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Raw materials shortage sends price shocks down the supply chain

A series of force majeure declarations by raw material suppliers is causing shortages and high prices that are putting FIBC manufacturers under strain.Sacks of sugar

According to a press release from the European Flexible Intermediate Bulk Container Association (EFIBCA), the German Association for Plastics and Packaging and Films (IK) and other trade associations in the plastics packaging industries have seen a series of major raw material manufacturers either reneging on their contractual obligations or cancelling confirmed deliveries.

When deliveries are made, they are coupled with significant price rises, which “sets the stage for near term price shocks”, according to the statement.

The string of force majeure declarations by the primary polymer suppliers to the European market adds to the problem of competition for raw materials between Europe, Asia, Africa and Central and South America.

Force Majeure is a standard clause in supply contracts that exempts companies from fulfilling contractual obligations because of external forces such as an act of God or parliament. But the EFIBCA statement claims the cases registered by raw material suppliers “lack detailed information and leave many open questions”.Efibca_logo_2

Raw materials can often account for 60 percent to 70 percent of costs for small and medium sized businesses and the impact of the price increase is “potentially existence threatening” for many of the companies. EFIBCA claims that “plastics converters will be left little choice but to pass these costs down the customer chain.”

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