The TricorBraun Pulse - July/August 2023

A Message from our Chief Commercial Officer and Chief Operations Officer

The good news is that supply chains are largely back to normal—but it sure seems as if we are one crisis away from everything going haywire again. Geopolitically, the War in Ukraine marked its 500th day amid fresh concerns about a prolonged war and Iran has started targeting ships in the Straits of Hormuz. Meanwhile, extreme weather is testing countries’ climate resilience; for example, drought conditions in Central America forced Panama Canal authorities to temporarily put restrictions on vessels transiting the waterway. And there’s labor unrest in North America that’s threatening to disrupt everything from port operations to trucking.

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 global 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

While ocean vessel capacity has been plentiful and rates low through the first half of 2023, operators have started to slow their transit speeds and reduce overall capacity—impacting pricing moving ahead. In addition, a mix of extreme weather and labor disruptions is threatening to create new supply chain headaches in North America and globally. A severe drought in Panama led authorities there to put restrictions on ships moving through the Panama Canal due to low water levels; 14 days of torrential rains in late June finally replenished lakes. During the drought restrictions, however, pressure built for over a month, with queues forming on both sides of the waterway and ships waiting for up to 10 days to transit the canal. Meanwhile, dockworkers with the International Longshore and Warehouse Union in Canada (ILWU Canada) walked off the job on July 1, disrupting Pacific port operations in Vancouver and Prince Rupert, BC. With unions later rejecting a tentative agreement, timing around the return to normal port operations remains uncertain. And, in the US, on July 25 UPS announced a tentative new labor agreement with more than 340,000 Teamsters drivers and warehouse workers--hopefully averting a strike that likely would have caused major disruptions to the movement of goods across the country. 

Our Actions

• We are continuously reviewing and adjusting routing plans, including leveraging alternative ports, railroads, and even cross-border trucking, to minimize operational disruptions and deliver products where you need them when you need them.
• We have a strong and relationship with a major US parcel provider that will enable us to minimize any disruptions caused by a UPS strike.

Learn More

A Drought in the Panama Canal Could Be Affecting Your Groceries and Packages: https://www.wsj.com/story/a-drought-in-panama-could-be-affecting-your-groceries-and-packages-heres-how-ae9fdd30

Canada Dock Strike Threatens to Disrupt Trade: https://www.bloomberg.com/news/articles/2023-07-01/dockworker-strike-at-canada-s-biggest-ports-to-fuel-inflation

UPS Moves Closer to Strike After Teamsters Contract Talks Break Down: https://www.washingtonpost.com/business/2023/07/05/ups-teamsters-contract-talks/

UPS, Union Avert Strike with Planned 5-Year Deal: https://www.reuters.com/world/us/ups-teamsters-union-reaches-tentative-labor-deal-2023-07-25/

Supply and Capacity 

The Big Picture

There’s no question supplies have improved—with ample capacity across most substrates. But many CPG companies remain concerned about consumer demand and the potential impact on supplies. In the US, retailers who stockpiled goods to protect against supply chain disruptions have now been forced to deeply discount prices to clear out excess supplies. The result: reduced inventory and increased demand are being forecast as the US economy rebounds and we head toward the holiday buying season. 

Our Actions

• 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. 

• We are working 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 manage your inventory and hedge against supply disruptions. 
• We are supporting our customers in customizing or redesigning their packaging to resonate with consumers as they modify their purchasing decisions to achieve more perceived value. Ask us how our design & decorating capabilities could elevate your packaging.

Learn More

Proposed “Can Tax” Could Mean Higher Grocery Prices for American Consumers: https://fortune.com/2023/05/18/inflation-steel-can-tax-could-mean-higher-grocery-prices-american-consumers-economy-politics-food-david-chavern/

US Retailers Booming Inventories Set Stage for Deep Discounts: https://www.reuters.com/markets/us/us-retailers-ballooning-inventories-set-stage-deep-discounts-2022-05-27/

Materials

The Big Picture

Prices for most virgin materials have flattened thanks to higher inventories and weaker demand. In the short term, PET, HDPE, and PP prices are down. As inflationary pressures start to decrease and consumers open their wallets again, there is likely to be an increase in demand as the year goes on. Meanwhile, prices for PCR resins are mixed. PCR PET prices are down, but PCR HDPE is up 16% over a year ago. A combination of greater CPG demand for recycled packaging coupled with potential new regulations from the EU are likely to tighten supplies and drive up prices. Meanwhile, aluminum prices are holding steady.

Our Actions

• We are maintaining a reliable supply of aluminum cans as we watch and wait on a decision on new steel tariffs. 
• We are leveraging our global reach to adjust to everchanging supply conditions and ensure that we’re providing our customers with the best solutions. Ask us how we can optimize your package, including efficient design, localized production, and lower freight costs.
• We continue to leverage sustainable supply options and share those with customers developing their sustainable brand stories. 

Learn More

Proposed “Can Tax” Could Mean Higher Grocery Prices for American Consumers: https://fortune.com/2023/05/18/inflation-steel-can-tax-could-mean-higher-grocery-prices-american-consumers-economy-politics-food-david-chavern/

Inflation

The Big Picture

The Economist raised troubling food for thought recently, asking “whether supply chain disruptions and energy-price spikes have led to persistent pressure on prices—and higher wages—that could set off a rare wage-price spiral.” While we don’t have the answer either, we know that while supply chains have improved, inflation remains stubbornly high in much of the world. In the UK, it’s still rising—whereas it is finally easing in wealthy economies ranging from Germany to Japan. The recovery is strongest in the US. Driven by lower fuel prices, the latest numbers show an increase of merely 3%—the 12th month in a row of decreases in the rate of inflation. 

Learn More

Britain is Now the Only Major Economy Where Inflation Is Still Rising: https://www.cnbc.com/2023/07/04/uk-is-now-the-only-major-economy-where-inflation-is-still-rising.html

Supply Chains Are Back to Normal. Why is Inflation Still So High?: https://www.economist.com/graphic-detail/2023/06/22/supply-chains-are-back-to-normal-why-is-inflation-still-so-high

US Inflation Cooled in June for the 12th Straight Month: https://www.cnn.com/2023/07/12/economy/cpi-inflation-june/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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