The spiraling rise in raw material prices is taking a heavy toll on flexible packaging companies in Britain, with more film producers in the red or being forced out of business, according to a local trade association.
The Tetbury, England-based Flexible Packaging Association warns of the ``dire situation'' in the market caused by ``enormous'' polymer price rises. The mounting pressure of soaring costs is evident in a string of poor financial results being recorded by FPA members. Some are being driven to the edge of bankruptcy, the organization warned.
``We have already seen increases of 40 percent in base resin prices,'' said FPA director Martin Unwin. ``The ratchet effect on film prices, particularly in oriented polypropylene, oriented polyamide, PET and polyethylene, is already evident.
``In addition, we are faced with significant increases in the cost of solvent, ink, transport and utilities. Our members cannot absorb cost increases of this magnitude,'' Unwin said.
The association represents companies in the United Kingdom producing a range of printed film packaging, largely in OPP, but also PE and foil or paper laminates. Members have annual sales of around £730 million ($1.3 billion), according to Unwin.
Of FPA's 15 member companies, six were losing money at the half-year mark. New evidence of the sector's plight came with news of another flexible packaging producer, GS Technologies Ltd. of Flint, Wales, going into administration in late September, Unwin said. GS supplies PP film and laminates for medical and sterilizable packaging.
``This situation is threatening to put people [in the business] over the edge,'' the FPA director said.
Even the biggest players in flexible packaging are being hit.
``We are seeing very big and continuing increases in OPP film prices, and polyethylene resin prices are going up the whole time,'' said Tino Savvas, Amcor Flexibles' director of confectionery and food packaging in Europe.
``There were a couple of rounds of increases in the last two months, and we expect to see one more before Christmas. The steady rise is making it difficult to recover. It's leaving us always behind and trying to catch up,'' he said, describing the constant price pressure, particularly on smaller, niche firms, as ``crippling.''
``No one is making good'' in this situation, Savvas said in a telephone interview.
``Companies in the FPA are seeing a return on capital of under 5 percent - pretty pathetic by any standards,'' Savvas said. ``We see a whole generation of [packaging] buyers who now believe prices can only go one way, and that is down. This can't go on indefinitely. We just cannot absorb this.''