When an object wants to rise into the air, whether an aeroplane or a leaf from a tree, it has to contend with gravity. The simplified equation is lift minus (or versus) gravity.
The two opposing forces suggest an unstable power struggle.
With the price of corrugate/boxes within the packaging world, we are seeing the opposite. We are seeing stability because of two forces that conflict with each other. As you will know from the news headlines, company press releases and everyday prices, the cost of energy is driving inflation to unprecedented levels.
That cost of energy is also making it more expensive to produce the packaging. Therefore, manufacturers and suppliers would love nothing more than to increase prices. That is the first force coming into play.
For context, prices have generally remained stable since April, and in some areas, we are seeing small reductions. Overall, however, prices – whether polymer or paper – are still at a much higher level than they were in 2019 or early 2020.
The opposing force, the element that is stopping the price of corrugate/boxes from increasing significantly – in line with the increase in wholesale gas price – is that demand is exceptionally low for this time of year. Usually, in the run-up to Black Friday and Christmas, demand is very high, with online shopping determining the demand for packaging.
Not this year. That’s because people are spending less and watching their bank balances closer. As a result, some of the big companies are offering to selectively “do deals” for attractive volume work. This makes good business sense.
Suppliers have spare capacity, and if it wasn’t for the cost of manufacturing, prices would already be dropping. In recent days we’ve had conversations with two of the biggest players in the packaging arena. One thinks the prices will have to go up to ensure that packaging companies can continue to turn a profit. The other believes prices will have to come down.
The outlook is unclear. The outcome could go either way, caused by the same reasons.
It is for that reason that The Crystal Ball is Broken.