Polyethylene prices move, and packaging quotations move with them. That is not a supplier being opportunistic; it is a supplier passing on a cost that is roughly two thirds of what they charge you.
Understanding the mechanism will not stop the movement. It will tell you which parts of your bill you can do something about.
Where the price comes from
Roughly, and it varies by product:
- The polymer — 60 to 75% of the cost of a film or a sack.
- Conversion — extrusion, printing, converting, waste. 15 to 25%.
- Freight — 5 to 15%, and higher for bulky low-density goods like empty boxes.
The polymer is the part that moves, and it moves for reasons that have nothing to do with packaging: naphtha and ethane feedstock, cracker capacity and outages, energy prices, and the balance between European production and imports.
Why quotations have a validity period
This is why a serious polyethylene quotation holds for a stated period — fourteen days is typical — rather than indefinitely, and why anybody offering an open-ended price is either building a margin against the risk or has not thought about it.
Neither is good for you. The first means you pay for the insurance whether or not the price moves. The second means the price gets revisited anyway, less comfortably, usually at the point of order.
On repeat programmes the answer is a quarterly fixed price rather than a spot quotation. Most plants will agree one on a running specification if asked, and few offer it unprompted. It is worth asking for.
The three things within your control
Feedstock is not one of them. These are.
1. Weight
You are buying kilograms. Every gram you do not need is bought at the market price, every time, forever.
Two examples with real arithmetic behind them:
- A sack specified 10 µm heavier than the job needs, at around 25,000 sacks per tonne, is roughly a third of a tonne of polymer per 25,000 sacks doing nothing.
- A wrapper set to 150% pre-stretch instead of 250% uses 169 g of film per pallet instead of 121. At 13,800 pallets a year that is two thirds of a tonne, or about €1,468.
The sack duty selector and the film cost calculator are where to look for your own figures.
2. Freight per unit
Sacks and film are dense. Boxes and pallets are not. For bulky goods the freight share of the delivered price is large, and it is almost entirely a function of how full the vehicle is.
Turning several part loads into one full load is usually a bigger saving than any price negotiation on the goods themselves. It is also the saving most often left on the table, because it needs somebody to look at the whole programme rather than at one line of it.
3. Specification churn
Every change of specification is a new production run, a new setup and, for printed goods, new plates. A supplier absorbing three specification changes a year is pricing for four.
Settling a specification and running it is worth a discount. It is worth asking for one explicitly.
What to ask a supplier
“What proportion of this price is polymer, and which index do you follow?”
You will not always get a number. You will learn a great deal from whether the question is understood.
A supplier who can tell you what they price against, and will fix a quarter against it, is one you can plan with. A supplier whose price simply arrives each time is one you are guessing with.