Raw Material Prices Surge Too Sharply, Packaging Company Owners Exit "in Tears

"Raw materials have risen too sharply; even if you give us orders, we can't afford to take them..." a carton factory owner who decided to give up his own factory said in pain.

In the past year 2020, although the packaging and printing industry greatly reduced labor and significantly improved efficiency, affected by rising raw material prices, listed companies generally saw negative gross margin growth.

If even listed companies with strong cash flow and a certain bargaining power in raw material procurement are like this, the pain of small and medium-sized packaging enterprises in the industry can be imagined. Against the backdrop of sharply rising raw materials, some enterprises that expanded too fast and lacked sufficient capital reserves fell one after another.

On June 21, the People's Court of Lianshui County, Jiangsu Province, issued an announcement recruiting an administrator for the bankruptcy liquidation case of Huai'an Fangzheng Packaging Co., Ltd.

On April 21, Henan Huali Paper Packaging Co., Ltd. (hereinafter "Henan Huali Packaging") announced that the bankruptcy assets of its two subsidiaries — Xinjiang Huali Packaging Co., Ltd. and Hubei Huali Packaging Co., Ltd. — would be publicly auctioned in May.

In May, the People's Court of Liangqing District, Nanning City, accepted the case of compulsory liquidation of Nanning Rongteng Carton Packaging Co., Ltd.

On February 8, the People's Court of the Zhengzhou Airport Economy Zone, Henan Province, ruled on the consolidated bankruptcy liquidation of Henan Xindoucai Printing Co., Ltd. and Zhengzhou Feitian Chuangye Technology Co., Ltd.

On February 5, the Shanghai Third Intermediate People's Court ruled to accept the case of compulsory liquidation of Shanghai Shenglong Packaging Plate-Making Color Printing Co., Ltd.

Having barely escaped the top of the 2020 price-increase wave,

the 2021 raw material price-increase wave swept in with even greater force, reaching its peak in February and March.

Because the price increases over the past year or so were merely a form of monetary inflation and not increases driven by demand, such increases are extremely irrational, even destructive.

On July 9, the National Bureau of Statistics released the June CPI and PPI data: PPI rose 8.8% year on year and CPI rose 1.1% year on year,

and the scissors gap between the two remained as high as 7.7%, consistent with the historical high in May.

This shows that upstream raw material price increases can no longer be transmitted to downstream, and the packaging industry in the middle has become a sandwich biscuit; this is also the fundamental reason why the more upstream prices rise, the weaker downstream purchasing willingness becomes.

The scissors gap between CPI and PPI harms midstream packaging and printing enterprises the most.

Packaging owners simply cannot bear the losing operation of producing inventory with high-priced raw materials, so quite a few owners have developed the idea of giving up taking orders.

Rising raw material prices and declining gross margins have greatly squeezed enterprises' living space and will inevitably intensify the reshuffling of the packaging industry. Yet the upstream market still shows no sign of calming down, with price-increase notices coming one after another,

and this enormous uncertainty has made many packaging enterprises lose confidence completely.

In the next three months, many major events are likely to occur in the industry.

——This article is reproduced from China Packaging Network (pack.cn), original link: http://news.pack.cn/show-377764.html