Protection from Rising Packaging Prices Bloomberg via Getty Images

Protection from Rising Packaging Prices

Comparison shopping, replacing and service bundling are effective strategies against the rising cost of transport packaging commodities.

Prices of paper and packaging products are on an upward trend as input costs rise for upstream suppliers and consumer shopping trends drive demand for shipping materials and services, according to a report from IBISWorld. The report anticipates that rising prices for wood pulp and paper will flow on to a number of paper-based packaging products and services.

Corrugated Boxes (Price to increase 3.0%):

The rising price of paper, a key input in manufacturing corrugated boxes, will force operators to increase box prices to maintain profit margins. With growing overall demand for corrugated boxes stemming from consumers and businesses alike, suppliers will be able to raise prices without risking drops in demand.

Molded fiber Packaging (Price to increase 4.2%);

IBISWorld expects the price of molded fiber packaging to grow at an annualized rate of 4.2% in the three years to 2017. Higher wood pulp prices and higher demand for packaging products are expected to fuel such price growth. Additionally, in the three years to 2017, the domestic population is anticipated to grow at an annualized rate of 0.8%. The growing domestic population will require more food, which is often packaged with molded fiber packaging, further driving greater demand in the next three years.

Packaging Services (Price to increase 2.5%).

Packaging service prices are expected to grow at an annualized rate of 2.5% in the three years to 2017. The rising price of packaging supplies will boost supplier input costs, fueling service price growth. Additionally, rising average wages in the packaging services market will further contribute to price growth.

Buyer Power

This report suggests that buyers can protect themselves from rising prices in multiple ways:

In the corrugated boxes market, buyers can take advantage of the commoditized nature of the product and shop around for the cheapest price.

Buyers of molded fiber packaging can look to viable substitutes if they feel the supplier is charging too much.

Buyers in the packaging services market can leverage the price competition that comes from low market share concentration. In addition, buyers can bundle these purchases with other paper and packaging goods from the same supplier, such as tape, cushioning or stationery, to help secure a lower price. Buyers may also get volume discounts by placing large orders or entering into longer-term contracts with suppliers.

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