Paper buyers returning in large numbers to the UK as global shipping cost increases start to bite
Friday October 15, 2021
Recent analyses of sales enquiries from BPC(UK) have shown that large numbers of commercial international paper buyers are looking to return to the UK market as the effects of rising global demand, long lead times, rising costs, and the effects of Brexit have impacted on the security of supply chains from overseas markets and particularly China.
One of the primary reasons for the shift back to UK manufacturing and supply in the paper industry is the cost of shipping materials from China. The cost of shipping between China and the UK increased by over 350% last year, severely impacting companies that rely on being able to import products such as paper and pulp: increasing the cost of the raw materials and finished paper products.
The cost increase can be attributed to many factors, but none more so than the impact of Covid-19 on the shipping and transportation industry and a misalignment between the implementations of lockdowns around the world. In the US, the UK, and the EU, lockdown resulted in higher demand for industrial and consumer goods made in China.
While this increase in global demand encouraged Chinese manufacturers freed from lockdown to pack their products into shipping containers for export around the world, it has been difficult for US European and UK companies still affected by various levels of lockdown to refill these containers for a return journey to China. This has left them effectively stranded, reducing the supply and availability of these containers, and pushing up transportation costs. According to the World Trade Organization, a container that before the pandemic cost around £600 to ship from Harwich to Shanghai is now going for as much as £4,500.
UK companies are starting to report that the increase in shipping costs means they are making a loss on some sales; importing from China is, in turn, becoming a less profitable business option with companies looking at alternatives, including sourcing once again from UK suppliers. One UK Trade Association has said its members have reported increases in shipping costs of up to 300% since the start of 2020. According to Capital Economics “Signs of strain are building up and the situation is likely to intensify before it eases.”
All this pressure, whilst bad news for many global companies, does mean that companies such as BPC(UK) who manufacture Paper Rolls and Thermal Till Rolls are benefiting from companies looking to spread their supply risk and source again from European or UK markets.