As a result of the Covid-19 pandemic and Brexit, lead times for the corrugated industry have risen dramatically. However, the CPI is optimistic that the market will soon return to a more balanced situation.
Very high demand, supply bottlenecks and soaring prices for containerboard and corrugated sheets and packaging are currently shaping the packaging markets in many regions. The UK is no exception here. The Confederation of Paper Industries (CPI), the leading trade association representing the UK’s paper-based industries, has issued a statement on the current state of affairs.
Two aspects – the Covid 19 pandemic and Brexit – are playing the main roles when is comes to long lead times and supply bottlenecks, according to the CPI.
The pandemic has fuelled a surge in online ordering, with the consequent demand increase for corrugated packaging.
Against this increased demand, supply chains were faced with some difficulties. Imbalance in container flows impacted global transport logistics.
Lockdown through 2020 also had an effect on paper mills which changed scheduled planned maintenance stops, leading to some imbalances in supply. What is more, despite the introduction of safe working practices, there have still been occasions when employees were required to self-isolate with the consequent impact on staffing and production.
The Brexit Transition Period came to an end on 31 December 2020 and there was uncertainty until late in the year with a trade deal only announced on 24 December. The CPI believes that, as a result of these uncertainties, many companies were stockpiling in the final months of 2020.
With the implications of Brexit now taking effect, products entering the UK can be subject to delays at customs. “We are still seeing evidence of delays at borders,” writes the CPI.
As a result of all of these developments lead times for the industry have risen dramatically, increasing from days to weeks. Some customers have been unable to source sufficient boxes.
Situation expected to level out
However, the CPI is optimistic that the market will soon return to a more balanced situation:
“While we can expect the implications of border delays due to Brexit to drop away in time as we settle into our new arrangement, there is still evidence of ongoing issues.
“As we move out of lockdown we can expect the maintenance schedules of paper mills to return to planned timelines; and the incidence of self-isolation will decrease. While we may find that consumer buying behaviour has changed for good, industry will adapt to such demands.”
The most important aspect, however, is new paper production capacity coming to the market soon, which will bring the market back into balance.
“A range of recent circumstances have come together resulting in an imbalance in supply and demand across the corrugated industry. These circumstances are changing and steps are in hand to address the imbalance with increased capacity. As the implications of Brexit settle and we come out of lockdown, we can expect the situation to level out,” the CPI concludes.
To find out more about the CPI click here