|Lead time delays||None||1-2 weeks|
|Unit cost changes||5-10% corrugated||None|
Over the past several months, you’ve probably heard the news about increasing tariffs on Chinese goods. Since August, nearly 6,000 line items in the Harmonized Tariff Schedule (HTS) were hit with a 25% tariff increase, going into effect on January 1, 2019.
In the third round of tariffs on September 24, 2018, nearly every type of packaging and packaging material made the list.
How the tariffs will impact Lumi pricing
Starting today, we will increase baseline pricing by 25% for the following products to account for the increase in tariffs. This tariff increase will only affect items in your Dashboard if they are made in China.
Why are we applying the tariff increase today if it takes effect on January 1st? With current lead times for manufacturing and sea freight from China, products ordered today will be affected by the tariff increase by the time they enter the US. You can stay on top of the current supply chain status by viewing the Delivery Schedule.
Historically, we have sourced the majority of our flexible plastic packaging (poly mailers, poly bags, laminated pouches) from China because of their highly competitive pricing, matched with their high standards for construction and print quality. We’re working with our manufacturing partners in mainland China to mitigate the U.S. tariffs as much as possible and provide geographic alternatives when we can.
As always, we’ll keep you updated on any price fluctuations and the drivers behind them.
Paper mills announce linerboard pricing twice a year, typically from February through March and September through October. We post all updates to linerboard pricing on our Corrugated Price Tracker.
We expect linerboard pricing to increase by $50/ton at the end of March, and this will increase the price of corrugated boxes by end of April 2018. At a glance, here are the predominant factors that are driving the pricing increase:
Reasons cited by mills for this particular increase include freight costs, moderate demand growth, and mill capacity. Domestic freight costs are at an all time high and the highest they’ve been since 2015, according to data from the U.S. Bureau of Labor Statistics. Demand continues to moderately increase a few percentage points per year, driven largely by the ecommerce sector. Current mill capacity utilization is at 93%-98%, so any growth is strains demand. (For reference, full capacity is typically considered to be around 85%, since 100% volume renders a factory inoperable.)
These are the predominant factors for the increase, but there are certainly other factors at work here as well. Notable, significant acquisitions on both the mill and converting side over the past year, and export paper pricing is at a high point.