The Mintec Category Index for packaging (global) maintained an upward trajectory in August, rising by 2.1% m-o-m to USD 1,789/MT. This represents an increase of 68% compared to the same period the previous year and 35% since the beginning of the year. The index was primarily driven by a rise in plastic and metal prices, as demand continues to surpass supply for packaging materials.
In August, the plastics market experienced mixed price growth, with prices continuing to rise in the US on sustained supply tightness. On the other hand, EU prices were flat or slightly weaker on improved production as resins factories reopen and ramp up production.
Although many US plants continue to reopen following disruptions earlier in the year, supply is expected to remain tight in the US resins market. Planned turnarounds and expected plant disruptions during hurricane season and the winter months have meant many producers are still operating under Force Majeure conditions. This has supported prices for US PP, which increased by 10% m-o-m to USD 3,808/MT in August, despite relatively strong inventories. US HDPE and LDPE markets were also affected, and prices rose 3.9% and 3.2% m-o-m to USD 2,657/MT and USD 3,208/MT, respectively.
EU plastics prices, in contrast, continued to weaken in August, marking the second consecutive month of falling prices. HDPE and LDPE prices led the month's losses, falling by 2.3% and 1.8% m-o-m, to EUR 1,848/MT and EUR 2,271/MT respectively in August, due to more readily available supply. Imports of all plastics into the EU remain weak from Asia and the Middle East due to shipping delays and surging freight costs. There may be a potential upside for the EU market if there is a significant increase in crude oil prices. However, with concerns around the delta variant of coronavirus and slowing global growth, price growth in the oil market will likely be slow in the short term.
Steel sheet packaging prices (US, EU) moved lower in August due to a slight slowdown in incoming orders since the end of July/beginning of August. Meanwhile, aluminium foil prices have soared nearly 50% this year, driven by tight bauxite and alumina supply and increasing demand.
The US steel hot-rolled coil (HRC) price on the CME decreased slightly in August from July's highs, down by 1.3% m-o-m but up by 222.5% y-o-y to a monthly average price of USD 1,888/MT. The m-o-m decline is due to a slight improvement in domestic steel production, coupled with a slowdown in demand. However, upcoming steel mill maintenance is expected to support domestic HRC prices, regardless of the weaker demand from the end-use sector. Due to low demand and trading activity in August, Northern Europe steel HRC also decreased marginally by 0.7% m-o-m, although higher by 185.8% y-o-y at EUR 1,204/MT.
The LME aluminium (3-month) price rose to a new high of USD 2,602/MT in August, up 3.9% m-o-m and 46.9% y-o-y, supported by global supply tightness and soaring demand. In addition, China's Xinjiang region (smelting hub that accounts for one-fifth of the world's supply) imposed output limits on five aluminium smelters, starting from August, as part of efforts to stop illegal production. The high aluminium prices in the US and Europe will likely be sustained for several months due to the Russian export tax (15%) on primary aluminium.
The global paper packaging market remained somewhat stable in August. In the US, paper prices experienced some increases in late August. Kraftliner and testliner prices in Asia stabilised in late August after sharp declines over the past few months.
The August average price of French kraftliner 175gr stayed flat m-o-m but up 37.4% y-o-y at EUR 897/MT as demand continues to outstrip supply. Demand from the e-commerce sector continues to drive the market, and kraftliner supply was reportedly tighter than other corrugated case materials, with inventory levels lower than average. The capacity to increase kraftliner deliveries is limited, and rising costs for raw materials are expected to support a price increase in the coming months.
The average price of French testliner 2 was stable in August compared to July. However, the monthly average price was 53% higher y-o-y, at EUR 750/MT, primarily driven by booming demand and high prices for recycled corrugated case material. As a result, producers are looking to implement additional price hikes in the coming months.