Today, why is it inevitable to buy more to secure your supplies?
Stéphanie, were the price rises on our products in recent months inevitable?
Yes, and I’d even go so far as to say that they were necessary to secure our supplies, keep our markets and guarantee delivery to our customers!
We need to understand quickly why we are where we are. It’s a combination of so many factors! In 2020, with the Covid epidemic, e-commerce is exploding (Amazon and others), and demand for paper for cardboard packaging is soaring, rapidly putting pressure on supplies and costs. That year, for example, paper for corrugated packaging could be bought for €330 a tonne, compared with €800 today!
At the end of 2020, the Chinese economy took off again, sea freight costs increased by a factor of 3 or even 4, and following the government’s ban on importing waste paper, China began to buy at all prices, sharply reducing the availability of materials in Europe.
At the same time, the winter storm in Texas in February paralysed the production of granules, solvents and pigments, and significantly disrupted the plastics and chemicals market in general. Demand for paper, an alternative solution, was further increased. Paper production was running at full capacity, machine maintenance was being postponed, and incidents and stoppages were multiplying, sometimes leading to production line breakdowns.
We are also witnessing the concentration of players and the arrival of the AGEC law, and the increases are also hitting recycling, a link in the chain that is finding itself less supplied… as a result, paper prices are rising still further.
In 2021, the US and Canada will also be experiencing an economic upturn. They are experiencing a shortage of materials such as wood, and are importing it from Europe on a massive scale, drying up the supply on our continent. This wood, which we use to manufacture pallets and paper pulp…
With the resurgence of Covid across Europe, production is limited or even halted. Teams are understaffed. The starch needed to make paper was also starting to run out.
Then, in February 2022, war broke out in Ukraine. All energy costs went up (for information, gas accounts for 25 to 30% of paper production costs…). Some paper mills even shut down their machines, and transport costs continue to rise.
As you can see, managing these parameters is a headache for us all.
How has CGP managed this unprecedented crisis?
We tried to resist at first, but our leverage in the face of global European demand was not enough. And like everyone else, and despite our position as leader in our business, we had no choice but to pass on the increases in order to secure our paper supplies and never default on deliveries.We also had to manage the outstanding amounts and high cash requirements needed to meet our purchasing commitments.
Are you saying that secure supplies also mean secure supplies for your customers?
Yes, of course. We’ve done a lot of sourcing in recent months and found new partners and alternatives. We place orders 6 months in advance, which as you can imagine requires sound finances. Our customers understand that we are all linked and that we have to stand together. Securing our supplies means securing theirs. That’s our primary objective. If we haven’t left anyone in difficulty, that’s the result of our foresight and the efforts of our technical and financial teams to find solutions. New prospects for European production are planned for 2024, but the cost of energy will not fall again in the short term. So we remain mobilised and attentive, and we are continuing to look for alternatives. Alternatives for raw materials to secure our supplies, and technical alternatives to optimise our energy costs.
Our customers are with us and have understoodthat ourinterests werelinked ? We will spend together this crisis !
