Rigid packaging prices expected to climb

According to the S&P depending on their contracts, processors can expect the higher raw material costs for ridged packaging to be to be passed on soon.

Those companies using rigid plastic containers, metal and glass for their products will the ones most affected by this increase in packaging prices. It is predicted that cosmetics and toiletry producers can expect the higher costs to be passed on sooner than other industries.

According to a Standard & Poor's report released this week, a significant number of manufacturers have responded to recent price hikes by managing their packaging inventories more efficiently and by shopping for their packaging more earnestly and purchasing lower priced packaging.

According to Liley Mehta a credit analyst for Standard & Poor's stated that ongoing raw-material price pressures, mainly due to significant hikes for plastic resin, and limited year-over-year volume growth are the key issues facing the packaging industry.

She went on to say "End customers are also managing their inventory balances in anticipation of raw-material price movements, and smaller order patterns have affected volume growth for plastic packaging suppliers".

Because of increased oil and natural gas prices and efforts by the petrochemical companies to push through further hikes are going to offset the slight decrease in prices we have seen the past few months in some plastic resins such as polypropylene and polyethylene. Now it appears that resin prices will increase for the remainder of the year adding further pressure to flexible plastic packaging companies.

Since most companies that produce ridged packaging generally have contractual agreements allowing for price adjustments due to raw material increases, they will be able to pass down their increased costs to their customers.

Also hit by increased raw material cost is the glass packaging sector in the US due to higher natural gas prices and increased soda ash prices, though most glass packaging producers are expected to gradually recoup higher energy costs through the price adjustment allowances within their contacts with their customers.