the BBC and The Sunday Times over the weekend and another calling cardboard 'beige gold', that gives a brief insight into the world of corrugated as it stands currently.
Lead times in our sector for raw material have stretched from a standard norm of 48 to 72 hours to over 6 weeks currently and with no sign of any improvement in the short term. This situation has been fueled by pre-Brexit stockpiling, the normal pre-Christmas spike and the huge increase in online shopping. Figures show that Amazon alone now consumes just over 7.5% (400,000,000 sq.m) of all the UK’s corrugated capacity and that truly is a colossal figure and to put that into perspective no other company in the UK is close to 1%!
Despite industry efforts all across the UK and Europe to increase production the sector is still not making the inroads into the current demand versus capacity shortfall that many industry insiders forecast would happen and therefore allow us to see a shortening of lead times. The view now is that lead times may well remain extended for the first two quarters of 2021 and maybe even longer. A major factor in this is how much of the new paper mill capacity created in 2021 is sold to the East and China in particular who are huge consumers of paper.
Given the foregoing, we would urge customers to keep a close eye on their corrugated inventory and wherever possible build into MRP or similar systems longer lead times for your corrugated requirements as favours from board mills for quick orders are falling on very deaf ears currently!
A second issue to consider now is that having flexed their muscles once this year already and pushed through one price increase the paper producers look set to repeat that in very short order. One of the very unsavoury things about the last price increase was that our sector was forced to pay that increase with no negotiation whatsoever and even on orders that had previously been placed and acknowledged at the pre increase price. We did not pass that increase on to you our customers on any orders up until the end of Feb even though we were forced to pay the increase from the 18th January, we’re not sure we would be able to do that again if an increase is forced through again as ruthlessly and as quickly.
So, at the risk of sounding like a desperate second-hand car salesman, we would politely suggest a check on your cardboard inventory to consider trying to sidestep any potential price increase and perhaps, more importantly, ensuring continuity of supply.
Like Covid this will pass but sadly like Covid we probably still have a few bumpy months ahead, we will do our best to keep you informed and of course to keep your supplies up to date.
As always when we write to you we want to thank you for your business and continued support, please stay safe.