Price Increases in the Labeling Industry

2021-05-12 18:11:37 admin

Price Increases in the Labeling Industry

Price Increases in the Labeling Industry

For the first time in over twenty years, the labeling industry is seeing multiple price increases.

Almost everything that is used to create a label is seeing price increases, from paper to silicone to the freight.

Everyone is facing the same problem, and no one is used to these price increases, but here at Smith Corona, we are still doing everything we can to get you high-quality labels.

With new announcements from Avery, Raflatac, Green Bay, Mactac, and others, thermal labels prices will increase once again by 3-6% in October 2018.

But why are price increases happening, and why are they increasing every quarter? Unfortunately, there are several reasons.

Silicone and Adhesive Shortage

Silicone metal, the material used to produce silicone, is mainly found in China. However, due to demand and new tariffs, it will be even more costly for U.S. silicone producers to acquire the raw materials.

Because 60% of the global supply of silicone comes from China, new tariffs have caused the price to almost double, greatly hurting the market.

How the Shortage Affects Companies

Sun Chemicals, the largest producer of printing inks and pigments in the world, saw prices raised by 30% on all of their silicone based products as of May 2018.

“The ongoing silicone shortage has caused our suppliers to continue increasing prices beyond anything we have seen in recent years,” said Vice President of Sun Chemical, Dennis Sweet. He continues, “[w]hile Sun Chemical has utilized all its resources to offset these shortages and increases, we need to pass some of these increases on.”

Sun Chemicals isn’t the only one in the industry dealing with price increases.

According to the Alexander Watson Associates’ Annual Survey of Industry Professionals, the concern for the availability of raw materials is high among members of the industry. In addition, all respondents of the survey said they experienced cost increases throughout 2017, and most of them expect the costs to continue to rise throughout all of 2018.

In early 2017, Momentive workers began a strike that shut down the silicone manufacturing company for over 2 months, as well as shutting down silicone production in their German facility.

“Silicone facilities worldwide have fallen behind necessary demand,” said Alex Sechi, a senior account manager for BRB International B.V., a producer of silicone. “The demand has increased all over the world.”

What the Future Holds

Unfortunately, there is little hope for a decrease in pricing for silicone.

“We know this is not a short-term problem,” said Zack Beier, director of purchasing at Q Holding Co, a manufacturer of silicone products. “There’s not one single constraint that can be remedied to solve the industry’s problems.”

The silicone market is expected to be extremely tight for the next two years and the price increases show this.

As for adhesives, raw materials are on the rise as well. Propylene prices are up by 50% since 2016 and methyl methacrylate is up by 10-20% since 2016.

Adhesive Price Increases:

  • SCIGRIP: 8%

  • H.B. Fuller: 5 – 12%

  • Ashland Inc: 3 – 4%

Silicone Price Increases:

  • WACKER: 10 – 20%

  • Evonik Industries AG: 1 – 10%

  • Ashland Inc: 3 – 4%

Paper Price Increases

There has been a worldwide increase in the demand for pulp used in papermaking.

It is believed that part of these price increases is the result of two things: the rise in demand for recycled corrugated boxes and China refusing to take highly contaminated recycled fiber. Chinese paper manufacturers are buying pulp in bulk for those boxes, reducing the pulp supply for the label industry.

In the last year, pulp prices have increased by 20-50%, showing no signs of slowing as sellers continue to raise prices. According to the Federal Reserve Economic Data,  the producer price index for pulp, paper, and allied products went from 167.4 in February 2017 to 219 in July 2018.

An Increase in Raw Materials

Raw material manufacturers have been increasing their prices, and this isn’t the first time.

These increases have been running multiple paper mills out of business, including West Linn Paper Company, a company forced to close down after 128 years due to the lack of available pulp.

Another factor to the increase is numerous paper mills losing money and shutting down. Some of these are due to economic factors while others are environmental. For example, Hurricane’s Irma and Harvey have resulted in 18 U.S. pulp and paper mill shutdowns.

Companies in Crisis

Since 2010, there have been eight major coated freesheet paper mill closures, and with fewer mills in operation, the number has been reduced to 27%.

The price increase for paper is unavoidable. With recent closures and the market as tight as it is, the price increase for paper is unavoidable.

Appvion, the 3rd largest paper coater in the world, filed for bankruptcy in October of 2017. They produce up to about 50% of all the coated direct thermal paper in the United States. Prices have increased by almost 30% due to input prices as well as Appvion trying to get to profitability, but they are still under pressure financially.

This results in the price rise of direct thermal paper, which will be up by 40% by the end of 2018.

As prices rise, companies usually get a one to two-month notice beforehand and typically prices rise by 8 – 10%. As we approach the fourth price increase, direct thermal paper costs are expected to have risen a total of 45% by the end of the year.

Raw Material Manufacturer Price Increases:

Mill ClosuresCapacity (in tons)
Newton Falls (2010)80,000
Hamilton (2012)50,000
Courtland (2014)115,000
Rumford (2015)60,000
Wickliffe (2015)280,000
Jay (2017)90,000
Combined Locks (2017)300,000
West Linn (2017)265,000

Paper Mill Closures

Raw Material ManufacturerPrice Increase
Green Bay Packaging Inc7%
UPM Raflatac6-8%
Acucote Inc5-7%
Spinnaker Coating LLC5.5-6.5%
Avery Dennison5%

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