Question from Darlene: We are hearing about price increases and possible supply issues with stretch film. How do we plan and secure supplies to support our production needs?
Hi Darlene, that is a very timely question and the topic of a lot of conversation in the industry. Since there is no all-seeing, all-knowing crystal ball to guide us, we have to piece together information from many sources and filter that through some common sense.
Supply constraints have been well documented recently, and to understand how they affect stretch film we will begin with resin production. Stretch film resin is produced by the polymerization of ethylene, which can be derived from either natural gas or crude oil. Ethylene is produced from natural gas, while naphtha is refined from crude oil and then broken down into ethylene gas. The bottom line is that stretch film pricing and availability can be impacted by anything that affects the supply of natural gas or oil.
We constantly study events that could impact resin production. It is a little easier for us because our resin is produced domestically, but having said that, we live in a global economy, and the laws of supply and demand apply universally. We are all aware of the recent oil supply challenges, and while oil may still be flowing here in the US, we are seeing prices at the gas pump peak. Uncertainty over supply with strong global demand naturally creates underlying upward pressure on price. However, anticipation is what drives pricing. You can see this as the crude oil price changes with each news release — pessimistic news drives the price up while optimistic news drives the price down, although nothing physical has changed.
So, to answer your question: until something changes to balance out global supply and demand, prices will continue to increase, and if the constraint to the global oil supply continues for an extended period, availability may also become a factor.
As I mentioned earlier, all our resin is produced in the US, so compared to many others in the market, we are in a much more secure position with respect to supply — but we are not fully insulated from escalating prices.
We have seen interruptions in resin supply many times before because of resin plant upgrades, weather events such as hurricanes taking refineries offline, transportation constraints, and so on — with very similar effects. While our current challenge will eventually resolve, the next one can be right around the corner.
The best bet against price or supply volatility is to find a way to reduce the amount of stretch film you use without sacrificing load containment. That is exactly what our technology does. I have been preaching for years that you purchase load containment, not stretch film. To meet your load containment requirements, stretch film suppliers have suggested you increase the amount of film you apply to your loads. In a way that works, because you eventually end up with the right load containment — but in the process they sell more stretch film, and it costs you more per pallet. Our approach is just the opposite: we have found ways to achieve load containment by using less stretch film. Yes, we actually want you to use less film! Using less film leads to many other benefits, such as less raw material consumed, elimination of transportation, less material in the waste stream, and less greenhouse gas generated.
We would be happy to provide you with a value analysis that will quantify your savings per pallet, source reduction, improvement in load containment, and increased machine capacity using Rapid Technologies.
Remember, the best way to reduce the impact of increasing prices and short supply — due to events beyond your control — is to simply reduce the volume of stretch film you purchase by half, without sacrificing any performance. And that is what we are here for!
Thanks for asking!
