The Film and Adhesive Supply Chain: Things Are Getting Better!

Global pandemic. Russia’s invasion of Ukraine. Fluctuating U.S. economy. A conflagration of factors has made the last several years particularly challenging in the film and adhesive supply chain. This has caused pain and frustration for customers looking to purchase forms and labels, as well as for the vendors producing these products. Paper and label stock have been subject to allocation, and when stock is available, prices have been skyrocketing. But with a new year, things are improving.

We are hearing reports from our suppliers that, while paper shortages and associated inflation will continue into 2023, in the film and adhesive world, things are trending in a positive direction. Domestic energy, packaging, and freight are beginning to stabilize, and the slowdown in demand during Q4 2022 has allowed the market to catch up on much of the backlog. While international shipping is still experiencing long shipping lead times (many of the components of film and adhesives come from overseas), our suppliers report that their suppliers are fully able to meet demand again. Things are getting better!

So where do things stand today? While it remains a mixed bag—continuing shortages and price pressures in some areas, with easing price pressures and growing stock availability in others—we are seeing noticeable improvement.

Status in the Film and Adhesive Supply Chain

According to one of our key suppliers, here is current situation on a number of fronts:

Acrylic Adhesives

The availability of acrylic adhesives continues to improve over early 2022. Key chemical building blocks for adhesives are more in balance, and costs are expected to remain flat through Q1 2023. Previous logistical issues with shipping containers and bulk tankers are expected to improve, as well.

Hot Melt Adhesives

The hot melt adhesive component supply has stabilized. However, pricing for hot melt adhesives could experience upward pressure as a result of the volatility of oil and gas feedstocks and energy costs throughout the winter months.

Films (Liner and Face)

Polyester (PET) film: Inventory of available supply is stabilizing. PET resin pricing is forecasted to decline in the first quarter as demand for other PET applications declines during the winter months. Demand for PET liner is expected to grow as PET liner become more familiar to the market.

Polypropylene (PP) film: After a period of stabilization, the PP market, on the other hand, is becoming more volatile—particularly as it relates to international sources. Increases in energy costs are becoming a factor with global suppliers.

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For more detail on the issues impacting the label supply chain, see our post “What’s Behind the Label Shortage?“

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Paper Stock

While things are improving in the area of film and adhesives, allocations and erratic lead times continue in the paper supply chain. Challenges remain:

• High demand for pulp
• Shortages of papermaking/coating chemicals
• Paper production capacity shortages

These factors have led to the continued need for allocation at nearly all paper mills producing pressure-sensitive raw materials. While pulp prices have likely stabilized, any cost benefit is not expected to flow through to specialty papers.

In addition, the impact of recently announced mill closures (and repurposing of mills) continues to be felt in the fundamental shortage of North American paper. This will adversely impact the label industry for the foreseeable future. This is forcing North America to become more reliant on imported paper. Further inflation is expected, with demand continuing to outpace capacity. We also expect continued rising energy and labor costs. Cost and availability of imported papers from the EU, in particular, are being impacted by tremendous energy increases and high logistics costs.

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For a more detailed look at the issues behind the paper shortage, see our post “What’s Behind the Paper Shortage?“

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Freight

The cost of ocean-bound freight and truckload freight rates have recently declined. The recent slowdown of retail and ecommerce shipments may signal a continuing easing of freight rates. However, this easing is expected to be overwhelmed by the high volatility of diesel and other energy costs.

With Film and Adhesive Supply Chain Improvements, We’re Ready to Rock ‘N Roll

Here at Wise, we are feeling the impact of the easing of the market. While there are still areas of volatility and price pressure, our stocks of materials are high and our ability to access stock has improved. Most of the more common materials (such as polypropylene films and polyester films) are becoming more available. Our lead times on purchase orders have improved, as well.

We aren’t out of the woods yet, but we are starting to see the light between the trees. If you’ve been slowing up on orders until the supply chain issue resolves, get those orders in! We’re cranking things and are ready to get back to full capacity!

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