Fast-moving consumer goods: How raw material prices will impact costs in 2024

Fastmarkets’ 2024 outlook for key raw materials and ingredients used in the production and distribution of fast-moving consumer goods

In this article, we delve into the 2024 market outlook for three key materials used in fast-moving consumer goods (FMCG) production – paper packaging (and the softwood pulp that goes into packaging and several other products in your supply chain), aluminium and palm oil. We explore their projected price trends and the factors influencing these forecasts.

Don’t see the material you’re responsible for procuring listed here? We’ve produced 2024 forecasts for a host of other crucial raw materials, available on our 2024 commodity market outlooks hub.

Sluggish macroeconomic outlook

In the 2024 macroeconomic landscape, characterized by a general slowness, three key factors will influence purchasing decisions:

  • Consumer demand’s pivotal role in North American and European economies, focusing on spending rather than sentiment, with China’s consumer behavior also crucial
  • The significance of renewable energy and electric transportation in the global economy, amidst geopolitical risks and potential positive impacts from decreased interest rates on consumer spending
  • India’s potential expansion in the global economy, particularly in maritime transport, indicating significant growth potential.

These factors underscore the importance of monitoring consumer behavior, renewable energy trends and India’s economic role for FMCG businesses.

Get the full picture: Three macro factors to impact purchasing decisions | 2024 preview – Fastmarkets

Pulp price recovery underway

In our recent analysis of global pulp markets, the focus was on insights from London Pulp Week (LPW), shedding light on key takeaways relevant to the pulp prices forecast for 2024.

Notably, there’s a pulp price recovery underway in China, driven by a surge in demand and restocking-related purchases, though questions arise regarding the sustainability of this rally. The discussion points from LPW underscore shifts in both supply and demand dynamics: while pulp producers have managed to reduce inventories through increased shipments to China and market-related downtime, capacity closures have also impacted the supply side.

Looking ahead, the industry anticipates a healthier market in 2024 with cleared inventory overhang and potential for tighter conditions, but concerns linger around high-interest rates, supply disruptions and the need for synchronized demand growth across major regions. This analysis provides valuable insights for stakeholders in the fast-moving consumer goods sector, particularly those reliant on pulp-based packaging materials, offering a glimpse into the factors shaping pulp prices and market dynamics for the upcoming year.

Read more here: What’s in store for global pulp markets? | 2024 preview – Fastmarkets

Paper and packaging landscape shows ‘significant volatility’

The global recovered paper (RCP) market has seen significant volatility in recent years, with fluctuations impacting prices across regions.

In North America, a surge in recycled-fiber-based packaging capacity drove prices up, despite a drop in average annual prices. In Europe, weak domestic demand led to price fluctuations, while in Asia, prices fell due to sluggish demand and increased competition. Geopolitical tensions, such as the Red Sea crisis and uncertainties in the Chinese and US economies pose additional challenges for the RCP market in 2024.

Despite growth predictions in certain sectors, like Russia’s corrugated packaging market, labor shortages and geopolitical factors continue to impact the global procurement landscape in the FMCG market.

Get more insights into the global paper and packaging market:

Increasing demand for ‘green’ aluminium

The food packaging sector in China faced challenges throughout 2023. In 2022, driven by the global pandemic, there was a notable increase in demand for disposable aluminium packaging. However, as pandemic-related restrictions eased worldwide in 2023 and the pandemic-induced economic trends diminished, the consumption of aluminium packaging primarily remained within the domestic market in China. This shift resulted in a downturn for the paper packaging industry overall, accompanied by a decline in prices.

The market has seen increasing demand for low-carbon aluminium within the beverage and packaging industry, aligning with global efforts to reduce greenhouse gas emissions. Advancements in low-carbon primary aluminium, including carbon-free smelting technologies, are facilitating the production of close-to-carbon-neutral packaging. Fastmarkets’ European aluminium low-carbon differentials reflect the market’s response to these developments, signaling a shift towards sustainable practices in the aluminium industry.

Read more: Low-carbon aluminium to become requirement for beverage and packaging industry: Ball Corporation – Fastmarkets

Aluminium recovery expected in latter half of 2024

The aluminium price has seen range-trading recently, with a decline since October attempting to stabilize. Initially, optimism regarding China’s economic recovery led to overestimation of its stimulus measures, but disappointment in its performance shifted sentiment to pessimism, impacting base metal prices.

However, there’s a belief that the market is now underestimating China’s potential for growth-supportive policies, which could prompt a scramble if the economy strengthens. Our base metals outlook suggests a gradual stabilization in the latter months of the year, with expectations of a more favorable macroeconomic environment as China’s recovery accelerates, potentially influencing base metal prices positively. While there may be further downside pressure, lower values are expected to attract dip buyers, contingent upon evidence of follow-through buying to justify a positive year-end outlook.

Palm oil prices stabilize on strong export demand

Palm oil, the world’s most widely used vegetable oil, faces increasing demand beyond traditional uses due to its role in renewable energy production. However, stagnant production in major producers like Indonesia and Malaysia, coupled with geopolitical and weather-related volatility, has led to severe price fluctuations in recent years.

While prices soared in 2022 due to supply fears and policy shifts, they have since stabilized, though tight supply conditions persist. Looking ahead to 2024, prices are expected to remain relatively high, supported by strong export demand and lower production forecasts. Factors such as government policies, weather patterns like El Nino and international regulations on renewable energy will continue to influence palm oil prices and production levels.

Find out more: Palm oil price and production outlook – Fastmarkets

Tracking commodity prices for the FMCG sector is critical

In conclusion, the 2024 outlook for key raw materials vital to FMCG production reveals a landscape influenced by macroeconomic factors, market dynamics and sustainability trends. As consumer demand remains pivotal amidst a general economic slowdown, FMCG businesses must monitor trends in spending, renewable energy adoption and India’s economic expansion.

Insights from the metals, forest and agriculture sectors highlight evolving supply and demand dynamics, with opportunities and challenges shaping pricing and availability. For stakeholders navigating these complexities, ongoing analysis is crucial to adapt and thrive in the ever-changing FMCG landscape. Stay informed with Fastmarkets’ comprehensive market intelligence and forecasts, guiding strategic decisions for success in 2024 and beyond.

Find out what’s in store for other key materials used in the production and distribution of fast-moving consumer goods, including wood pulp and paper, base metals and pallets. Visit our 2024 outlook hub.

Case Study

Learn how to monitor packaging prices using cost and price indices and understand the underlying cost drivers, from material cost to labor, energy and more. Examples include cartonboard, liquid container and paper bag.

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