Paper packaging: Price and cost indexing examples

Understand core cost considerations for your packaging procurement strategy

Look deeper into the packaging production process to understand how fiber costs, mill costs, transportation costs and exchange rates fluctuate and impact your price. Improve your negotiation strategy and better anticipate future price chances.

Fastmarkets’ Index Builder is a tool that shows you how your box price should have evolved relative to changes market prices. The price index is based on the market price of materials. It also includes estimates for converting, overhead, profits and other.

The following analysis looks at:

  • Containerboard: The material used to make your shipping boxes
  • Carton board: The material often used to make your branded packaging

Example 1: Containerboard

Shipping boxes, secondary packaging for shipping, containerboard for parcels transportationShipping boxes are made out of containerboard. In this example, we will look at brown medium kraft, corrugated packaging in North America.

Price index

The price index report from Index Builder shows how the box price evolved relative to changes in market prices of corrugated packaging. It represents the cost to buy the paper/board and convert it into an end product. It also includes estimates for converting, overhead, profits and other.

If the contract began in September 2018, the overall change has been an increase of 14.41% in cost per 1000 pieces. The three fibers that make up the packaging material account for 65.9% of the price. There has been a more significant increase in this fiber cost in 2021-2022.

If you purchase this type of corrugated packaging, your supplier has likely adjusted your price based on this increase. If your price increase was significantly higher, you may want to consider revisiting your contract.

Cost index

The cost index report from Index Builder shows how your box price should have evolved relative to changes in the cost to produce corrugated packaging. The cost index is based on the costs your box supplier incurs to produce the materials. This includes cost drivers such as fiber, energy, labor, and chemicals.

The overall change has been an increase of 34.13% in cost per 1000 pieces. Fiber cost has increase 87.6% since Q3 2018. Does your contract reflect a similar increase?

Example 2: Carton board

Pharmaceutical carton board paper packagingProduct packaging comes in a variety of shapes, sizes and finishes. Carton board or boxboard is used by a variety of food, pharmaceutical, and CPG branded goods. Your packaging can say a lot about your brand and is a worthy investment. In this example, we will look at tuck and tongue folding carton in Europe. Let’s say the contract began in September 2018 and your cartons are made out of white-lined chipboard:

Price index

The price index report from Index Builder shows how the box price evolved relative to changes in market prices of carton board.

If this contract began in September 2018 and your cartons are made out of white-lined chipboard, then the overall change has been an increase of 4.36% in cost per 1000 pieces as of June 2021.

Your supplier may have adjusted your price based on this increase. If you have a contract for carton made out of white-lined chipboard, consider this market fluctuation when reviewing your price.

Cost index

The cost index report from Index Builder shows how your carton price should have evolved relative to changes in the cost to produce carton board.

The overall change has been an increase of 45.61% in cost per 1000 pieces. Fiber cost has increased 52.4% since Q3 2018 to Q4 2021. Energy cost has also been a major cost driver in Europe. Energy costs have skyrocketed in Europe in 2021, now 205.8% higher than at the start Q3 2018.

Did your carton board supplier contracts reflect this energy cost increase?

Take a deeper dive and index your own box prices and supplier costs

Index Builder helps you plan and negotiate your packaging supplier contracts. Plus, discover how Fastmarkets can support your business decisions with price reports, forecasting, news and more. Speak to a rep today.