2022 was a challenging time for paper packaging producers. The cost to produce boxes went on an upward trajectory, while pressure from buyers kept the prices relatively grounded.
In normal circumstances, rising costs are usually met with commensurate increases in the price of products to ensure profitability. However, in the last couple of years, the market price for the paperboard material to make the corrugated boxes had not quite caught up with this rise in the cost to produce them. As a result, the integrated box producers were faced with squeezed margins.
This turning point in the market can be illustrated by our Index Builder model. It calculates how the cost of producing the box evolved based on two different perspectives:
- The evolution of the prices of the paperboard material using our price data
- The evolution of the cost to produce the paperboard material using our cost benchmarking tool, Analytical Cornerstone
In our example, we take a look at the cost evolution of corrugated packaging in Europe using two types of containerboard – recycled liner and recycled medium – and a box price starting point of EUR100 per 1000 pieces from 2020 to 2023.
Click through the charts below to see the cost evolution story.
This increase in cost was caused by several macroeconomic and geopolitical drivers, including inflation, the war in Europe, supply chain challenges and Covid-19. Consequently, the price of energy, fiber, labor, chemical and other cost factors had skyrocketed.
While we have moved away from the peaks in 2022 and cost drivers such as energy and fiber prices have become more stabilized, it is important to keep in mind that these market conditions could turn again in the near future. For Europe, there is still uncertainty surrounding energy security for mills and the war in Europe. The appearance of another macroeconomic or geopolitical event could also change the market conditions we see today.
Our Index Builder model combines our trusted and benchmarked price data with our industry-leading mill intelligence database. It can give you a clearer view of what is happening in the market and, in turn, insights into what factors are influencing the price of your packaging product.
Find out how our Index Builder model can help you today by speaking to our team or scheduling a demo.
