The traditional packaging film market is projected at $25.9 billion USD for 2024, with a compound annual growth rate predicted to be 5.6%. This huge market is not immune to the fluctuations that arise from the changing costs of oil. In this article we will explore more how the rising oil prices impact both the production and transportation costs of packaging film and explore strategies for mitigating these challenges. Market volatility is inevitable, requiring businesses to remain agile and responsive to survive and thrive.
THE LINK BETWEEN OIL AND PACKAGING
The interconnection between oil prices and the cost of plastic packaging, such as stretch film and tape, is significant, and it affects everything from the cost of raw materials to production and distribution. This is primarily because many plastics are derived from petrochemical products, which are directly linked to the price of crude oil. As the price of crude oil climbs, so does the cost of these petrochemical derivatives, leading to higher production costs for plastics. Aside from the raw materials, the production and transportation of plastic packaging materials are energy-intensive processes, and so, higher oil prices translate into increased manufacturing and shipping costs. This is because fuel costs are closely tied to oil prices, and due to fuel usage in a majority of machinery and vehicles, the impact will be felt throughout the supply chain.
Additionally, fluctuations in oil prices can lead to market uncertainty and volatility, which can further exacerbate price changes for stretch film and tape. Manufacturers and suppliers may adjust their pricing strategies in response to expected changes in oil prices, which can lead to price instability in the packaging market.
This dynamic emphasizes the broader impact that global oil markets have on the cost structure of plastic packaging, influencing not only the direct costs of raw materials but also the overall economic environment in which these products are produced and sold.
NAVIGATING THE CHALLENGES
In this ever-changing world, it is essential to assess your costs regularly. Companies must adopt strategic approaches to navigate the impact of rising oil prices.
Three tips for mitigating costs:
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Strategic Supplier Selection: Conduct thorough research and evaluation to identify the most reliable and cost-effective suppliers. Consider technical expertise – as a supplier with poor product knowledge has hidden costs.
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Long-term Contracts: Consider contracts and open purchase orders to lock in prices for packaging materials, thus shielding your supply chain from sudden price spikes.
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Continuous Monitoring and Adaptation: Ensure you are always open to reviewing your suppliers regularly. Relationships of course go a long way, but if you don’t monitor, you don’t know where you are losing money. Ask us for a no obligation analysis on your stretch film usage for cost savings.
UNLOCK EXPERTISE WITH DUMAK
At DUMAK we focus on product expertise and technical knowledge, and we guarantee our customers 100% satisfaction with all orders. We ensure all of our Account Managers receive expert training from day one, and have a team of tenured colleagues supporting them, so we know you will get the best price on the perfect solution for your packaging needs. If that wasn’t enough – you will also pend less with our exceptional pricing on stretch film and one of the lowest flat rate fuel surcharges on shipments in the industry – increasingly more important with the fluctuations in the cost of fuel. Contact us today!
