Blog Posts & Case Studies
What factors are causing the increasing costs of cardboard boxes?
If you have tried to source packaging within the last year, you will probably have struggled to get what you were looking for. You will have noticed the increase in cost and the insanely long lead times from most packaging suppliers. The price of recycled cardboard that is used to make new boxes rose from £10 a tonne in January 2020 to £150 in April 2021. All cardboard manufacturers and cardboard suppliers are facing the same issues, rising costs of cardboard and raw materials.
So what factors are causing the increase?
There are several areas that we need to delve deeper into to understand the reasons why cardboard costs are higher than they were this time last year. There has been an influx in demand for products sold via online methods, requiring more use of cardboard boxes. We are living in a digital world; more companies are providing more products online and consumers are more comfortable purchasing online. Companies are stockpiling packaging. We did not recycle as much as we should have during the pandemic. And finally, the cost of shipping has increased during the pandemic.
Let us look at each of those factors in some more detail.
Influx in demand
Firstly, we need to look back to 2020. Shop closures during lockdown meant that we had no alternative but to turn to shopping online. Online sales have been accelerated because of the pandemic. 200 millionextra parcels were delivered by Royal Mail in the run up to Christmas 2020. Interestingly, it is estimated that approximately 17.2 million Britsplan to switch to online shopping permanently post-pandemic. UK Online Retail Sales were £59bnin 2018, £61bnin 2019 and jumped to a staggering £92bnin 2020. UK Online Retail Sales were £59bnin 2018, £61bnin 2019 and jumped to a staggering £92bnin 2020. Amazon's UK revenue increasedfrom £12.8bn in 2019to £19.5bn in 2020.
We are going digital
Internet sales as a % of total retail sales in the UK Feb 2020 - 20.2% Jan 2021 - 36.3%. Businesses are providing more online and therefore we are purchasing more online. Some businesses that were not previously trading online because they did not have the know-how or the infrastructure to do so, have discovered new and innovative ways of how to become an ecommerce business. Smart packaging is being developed and used in some industries that may have been deemed unable to trade online in the past. Industries such as food and agriculture with difficult to transport perishable goods now have industry specific packaging. Ecommerce’s share of global retail trade grew from: 14% in 2019 to 17% in 2020. Some of that growth was organic and some was due to the pandemic however the trajectory of digital growth is years ahead of where it was estimated to be at this point. According to the Confederation of Paper Industries(CPI), demand for cardboard boxes from online retailers is five years ahead of where it had expected it to be before the pandemic.
Stockpiling
It is all to do with supply and demand. The more we demand the lower supplies are, the higher the prices are. The more producers source raw materials, the more prices are pushed up. Bigger companies are stockpiling boxes to fulfil increased orders and potential future orders. In fact, 18.6% of UK manufacturesadmitted to stockpiling in 2020. Remember the loo roll shortage? The same principle applies. People panic bought out of fear of short supply, demand outstripped supply resulting in empty shelves.
Lack of recycling
To make more cardboard, we need to recycle more cardboard. During the pandemic, we did not recycle as much. The amount of ‘local authority collected waste’ sent for recycling in April to June 2020 was 2.7 million tonnes- down 0.5 million tonnes from 2019. Prices of old cardboard used to make new boxes rose from £10 a tonnein January 2020 to £118 in February 2021 and £150 in April 2021.
Cost of shipping
There has been a four-fold increase in Shipping Costs. Shipping a 40-foot container from Asia to northern Europe has increased from £1,400in November 2020 to £6,500 in January 2021 and to £7,800 in May 21. Companies are being quoted £10,000to ship a container to the UK, when the usual price is £1,800.
As the world gets back to normal, we should begin to see the light at the end of the tunnel and things begin stabilise in most industries.
Written by Janan Thomson, Marketing Manager at McKinleys Group. McKinleys Group is a B2B packaging supplier & distributor in the South-East of England. McKinleys offer a wide range of eco-friendly packaging.
