The TricorBraun Pulse - April 2023
A Message from our Chief Commercial Officer and Chief Operations Officer
Resilience and volatility: this is the duality that we’re all going to be navigating through 2023. There are signs of resilience, notably a significantly rebounded global supply chain. For example, container ship capacity has improved, returning rates to pre-pandemic levels. And China has ended its COVID Zero policy, bringing with it hopes of more predictable manufacturing and port operations there. And, yet, inflationary pressures and high labor costs remain in the US and globally. In addition, the war in Ukraine shows no sign of ending—and Russian aggression continues to bring volatility to global markets for energy and other commodities.
Our entire TricorBraun team understands how demanding this unsteady global market is for your business, and we are committed to helping you navigate through the uncertainty. From supply options to freight partners to alternative materials, we’re leveraging our international reach and adjusting quickly to changing market conditions to deliver the best total costs and best value available. Please contact us to see how we can further support you. We appreciate and value your business—and we’re here to help.
Sincerely,
Transportation
The Big Picture
The good news is that container shipping rates have returned to pre-pandemic levels and are likely to remain there for a while. But a series of pending labor negotiations at ports in the US and Canada are leading to concerns about potential disruptions. Meanwhile, fluctuating fuel costs, high labor costs, and new regulations on the US trucking industry could forecast higher US truckload and less-than-truckload shipping rates ahead.
Details
- Spot container shipping rates have dropped significantly, and rates from Asia to the US are now at pre-pandemic levels. A combination of softening demand and strong inventories in North America, coupled with new container vessels scheduled to come online, means that rates could stay low at least through May. However, we are hearing that the Ocean Carriers are rapidly pulling capacity before summer and will attempt to push through price increases as demand possibly increases. We will keep you posted as the spot market reacts to these market changes.
- Longshore labor negotiations in the US and Canada continue to create uncertainty, with five multi-year labor contracts set to be negotiated in 2023 and 2024. Meanwhile, the Longshoremen’s union contract negotiations remain deadlocked, creating ongoing uncertainty at US West Coast Ports—and an increase in discretionary cargo being shipped instead to the East and Gulf Coasts.
- US domestic truckload market rates are forecast to inch back up over time due to a combination of high labor and maintenance costs combined with fluctuations in the price of diesel fuel. Driver pay increased on average 65% during the period 2018–2022.
- A new regulatory proposal on truck driver speeds could delay shipments and further raise costs. The Federal Motor Carrier Safety Administration is expected to release a proposed rule in June that would cap speeds at 65 mph for trucks over 13 tons. If enacted, the proposal would slow down deliveries—and likely lead to new rate hikes by shipping companies.
Our Actions
- We are aggressively seeking contract pricing with ocean carriers in our largest lanes while market rates are deflated in order to preserve and protect pricing over an extended period of time.
- We are insourcing dray operations to ensure that TricorBraun has complete control from ship to door. Our goal is to also lock in dray (port to warehouse) trucking rates while there is excess capacity in the market.
- We have partnered with one of the largest, most well-respected LTL companies in North America. While we will continue to balance freight volumes among key partners, our new strategic partner will provide substantial savings opportunities for our customers over the next 12 months.
Learn More
While Details Are Scant, PMA and ILWU Signal Labor Negotiations Are Ongoing: https://www.logisticsmgmt.com/article/while_details_are_scant_pma_and_ilwu_signal_labor_negotiations_are_ongoing
Asia-US Container Rates Continue to Plunge: https://www.hellenicshippingnews.com/asia-us-container-rates-continue-to-plunge-us-ports-wide-open-as-consumer-demand-wanes/
Supply and Capacity
The Big Picture
Supplies of everything from cap liners to resin have improved in the last several months as a result of softening demand and new North American capacity. While supply has improved, inflation and labor costs continue to impact prices. Glass supply is expected to remain tight through 2023—although some spot capacity has opened up on the US domestic side. US warehousing space remains at a premium, especially on the East and West Coasts as inventories in all products remain high.
Details
- The overall US resin supply is strong.
- Demand is increasing for sustainable solutions in order to meet the demands of retailers, legislators, and consumers. Package solutions ready for recycle are in high demand, including all-plastic pumps and sprayers, post-consumer recycled (PCR) resin, and biodegradable additives.
- Lower international freight rates have opened up options for glass supplies that were not viable just 6 months ago, and Asia is once again more competitive than some other options.
- We continue to observe higher industrial leasing and warehousing costs in most markets. Warehousing costs continue to rise and are now up over 25% nationally from a year ago, and much higher in California and New York/New Jersey. Factors include rising inventories and continued demand increases across the economy.
Our Actions
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The decrease in international freight has driven some demand back to Asia. Most consumers, however, are leveraging duplicate supply options in North America and Asia to ensure supply consistency. We are building a supply chain to ensure reliability for our customers.
- We continue to investigate new sustainable materials and packaging to offer to our customers.
- We continue to work with our global and domestic glass manufacturers to match consistent, high-quality supply with your requirements. We have stock tools across multiple supply options and are constantly reviewing total costs, including shipping and associated tariffs and duties, to help you with the best option for your business.
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We continue to work with our customers to develop and monitor stocking programs to ensure steady supply and just-in-time deliveries, while leveraging our suppliers’ improved lead times. Ask about a warehousing agreement and how it could help you alleviate supply disruptions.
Learn More
Holding Excess Inventory Keeps Getting Pricier
Materials
The Big Picture
Prices for most virgin materials are expected to flatten out thanks largely to improved inventories and weaker demand. Recycled resin prices are expected to remain higher than virgin—with supplies tight as brands incorporate more PCR content into their packaging to meet their sustainability commitments. The price of PET PCR has dropped recently, however, due to some softening in demand; this is not likely to continue long term. Meanwhile, the UK’s plastic packaging tax just increased. And new packaging and packaging waste legislation introduced in the European Union, if adopted, could further tighten PCR supplies—and raise prices.
Details
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Overall, resin prices are expected to ease in 2023 as demand weakens and new capacity comes online. In the short term, HDPE is up slightly. PP prices are also up this month due to monomer supply issues.
- Recycled PCR PET (food grade) and PCR PP prices have dropped, while HDPE PCR (food grade) has increased slightly. We expect to see continued volatility in PCR resin pricing this year.
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The UK’s plastic packaging tax rose to £210.82 per ton on April 1, an increase of over 5%. The tax applies to plastic packaging manufactured in, or imported into, the UK that does not contain at least 30% recycled plastic.
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The EU has proposed a sweeping new measure aimed at reducing packaging and packaging waste. The measure addresses package design, shipping, compostability, reuse, recycling, and compliance—and it would impact everything from coffee pods to shipping containers.
- Raw materials prices for aluminum are down, but supplies are forecasted to be constrained.
Our Actions
- As aluminum supplies tighten, we are maintaining a reliable supply of cans.
- We are continually evaluating supply chains to ensure we are providing our customers with the best solutions in this challenging economic environment. We are also leveraging our global reach and pulling levers as needed to adjust to ever-changing supply conditions.
Inflation
The Big Picture
The dual impacts of resilience and volatility are nowhere more evident than when it comes to inflation. In the US, the latest economic numbers reveal that the year-over-year inflation percentage is at its lowest level since September 2021 but still high. At the same time, rising interest rates have hit the banking sector hard—rattling investors and raising renewed fears of a possible recession. The Federal Reserve just raised interest rates by another 0.25% at their March meeting. On the other hand, Inflation eased slightly across Europe’s Eurozone, but food and fuel price remain volatile. In the UK, however, inflation jumped to 10.4% due to soaring food prices and food shortages. Meanwhile, Australians are easing inflation but little relief when it comes to the price of groceries.
Learn More
Australia’s Annual Inflation Rate Eases: https://www.theguardian.com/australia-news/2023/mar/01/australias-annual-inflation-eases-to-74-in-january-following-record-run-of-interest-rate-hikes
Eurozone Inflation Eases, But Core Prices Pick Up: https://www.reuters.com/markets/europe/euro-zone-inflation-eases-feb-core-prices-pick-up-2023-03-17/
UK Inflation Rate in Surprise Rise to 10.4%: https://www.theguardian.com/business/2023/mar/22/uk-inflation-rate-rises-price-rises-interest-rates
US Inflation Fell for the 8th Straight Month: https://www.cnn.com/2023/03/14/economy/cpi-inflation-february/index.html
Our team is working day and night to help you manage today’s uncertainty, and we’ll continue to harness our expansive resources and industry-leading capabilities to serve you. As your global packaging partner, we will continue to leverage our:
- Unmatched purchasing power, access, and scale, including a vast supply network of more than 1,000 domestic and international suppliers
- Financial strength to make investments that support supply
- Strong relationships with strategic suppliers to increase capacity
- Stable shipping connections, to move supply even in tough times like these
- Team of sourcing experts, on the ground throughout the world, seeking new product options and negotiating supply for your benefit
- Dedicated in-house quality professionals, preventing issues and assuring standards
- Expert supply and demand forecasting to help you plan ahead, and strengthen continuity of your supply
For more, contact your TricorBraun packaging consultant or marketing@tricorbraun.com.
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