Raw material crisis impacts the manufacturing industry

2022-01-11T17:46:38+03:00 11 January 2022|

Manufacturers producing added value commodities on a large scale remember the year of 2021 as being a tough one. Shortages of raw materials and logistics bottlenecks made business very difficult. The corona crisis was the trigger that stood at the basis of it all. Company managers, freight transport operators, economists and responsible state institutions all talk about the limited access to raw materials manufacturers face all over the globe. Companies and economies have been initially affected by the closure of factories, mines and shipyards that caused massive disruptions in the global supply chain leading to merchandise pilling up in ports and the rise in transportation costs. The temporary blocking of the Suez Canal further amplified the logistics chains challenges.

The scarcity and mismatch in the supply of raw materials continue to put pressure on industry, causing significant price increases globally. The slow recovery of economies in the world accompanied by robust demand for physical goods, overwhelmed global manufacturers as factories couldn’t obtain enough raw materials and parts. This situation also led to raw materials used by the packaging industry to reach historic highs in acquisition cost, which rose prices of plastic containers, bothering everyone, consumers included. If the situation persists, and signs are that it will, at least until 2023, this will put more pressure on inflation affecting the population spending power. Rising prices for energy, fossil fuels, materials together with ongoing labor shortages due to laid-off workers and other bottlenecks in the supply chain all point to a rather difficult 2022 for everyone.

Companies and their clients in the packaging industry sector had to face multiple hurdles lately, from limited access to raw materials and discontinuities in the supply chain, to rising key material and freight costs. Changes in the European and national legislative frameworks regarding the use of plastic and pressure coming from increased prices on the entire production and supply chain make the business environment a very difficult one to operate in for companies, small or not. The ever-growing environmental responsibility to minimize carbon footprint using less and less plastic only make producers of packaging materials for the food industry seek alternative containers solutions. As prices for plastic derived raw materials have risen to an unsettling level with no end in sight, it becomes an issue of cost versus function, making companies rethink the management of both their production and supply chains.