At the start of the year, the packaging market looked as though it might soften. Demand was not as high as it could have been; there was spare capacity in the market, and prices looked like they might start to come down.
Then the Iran and Middle East situation changed the picture.
With oil spiking, the impact on packaging has been immediate. It directly affects a lot of plastic packaging, but it also indirectly affects other areas where there is high energy usage, transport cost or manufacturing intensity. In packaging, very little sits in isolation. Oil, energy, transport, raw materials, supplier stock and lead times all feed into the price a client eventually sees.
To understand what is happening, I track two key areas. The first is LDPE, low density polyethylene, which is a useful marker for plastic packaging. The second is EUWID, which tracks paper and corrugate markets, giving a view of what may be happening with boxes and related products.
The movement in LDPE has been significant. From January to the end of May, LDPE had gone up by 67.5%, with most of that movement happening through March and April. Some in the market think it may have peaked, but that depends heavily on what happens next. If the situation escalates again and oil rises further, we could see more movement.
That uncertainty is already changing buying behaviour.
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