The pressure remains despite the drop in material prices

Supply chains across Europe have been warned that persistently high prices for inputs other than raw materials are likely to keep the cost of essential products such as pallets and packaging high for the foreseeable future.

According to some European industry indices, the cost of raw materials used to make packaging – pallet wood and steel (for nails) – fell in the third quarter of 2022. However, high energy and fuel costs drive up the cost of logistics, heat treatment and kiln drying of wood. Meanwhile, other higher-priced inputs, including labor, now account for a significantly larger share of the price of goods such as pallets and packaging than they used to. This has pushed up the actual price of these items significantly.

According to the European Road Freight Rates Benchmark Report prepared by Transport Intelligence, Upply and IRU, average European road freight contract prices hit an all-time high (129.7 index points) in the third quarter of 2022, an increase of 5.4 points from the previous quarter 2 and 19.6 points for the same period last year. On the spot market, prices rose to 142.6 points, up 6.0 points qoq and 26.4 points year-on-year.

The report added that the cost of diesel typically accounts for a third of total transport costs – but can now account for 50% of the cost.

Market and consumer data firm Statista says the OPEC basket’s average monthly crude price rose to $117.72 in June from $85.41 in January 2022. Meanwhile, European Union agency Eurostat said hourly labor costs in the euro zone rose 4.0% in the second quarter of the year, up 4.4% from the same quarter last year.

Increased costs of inputs like these are affecting manufacturing companies of all types across Europe, including the pallet and packaging sectors.

Fons Ceelaert, Secretary General of the European Federation of Wooden Pallet and Packaging Manufacturers (FEFPEB), said: “Commodity costs have eased slightly in recent months after historical highs. However, national associations across Europe report that persistently high energy, transport and labor costs are still having a major impact on the prices paid by manufacturers and workshops.

“Pallet and packaging companies across Europe are working closely with their customers to minimize the impact of this ongoing pressure. In the meantime, FEFPEB will continue to monitor this situation and update the market with the latest developments.”

The recent FEFPEB Members’ Congress, held in Florence, Italy at the end of September, addressed the current challenges facing the sector. The event, titled ‘Wood Pallets and Packaging at the Heart of the Sustainable Economy’, featured presentations and discussions on current crises, including tackling energy and shipping costs, building on the industry’s strong green credentials, and recruiting and retaining talent for the future.

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