Converters contend with raw material pressures

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August 1, 2008 - Packaging converters face raw material cost pressure at least through end of 2008. Study, published by Standard & Poor’s Ratings Services, New York, NY, Industry Report Card: Global Packaging Companies Struggle With Raw Material Pressures, predicts especially tough time for companies that sell primarily in US where demand for rigid, flexible packaging for dairy, beverages, foods is softening as consumers reduce spending to offset high gas prices, rising food prices. More globally diversified converters, especially in metal, glass packaging, benefit from growing demand in eastern Europe, Asia, Latin America. “The biggest challenge facing plastic packaging companies is the unprecedented increase in raw material prices, namely polyethylene and polystyrene,” says Standard & Poor’s credit analyst Liley Mehta. “We expect these price hikes to hurt earnings and working capital for most companies in the second half of 2008,” she concludes. With effect of stimulus package wearing off, Standard & Poor’s economists anticipate mild recession to start before end of 2008, continue into 2009 with improvement by late 2009, through 2010.
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