The coronavirus pandemic has exposed the fragility of global supply chains. There are problems even with products as simple as the transparent film that protects meats and other products in the supermarket. To produce it, the German plastic packaging industry, mostly medium-sized companies, turn to semi-finished products.

A future without plastics

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FOLLOWING

Among them is naphtha, a by-product of fuel production. Oil and chemical companies with refineries in Saudi Arabia, the United States, China and Europe thus play an important role before the manufacturers of the plastic wrap can make their product.

Convoluted supply chains

“The plastic packaging industry is highly interconnected around the world, one branch is highly dependent on one another, and consequently it is also very vulnerable if things get stuck at one point or another,” says Mara Hancker, spokesperson and director. General of the Synthetic Packaging Industry Association (Industrievereinigung Kunststoffverpackungen, IK).

Right now, things get “stuck” in many places at the same time. According to a survey from the beginning of March, three-quarters of companies in the sector complained that their supply of raw materials was scarce or even very scarce. 80% admitted difficulties in acquiring them and the same proportion hoped that the situation would not improve in the short term.

“Raw materials are still hard to come by, and where they can be found they are extremely expensive,” Hancker tells DW still a month after the survey.

Price increase

In the first three months of the year, the plastics used by the packaging industry have risen a lot in price: polyethylene, for example, more than 35%. Others, like polyurethane, have become 50% more expensive in the last six months.

The German Association of the Plastic Processing Industry (GKV) also speaks of a massive disruption of raw material supply chains. Some companies have to reduce production because there is not enough raw material. Others consider the change to alternative plastics, but this is not only a challenge from a technical point of view, but it is linked to all kinds of regulatory obstacles, especially in the food sector.

Lower production, higher demand

How can this shortage occur? The main reason is the coronavirus pandemic, which has “rocked” the global economy and supply chains, Hancker says. For example, maritime transport: first, cargo ships were stuck in ports, and then container prices skyrocketed.

With business declining everywhere, many intermediate product manufacturers have taken advantage of their equipment maintenance, a process that can take months. In addition, other problems were added, such as winter storms in the United States or the collapse in the Suez Canal caused by the container ship Ever Given.

So even though there were fewer inputs available, demand grew more than expected, partly also thanks to China’s economic recovery. “The market is booming there and absorbing everything right now,” Hancker explains. In Germany, he says, the auto and construction industries are driving demand.

Vaccine shipments affected?

Until now, the shortage has been most notable in film and food packaging; But there are already warning signs in the medical sector as well, he says. “Our companies have a lot of difficulty getting expanded polystyrene, which is known as Styrofoam or Airpop. And it is also the material that is currently used to isolate and keep coronavirus vaccines cold during transport.”

It will be some time before the supply situation recovers. In any case, the forecasts of the packaging companies coincide with those of the evolution of the pandemic. “Most of our members anticipate that the situation will ease again at the earliest in autumn,” says Hancker, a spokesman for the IK.

(lgc/few)

Author: Andreas Becker

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