Market disruptions, like those caused by the winter storms that hit Texas and the Gulf Coast, usually follow fairly predictable patterns of recovery. Costs rise with constrained supply for a few weeks and then follow a steady decline largely in sync with volume recovery over the next two plus months. Not so here. We enter the heart of our summer, a full five months later, with prices for blown film grades of polyethylene at record highs over twice what they were a year ago. Of course, it’s not just about resin costs.
The breadth and depth of America’s recent supply chain challenges are often attributed to unprecedented growth and swings in consumption patterns. We think that’s true. At the onset of the pandemic, demand dropped precipitously. Then, accelerated by a shift in consumer spending from services to goods, demand spiked. Finally, when supplier performance lagged due to a nationwide labor shortage, customers went from just-in-time to just-in-case ordering. Supply chains everywhere were caught flat-footed.
Today, sustained high resin pricing is just the tip of the iceberg. Each of us has experienced a relentless escalation in shipping costs. Reduced availability of other raw materials (ORM), driven chiefly by labor shortages, has driven service levels down and costs up on such basic staples as corrugated boxes, roll cradles and pallets.
Prices in this catalog reflect a 5% increase on all Laddawn stock items, on average.
There is yet one more story unfolding. Driven by big swings in consumption patterns, importers face their own unique challenge: ocean bound freight. The world’s container fleet, partially curtailed early in the pandemic, has not kept pace. New global demand patterns are particularly problematic and relief in the form of new container ships is not expected until 2023. In the meantime, port congestion, pandemic related workforce setbacks, and constraints in domestic trucking and rail delivery continue. For America’s packaging distributors, it is an important story to follow.
We expect cost escalation and supply bottlenecks to continue well into the fall months. Overall, we expect a measure of demand relief as inventories build. Moreover, in a post-pandemic economy, it will be helpful if growth in consumer spending tips back towards services over goods. All the while, an improving U.S. labor force remains the lynchpin. For Laddawn and our vendors here and around the globe, we see continued slow, steady progress.
On behalf of all of us in Atlanta, Dallas, Devens, Manchester, Sparks and Sterling, thank you for your business.
Mark P. Bourgeois
Director of Sales & Customer Experience