The TricorBraun Pulse - November/December 2022

A Message from our Chief Commercial Officer and Chief Operations Officer

The global supply chain is finally improving, but the impacts remain uneven. In the US, recent economic indicators have been better than forecast, bringing with them downward pressure on some prices as supplies recover and retailers work through strong inventories. At the same time, inflationary pressures and high labor costs remain. Elsewhere around the world, surging energy and food prices are raising fears of recession. This global volatility is likely to continue well into 2023.

Our entire TricorBraun team understands how demanding this volatile 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,

The Big Picture

Uncertainty remains the watchword when looking at the overall transportation picture. After softening demand led to declining container shipping rates, carriers have started to counter by canceling sailings to drive rates back up. Meanwhile, negotiations over a new labor contract at West Coast ports remain deadlocked, increasing concerns about potential disruptions. 

Details

• Negotiations between the ILWU and the PMA remain deadlocked—with no significant progress reported. While the two sides are openly committed to avoiding supply chain disruptions, neither side seems willing to budge on port automation and other contentious issues. Meanwhile, smaller disagreements, such as the recent dispute at the Port of Seattle over repair and maintenance work, threaten to snowball into bigger disruptions if union members implement work slowdowns in solidarity.
• Container shipping rates from Asia to the US continue to decline. Rates have dropped 32 out of 45 weeks during 2022 and are now 78% lower to the West Coast and 58% lower to the East Coast, (compared to the last week of December 2021). There remains market uncertainty however, as interest rates increase and businesses continue to work through stockpiles of inventory. In addition, carriers have canceled over 25% of sailings in November (with more cancelations expected this month) in order to drive capacity shortages and upward pricing.
• US domestic truckload market rates continue to fall weekly as consumer spending wanes and trucking volumes decrease. Linehaul rates have fallen approximately 23% since rates peaked at near all-time highs in February. Rates are currently about 15% lower than the same time last year.
• US domestic less-than-truckload (LTL) carriers continue to implement annual General Rate Increases (GRI) across the market. These have ranged from 5–8% over the last year. Both TFI International (previously UPS Freight) and FedEx Freight have implemented 6.9% GRIs to take effect during 2023.

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.
• TricorBraun runs semi-annual pricing exercises across 50+ freight partners to ensure rates are market competitive. This process allows us to lock in rates and protect our customers from market volatility during each cycle.
• We have recently 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

Retailers Biggest Wish Is to Get Rid of All That Excess Inventory: https://www.cnbc.com/2022/11/13/retailers-biggest-holiday-wish-is-to-get-rid-of-all-that-excess-inventory.html

UPS Expects Holiday Package Surge to Peak Later This Year: https://www.supplychaindive.com/news/ups-holiday-package-volumes-peak-season-2022/634817/ 

The Big Picture

Supplies of everything from liners to resin are finally starting to improve as a result of softening demand and new North American capacity coming online. While supply has improved, inflation and labor costs are impacting prices. Glass supply is expected to remain tight through 2023—although some spot capacity has opened up on the domestic side. US warehousing space remains at a premium, especially on the East and West Coasts.

Details

• Overall US resin supply is strong as demand decreases.
• Demand is increasing for plastic pumps and dispensing sprayers as retailers and brands seek more responsible packaging choices in response to consumer demand for refillable and recyclable solutions.
• Glass supply has adjusted to plant closures in Ukraine and Russia. Lower international freight rates have opened options from Asia that were not viable just 6 months ago. We continue to find spot and some contract capacity globally as well as domestically to help with your requirements.
• We continue to observe higher industrial leasing and warehousing costs in most markets. Though there are articles touting that Amazon is giving back space to the market, we have not seen this result in lower rates—especially at East and West Coast locations. 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

• 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’re maintaining a supply of stock bottles, closures, and pumps for 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 to help you with the best option for your business. 

• We're leveraging our existing warehousing relationships while at the same time challenging our suppliers with lower cycle times and order quantities to use less space. But, when needed, we have added capacity. Our new, larger locations in Kansas City, Miami, Cleveland, and Salt Lake City are helping us expand our support offerings for you. Ask about a warehousing agreement and how it could help you alleviate supply disruptions.​ 

Learn More

Shell Chemical Begins Production at Pennsylvania PE Plant:

https://www.plasticsnews.com/news/shell-chemical-begins-production-pennsylvania-polyethylene-plant

The Big Picture

Prices for most virgin materials continue to decrease thanks largely to improving inventories and weaker demand. Recycled resin prices, however, are up.

Details

• Resin prices continue to decline due to reduced demand and new capacity coming online. PE, HDPE, PET and LDPE prices have all declined. 

• In contrast to most virgin resins, recycled HDPE, PET, and PP prices have increased due to a combination of rising demand and supply constraints.

• Aluminum prices have continued to drop from their near-record highs as demand slows down.

• Pricing for corrugate containers has stabilized for now—and the forecast is for more price stability as we move into the new year. 

Our Actions

• 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 everchanging supply conditions.

The Big Picture

The global supply chain is finally showing signs of improvement—but the impact continues to be uneven. In the US, the latest economic numbers continue to suggest inflationary pressures are starting to ease. While the key measures of inflation remain high, the latest numbers were significantly better than forecast. In Europe, however, energy price surges brought on by Russia’s invasion of Ukraine are having predictable results: higher consumer prices and slowing economic growth. And, in Australia, inflation is at its highest level since 1990.

Learn More

Australia Inflation Races to 32-Year High: https://www.reuters.com/markets/asia/australia-inflation-races-32-year-high-sounds-rate-alarm-2022-10-26/

Canada Inflation Steady at 6.9%, Keeping Rate Hikes on Track: https://www.bloomberg.com/news/articles/2022-11-16/canada-inflation-steady-at-6-9-keeping-rate-hikes-on-track

UK Inflation Hits 41-Year High as Recession Looms: https://www.wsj.com/articles/u-k-inflation-hits-41-year-high-as-recession-looms-11668582865

Yet Another [US] Economic Report is Showing Inflation Pressures Are Easing: https://www.cnn.com/2022/11/15/economy/us-ppi-inflation-october/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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