As the US flexible packaging industry enters a pivotal phase, it faces a changing landscape of challenges and opportunities. After sustained growth and high demand, the industry experienced an unexpected slowdown in the first two quarters of 2023, contrasting sharply with the previous quarters' robust performance. The demand was strong despite COVID being at its peak, shipping costs increasing manifold, and lead times at an all-time high.

Stock up to de-risk

Buoyed by relentless demand, rising prices, and heightened supply uncertainty, industry players found themselves compelled to stock up more than necessary. The result: the accumulation of inventory at various levels within the supply chain, reaching unprecedented price levels. However, as the world gradually returned to a semblance of normalcy and the global supply chain regained stability, freight rates reverted to pre-COVID levels, and lead times improved significantly, reducing the turnaround time from four to six months to a mere two to three months.

The Expansion Dilemma

Building upon years of profitability and sustained growth, late 2022 witnessed new capacities in the flexible packaging landscape, predominantly in Asia. This expansionary trend is set to continue throughout this year, ensuring a steady influx of additional capacities. As a result, the industry has started to witness a decrease in prices thanks to these newly added capacities, reduced fixed costs, and enhanced turnaround times within the same manufacturing locations.

While a select few companies have strategically adopted a cautious approach by purchasing small quantities to maintain lower material costs, the flexible packaging sector remains committed to reducing inventory levels and optimizing their supply chains. Anticipating this trend to continue into the third quarter of 2023, we expect the US flexible packaging industry to gradually shift toward its normal buying cycle and witness some consolidation from 2023 onwards.

The Asian Rise

Asia, already a dominant force in supplying various flexible packaging substrates such as films and foil, is poised to maintain its growth curve. This regional dominance, coupled with excess capacity and demand returning to normal levels, will inevitably drive the prices of films and foil further downwards throughout the rest of the year. The feedstock prices are expected to be stable for the rest of the year.

Partnerships - The Way Forward

Amidst this evolving landscape, the industry is primed to witness an influx of innovative supply and service offerings. These offerings will be centered around guaranteed supplies at market-linked prices and offering convenient terms, providing a competitive edge to companies. In this evolving landscape, firms that forge long-term partnerships with their suppliers, treating them as strategic allies, will emerge as the ultimate winners.

Endnote

As we conclude this outlook, it's evident that the US flexible packaging industry stands at a crucial inflection point. The third quarter of 2023 promises transformative replete with new dynamics, rules, market shifts, and opportunities. Adaptability, innovation, and strategic partnerships will determine success in this emerging era. Brace yourselves for a buyer's market.

If you want to learn more about flexible packaging or looking for packaging solutions, please email info@webpackagingsolutions.com or call +1-832-953-3192/96.