BCF Information note - Wallcoverings raw material prices hit new high

New statistics published in the last few days show the spectre of raw material price inflation continuing to loom ever larger over the wallcoverings industry with new data for December and January showing another round of record increases.

For the key raw material of wood pulp, prices for Northern Bleached Softwood Kraft in Europe were up 51% on this time a year ago while the figure for Bleached Hardwood Kraft was 70% higher according to industry sources.

Other important raw materials have also continued to increase rapidly with the latest figures from the ONS showing the index of input prices for the paint and printing inks sector increasing by a further 19% in January this year. Already by June 2021 prices were up 10% but by the end of the year the rate of change had almost doubled making it the fastest increase since 2008.

A major contributing factor has been the huge increase in oil prices which were on average up 70% in 2021 with more recent figures for today (21st February) showing Brent spot prices at $94 per barrel being up a further $20 since the end of December.

In addition, surging energy prices have piled further pressure on wallcovering manufacturers with more increases expected later in the year as contracts come up for renegotiation at much higher prices. However, there is some better news here compared with a few weeks ago as gas prices have come off the peak levels seen just before Christmas.

For raw materials there are few signs of any respite as we head further into 2022 with availability and supply constraints due to the pandemic still adding further to purchasing managers worries. On top of this, a turn for the worse in the Ukraine standoff could see more turmoil in international commodity prices.

Some of the biggest price hikes in December were again in solvents but with resins and related materials, pigments and packaging all reporting further increases.  For solvents, some prices were more than double the level seen in December 2020. For pigments, increases of about 20% on a year ago were seen for Titanium Dioxide.

Looking to the future, reliable forecasts are hard to come by but with most major forecasting bodies expecting oil prices to remain well above of $70 per barrel for 2022 the indications are that higher costs are here for the foreseeable future.