Today, why is it inevitable to buy more in order to secure your supplies?
Stéphanie, were the price hikes on our products in recent months inevitable?
Yes, and I’d go so far as to say they were necessary to secure our supplies, keep our markets and guarantee delivery to our customers!
We need to quickly understand 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 a strain on supplies and costs. That year, for example, paper for corrugated packaging could be bought for 330 euros a tonne, compared with 800 today!
At the end of 2020, the Chinese economy took off again, sea freight costs multiplied by 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 material in Europe.
At the same time, the Texas winter storm in February paralyzed the production of granules, solvents and pigments, and had a significant impact on the plastics and chemicals markets in general. Demand for paper, an alternative solution, was further increased. Paper production was running at full capacity, machine maintenance was postponed, and incidents and stoppages multiplied, sometimes leading to production line breakdowns.
We’re 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 is still on the rise.
In 2021, the US and Canada are also experiencing an economic upturn. They are experiencing a shortage of materials such as wood, and are importing it massively from Europe, drying up availability 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 is also starting to run out.
And 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 did CGP manage this unprecedented crisis?
Initially, we tried to resist, but our leverage in the face of global European demand was insufficient. And like everyone else, despite our leading position 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 our outstanding amounts and the high cash requirements needed to meet our purchasing commitments.
Does secure supplies 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’re all in this together, and that we have to stick together. Securing our supplies means securing theirs. That’s our primary objective. If we haven’t left anyone in difficulty, it’s the result of our anticipation and the efforts of our technical and financial teams to find solutions. New European production prospects are planned for 2024, but the cost of energy is not going to fall in the short term. So we remain mobilized and attentive, and continue to look for alternatives. Alternatives for raw materials to secure our supplies, and technical alternatives to optimize our energy costs.
Our customers are with us and have understoodthat ourinterests werelinked ? We will spend together this crisis !
