Packages and closures for packaging

Butterfly effect: how will cancelled holidays and bad wind in the Suez Canal affect prices of cosmetics?

More than ever before, the last year truly proved the fact that we live in a global village. Every country, almost every business owner, and finally every man, depend on other people and random events. We always knew it in theory, but now we have found it to our cost.
The last year’s pandemic outbreak caused, among other things, supply chain disruptions. In consequence, many companies decided to find subcontractors within the range of 2,000 kilometers. This solution seemed sensible and was meant to secure the production and its stability.
Unfortunately, the Suez Canal blockage  has proved that deliveries between Europe and other continents have not decreased. Now it’s May and we know that these few days of obstruction will bring about negative consequences which will include higher transportation fees, which will then increase retail prices.
Why is it so bad since everything is once again “flowing”? We need to consider some factors. First of all, these few days of blockage built up huge queues in ports for loading and sailing off. Secondly, there has already been a problem with containers. Low export from Europe to China, Japan or India and high demand for commodities from these countries to Europe, result in the fact that there is an insufficient number of empty containers. Hence, there were problems with smooth transportation already before the blockage. When many ships had been directed to routes around Africa, their containers dropped out of the regular circulation.
Before these container ships reach Europe, before they are unloaded and before we return to the normal rhythm, three or four months will have to pass.
Higher tolls imposed by the countries that own the sea routes, as well as ports and transportation companies, will impact retail prices of the transported goods. Unfortunately, it will be the consumers who will personally suffer from the fact that Egypt wants to make up for blockage-related losses or that the ports in faraway countries are so busy that they can enhance their prices however they want.
After the Suez Canal obstruction the Internet was flooded with memes that made fun of desperate people who faced delayed deliveries from AliExpress.
However, it is less funny to think about ships from Asia, Africa or Arab countries which carried virtually everything: raw materials, components for machines, cars or packaging, pharmaceutical or personal care products. It concerns not only China, but also other Asian countries – for instance India or Thailand, which are among the top textile exporters. Even though Australia is a faraway continent, it is also economically important for Europe.
No one suspected that such situation is possible. Today it is difficult to speculate what and where in the world could happen. How should we know if next time some type of higher power won’t clog American ports? Now we know that it is impossible to be an autonomous country or even a self-sufficient continent.

Plastic prices

Another factor which might put a strain on the cosmetics industry is the reduced number of flights. What does that have to do with the price of plastic? Let us explain.
Limited travelling abroad negatively impacts not only the mental state of isolated people, but also the overall situation of tourism and aviation industries, as well as plastics manufacturers.
Plastics production is mostly based on oil-refining leftovers. During the fuel production crude oil is divided into fractions with different boiling points. One of them is heavy petroleum, the so-called naphtha, which is not used in the petrochemical processes. However, it is a key element in the production of plastics.

For long months now, gas tanks have been bursting at the seams. They are full of air and standard fuels which are not as demanded as before 2020. Aviation companies and gas stations order much less fuel than normally. When the liquid fuel production was limited or even completely shut down, we witnessed a historical precedent.
The simple result of this equation is shortage of naphtha and constricted production of plastics. It would be then sensible to resort to recycled granulates. As far as the price of the virgin material depends only on the refineries, the cost of the regranulate is affected by many factors. The first step is the selective waste collection which is up to all consumers. It is a proper moment to say it out loud that the prices of final products depend on our approach to home recycling. If there are still some people who think throwing away waste is the most mundane chore, now they can attach more value to it, even that financial one.
We also have to consider next “stops”, such as city or borough sort plants, recycling stations, as well as manufacturers who know how to properly use recyclates in new products.
Waste cost and quality, as well as the question whether it requires additional selection, later transport between different points (despite fuel surplus gas prices have not dropped), profitability of the whole process (increasing electricity prices are also relevant), human factor, and recently the question of the production rate which might be endangered by the infections – all these chain links force us to acknowledge that the regranulate is not a cheaper option than the virgin material.
If one didn’t consider the current macro- and microeconomic situation, common sense would tell us to look for other solutions. However, other solutions, such as intercontinental import, got stuck in the ports.
Another paradox is the fact that the lifting of restrictions in most European countries will not improve the economy. It will increase the demand for goods from Asia, which means more congestions…

It would be sensible to resort to air transport. Since passenger traffic is reduced, then maybe cargo would fix and rejuvenate refineries and air industry. Not really, because aviation and airport service charges are “unshrinkable”, so it is better to stay on the ground than to fly for peanuts.
Polpak Packaging’s three steps ahead
It wouldn’t be in our nature not to brag about what we did in order to be able to share summary articles instead of nervously looking for new subcontractors.
The last year proved that even a short period of a few months is enough to empty our storages. Demand for closures (mainly for disinfectants) was so huge that we were completely swamped. For some time we had to extend lead times, which we felt really uncomfortable with. We drew a lesson from the pandemic crisis and when the dust settled, we took care of our storages. We are not saying that we don’t care about the global situation and we are not conjuring reality by asking the Ohio butterfly to flap its wings the right way, but we know that we need to secure our deliveries in order to complete our customers’ orders.
It is the second year of the unknown and many surprises, so we try our best to be ready and secure areas which we can control. Such strategy safeguards our own financial liquidity, but also our customers’ production continuity.
Paradoxically, unexpected events taught us to stay calm, focused and flexible. If we want to develop, we need to determine our own directions of change, however sometimes it is the change that forces us to choose a new approach. Freezing in place at the moment of the unknown is the worst solution which would endanger our own company, as well as our business partners.
We have always known that our closures contribute to the success of many cosmetic and detergent companies. We will give our all not to disappoint the trust of our partners.

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