Cost Explosion for Packaging Materials

The significant increase in raw material prices and also in the costs of energy, logistics and packaging materials are currently causing particular problems for manufacturers of confectionery and snack foods in Germany, in addition to the effects of the Corona pandemic.

„There are extreme distortions and dramatic price increases for many important raw materials at the same time,“ explains Dr. Carsten Bernoth, Chief Executive Officer of the German Confectionery Industry Association. (BDSI). „Manufacturers are particularly feeling the effects of significant price increases in the purchase of the most important agricultural raw materials wheat, soy and sugar, but also in the area of packaging.“ The price of wheat climbed 50 percent to a new all-time high on the commodity futures market within a year, and a below-average harvest is also expected. The cost of milk powder, sugar, hazelnuts or soybeans has also risen sharply. These movements were caused, among other things, by lower crop yields, lower imports from third countries, but also an increase in demand in Asia.

Costs for the procurement of packaging materials and in the areas of logistics and energy also increased significantly. For example, the price of electricity for industrial customers has almost doubled within a year. On the futures market of the EEX energy exchange, a megawatt hour (MWh) of electricity to be supplied in the coming year costs just under 70 euros. The wholesale price, which is the basis for many contracts for industrial customers, has not been this high for twelve years. In March 2020, at the start of the pandemic, a MWh still cost 35 euros. The price is driven by the equally steep rise in the CO2 price. Since the beginning of the year, it has been 25 euros per ton of carbon dioxide. There is also currently insufficient freight capacity in international logistics on road and rail as well as on container ships, the association reports. Containers are in short supply for transporting goods around the globe.

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During the Corona pandemic and as a result of temporarily idle global trade, many companies reduced their capacities and inventories, also explained Dr. Lorena Fricke of the IK Plastics Packaging Industry Association at the Packaging 360° congress, which was held as a hybrid event in Frankfurt on September 6 and 7, 2021. Now these downsized production capacities are meeting with a surge in demand as the economy recovers in many parts of the world.