Author: Site Editor Publish Time: 03-25-2022 Origin: Site
For the time being, the war between Russia and Ukraine may not be completely obvious to the packaging industry in the medium and long term, but it is highly likely to have far-reaching effects. The outbreak of the war has caused the prices of various raw materials to climb sharply, and the operations of many companies in the packaging industry have been directly affected. Companies in the industry have largely suspended various operations in Ukraine, with some announcing the suspension of production and sales in Russia, while others report that they will continue to monitor the progress of the situation before announcing their next move. Meanwhile, crude oil, natural gas and naphtha all hit new highs, as did aluminum products.
Raw Material Prices Rise
Oil and gas prices have soared as a result of the Russia-Ukraine war, with the Independent Commodity Intelligence Service (ICIS) reporting that crude oil prices have reached highs not seen in years over the past week. on Friday, March 4, more than a week since the Russia-Ukraine war, the BFOE physical delivery price for the day was $120 per barrel. And by Monday, March 7, gas prices in the Northwest European market soared to an unprecedented level of more than 270 euros per megawatt-hour.
ICIS Senior Oil Market Analyst Ajay Palma explained that even before the war broke out, supply and demand tensions were driving crude oil prices higher. This precarious supply-demand balance was the result of a strong rebound in demand following the epidemic, while supply was completely unable to keep up.
he crisis in Ukraine has pushed prices even higher, as the global community will be concerned about whether Russia still has the capacity to export 4.5 million to 5 million barrels of oil a day, about half of which is destined for Europe. "The reason it has spiked further in the past few days is that Russian oil and gas exports have been significantly reduced, despite the fact that there are no direct sanctions on Russian oil or gas production," Palma said.
On the oil side in particular, Russia is exporting about 150,000 barrels a day less oil to the rest of the world, purely because of the very low transparency of these sanctions. The announcement on the part of the White House that it is willing to impose sanctions on Russia's oil and gas exports has also pushed up the price point.
According to Palma, the only move that could lower oil prices in the near future would be oil from Iran. "That's the only major factor that can really affect oil prices at this point," Parmar explained, "and now that the nuclear deal makes more sense than it did in the past, it looks like Iranian oil might be coming to the global market soon."
Iran could add about 1.3 million barrels of crude oil per day to the market, which it claims it could do in one to two months, but in reality, 1.3 million barrels of oil per day would enter the market in about 3 - 6 months. Iran also has additional stocks of 80 - 120 million barrels globally that it could supply to the market as well.
"We don't know how much they will release all at once, but you could see maybe 1.5 or 2 million barrels per day of crude coming into the market," Parmar said, "and if we see Russian exports cut in half, say, from 4.5 million to 2.2 million barrels, then an additional 1.5 million to 2 million barrels of Iranian oil would offset a lot, but it wouldn't offset the full negative impact."
Naphtha prices have also been pushed higher, partly reflecting high crude oil prices, but prices continue to rise due to low stocks of key petrochemical feedstocks. "Amsterdam-Rotterdam-Antwerp (ARA) naphtha stocks are now at their lowest level since 2016, very low indeed," commented Palma.
"Russia also supplies a lot of European naphtha demand. About 50 percent of Europe's total naphtha imports come from Russia, so this conflict poses a direct threat to the naphtha market and the crude oil market," he added. Due to high crude oil prices, the price of liquefied petroleum gas has also risen, pushing up the price of petrochemical feedstock.
Ethylene prices, which are closely related to naphtha, have also risen. According to ICIS, 60 percent of global ethylene demand comes from polyethylene, explained ICIS senior analyst Lorenzo Mejia, adding that ethylene contracts signed in Europe earlier this month rose 95 euros per ton, adding that polyethylene prices could be higher than that baseline.
"The impact on prices is obvious and we will definitely see higher prices," he said, adding that "in the very short term, higher polyethylene prices are a possible consequence, which is also related to many demand issues, because in any case, higher energy costs, higher production costs, could also affect demand in Europe."
In the last few years, Russia has increased its exports of polyethylene (mainly HDPE) to Europe. This could also stop, which could affect feedstock prices in the short term, Lorenzo Mejia noted. In the long run, however, this should not be a problem, as European buyers can find alternative sources from the U.S. and the Middle East.
In addition, Reuters reported on Tuesday, March 1, that aluminum prices were on an upward trajectory due to financial sanctions imposed on Russia, which have led to concerns about supplies from Rusal, the largest producer of aluminum material outside of China. According to Reuters, aluminum prices reached a record high of $4,073.50 per ton.
Due to the war in Russia and Ukraine, many printing machine builders are reporting that they are unable to ship equipment to both Russia and Ukraine as scheduled, and sales and services are largely at a standstill.
Messe Düsseldorf Group has suspended its operations in Russia (including the activities of its subsidiary Messe Düsseldorf Moscow). So has Norwegian carton company Elopak, which has halted its activities in Russia and temporarily closed its plant in Ukraine, noting that it will continue to pay the salaries of affected employees.
Stora Enso has also halted production and sales in Russia, as well as exports. The company employs about 1,100 people at its three corrugated packaging plants and two wood products sawmills in the country. It noted that a "mitigation plan" has been put in place to ensure that it has access to imported materials.
In response to the escalating geopolitical situation in Europe and the crisis in Ukraine, UPM has temporarily suspended supplies to Russia. Although international sanctions are not currently targeting the forestry industry directly, UPM says sanctions on the financial sector could affect the company's or its customers' business and transactions in Russia.
Another Nordic giant, UPM, has also temporarily halted its operations in Russia. The group operates a sawmill in Sverre, in Russia's Leningrad region. The mill produces a capacity of 285,000 cubic meters of sawn timber, 95% of which is used in the export market.
International Paper is now considering what to do with its joint venture in Russia, the Ilm Group. International Paper, which owns 50 percent of the Ilim Group, and International Paper, which also owns 20 percent of Sylvamo, a pulp, paper and board producer, have announced that they will cease operations in Russia and evaluate various possible decisions, including a sale or exit from the Russian market.
Allied Group said it is "evaluating all possibilities" for its Russian operations, which are beginning to be affected by the sanctions imposed on Russia as a result of the war between Russia and Ukraine. Syktyvkar does not receive any direct funding from Alliedi, which employs about 5,300 people in Russia and is under increasing pressure to continue operating in the country. In its update alert, Allied said it is evaluating all possibilities for its Russian assets, including "any form of legal divestiture.
CCL, a global leader in specialized labeling, security and packaging solutions for companies, government agencies, small businesses and consumers worldwide, has announced that it will suspend future financial support for its investments in Russia while continuing to comply with all trade sanctions imposed by government decision makers. Kontur, 100% of which is based in Podolsk near Moscow, and the remaining 50% is held by an Azerbaijani entrepreneur focused on labeling customers in the food and beverage and healthcare and hygiene sectors.
Meanwhile, Tassus announced that LABELEXPO Europe, a trade show for the label and packaging printing industry, has been rescheduled for September 11-14, 2023, due to supply chain issues and the war between Russia and Ukraine.
The Forest Stewardship Council of Ukraine (FSC) issued a personal appeal to those involved in FSC certification, and the FSC Ukraine director encouraged stakeholders to take action and take a stand against what he called "a violation of the integrity of the entire region and FSC values. "All possible measures will be taken within the scope of our organization to uphold FSC values and to find ways to effectively address short and long-term challenges." The organization also said it is currently reviewing the situation and expects to issue a statement focusing on forest conservation, first on Ukraine in the next few days and then on Russia in the next few weeks.
On paper packaging, Cepi, an association representing the European paper industry, noted, "The war in Ukraine is causing instability and unpredictability in trade and commercial relations between the EU and Ukraine, as well as between the EU and Russia, and even between the EU and Belarus. Doing business with these countries will clearly become more difficult, not only in the coming months, but for the foreseeable future. This will have an economic impact, which remains difficult to assess."
Finally, the European Federation of Packaging Associations (EPIC) issued a statement outlining its condemnation of the war and support for Ukraine and calling for joint action in response to the invasion.EPIC represents national packaging bodies in 17 countries, including Ukraine.