Q4 Industry Update:
Packaging Raw Materials,
Economic Activity,
and Transportation
Introduction
At Berlin Packaging, we pride ourselves on providing the most reliable, efficient, sustainable, and cost-effective packaging solutions available to our customers. As your packaging partner, we closely monitor industry conditions that may impact your business. Our Industry Update, published quarterly, features news and analysis on Plastic Resins and other Packaging Raw Materials, Economic Activity (consumer spending, inflation, interest rates, GDP), Ocean Freight, and Domestic Transportation.
Resins & Raw Materials
Prices for packaging raw materials have been relatively stable in recent months due to slowing inflation, declining energy prices, tepid demand, ample supplies, and unutilized manufacturing capacity. However, the possibility of new tariffs on imported goods by the incoming Trump-Vance administration and a potential dockworkers strike at U.S. East and Gulf Coast ports in January could push prices higher at the start of 2025.
The Producer Price Index (PPI) for final demand goods (e.g., CPG products, raw materials) and services (e.g., transportation, warehousing) increased 0.2% in October after rising 0.1% in September and 0.2% in August. A 0.3% gain in final demand services drove the October increase, while the final demand goods inched up by 0.1 % following two consecutive monthly declines.
The October index for transportation and warehousing of personal consumption goods decreased by 0.4%, following a 0.4% decline in September and a 0.8% drop in August. Over the past 12 months, this index has fallen 0.7%.
Berlin Packaging maintains a best-in-class approach to sourcing packaging materials and manufacturing platforms. We are not bound to a specific material, technology, tool, or country of origin, affording us tremendous flexibility to find the most cost-effective packaging solutions for our customers.
Plastic Resins
The October PPI index for intermediate demand plastic resins rose 3.5%, following two monthly decreases. The October index for intermediate demand plastic packaging products increased by 0.4%, following a 0.2% increase in September and a 0.4% drop in August. Over the past 12 months, the index for intermediate demand plastic resins increased by 2.2%, and the index for intermediate demand plastic packaging products rose by 0.7%.
Recycled PET prices moved higher recently as demand for bottled water grew because of relief efforts in the southeastern U.S. from the devastation caused by Hurricane Milton in October and Hurricane Helene in September. Both hurricanes made landfall on the west coast of Florida. In addition, many CPG companies are working to meet their 2025 commitments for recycled content in plastic packaging, further buoying prices.
In October, the Coca-Cola Company announced it had fully transitioned its 20-oz bottle portfolio of Coke products to 100% recycled PET in the U.S. By year's end, the beverage giant estimates it will save 80 million pounds of virgin plastic or nearly 2 billion bottles.
Here's a brief rundown of the current market conditions for various resins:
- PET (Polyethylene Terephthalate): Lower seasonal demand for beverages due to colder weather plus higher resin inventories have contributed to a slight decline in PET prices.
- HDPE/MDPE/LDPE (Polyethylene): PE prices are forecast to be flat in November, following a price drop in October amid building inventories and declining demand.
- PVC (Polyvinyl Chloride): Slowing housing starts (construction accounts for 60% of PVC sales) have reduced demand, leading to decreased PVC prices.
- PP (Polypropylene): High inventories, reduced demand, and lower feedstock costs have led to lower PP prices in October, while November price projections are flat.
- PS (Polystyrene): PS prices are expected to roll over from October to November, following a price drop in October due to lower raw material costs.
- Post-Consumer Recycled (PCR): According to the 2023 packaging volume data from the 2024 Ellen MacArthur Foundation (EMF) Global Commitment report, the weighted average of plastic PCR content has increased to 14% from 12% in 2022. However, EMF signatories (including businesses representing 20% of all plastic packaging produced globally) are unlikely to meet their 26% PCR target by 2025.
Glass
The percentage of U.S. beer packaged in glass packaging continues to lose market share to metal cans, according to data from the Beer Institute. In 2023, glass accounted for 26.9% of beer containers, down from 34.7% in 2014. Nearly two-thirds (64.1%) of beer was packaged in metal cans in 2023, up from 54.8% in 2014. For imported beers, glass is still king, representing 55% of import volume.
Metal
U.S. recycling rates for aluminum beverage cans dropped to 43% in 2023 from 45% in 2020, according to the latest data from the Aluminum Association and the Can Manufacturers Institute (CMI). The 2023 rate is far below the average recycling rate of 52% since tracking began in 1990. The two groups cite aging recycling infrastructure and a passive approach to recycling policy for the downturn in recycling rates.
"While we recycled more than 46 billion cans in 2023, we threw away more than 61 billion cans," said Charles Johnson, president & CEO of the Aluminum Association. "That’s nearly $1.2 billion worth of aluminum that ends up in a landfill every year."
Aluminum beverage cans contain an average of 71% recycled content, down slightly from 73% in 2019.
Pulp & Paper
According to the American Forest & Paper Association (AF&PA), the U.S. recycled about 71% to 76% of cardboard and 65% to 69% of paper and paper-based packaging in 2023. The cardboard recycling rate is down significantly from the 93% figure for 2022 because of new data collection and calculation methodology from AF&PA, while the paper recycling rates were similar for the two years.
Four major fiber-based packaging suppliers recently announced 2025 price increases for linerboard, corrugated, and other paper products. The new prices will take effect in January.
Although Berlin Packaging cannot control the price of raw materials, we do offer multiple value-added services and income-boosting solutions to help our customers Package More Profit. Over the past few years, Berlin Packaging has added more than $200 million in profit to our customers as a unique benefit of doing business with us.
Economic Indicators
As the last couple weeks of 2024 tick off the calendar, the U.S. economy appears to be on solid footing with a strong labor market and healthy consumer spending. However, inflation remains above the annual 2% target. Here's a snapshot of recent economic activity, data, and news influencing the consumer packaged goods (CPG) market and the packaging industry in North America.
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U.S. consumer spending rose 0.4% in October, following a 0.8% increase in September.
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Consumer sentiment was positive for a fifth consecutive month in December.
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On an annual basis, U.S. and Canadian inflation are 2.7% and 2.0%, respectively.
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The Fed cut interest rates by 0.25% in November, the second reduction in 2 months.
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In the third quarter, U.S. GDP rose 2.8% and Canada's real GDP edged up 0.3%.
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Thanksgiving to Cyber Monday holiday shopping beat expectations.
Consumer Spending and Sentiment
U.S. consumer spending and retail sales increased 0.4% month over month (MOM) in October, following a 0.8% gain in September. Food and beverage store sales inched ahead 0.1% in October after posting a 1% gain in September. Health and personal care store sales fell 1.1% in October, following a 2.3% surge in September, while building materials & garden supplies stores showed sales advances in October (0.5%) and September (1%). Online shopping sales grew 0.3% in October and 1.7% in September.
In Canada, consumer spending and retail sales increased 0.4% MOM in September, according to data from Statistics Canada. Higher sales of food, beverages, alcoholic beverages, and building materials & garden equipment drove the September gain. Statistics Canada projects retail sales to rise 0.7% MOM in October.
Consumer sentiment — a measure of how U.S. consumers view their finances and the economy — increased for the fifth consecutive month in December, rising about 3% to its highest reading in seven months, according to the University of Michigan consumer sentiment survey. Year-ahead inflation expectations rose to 2.9% in December from 2.6% in November, the highest reading in six months but within the 2.3% to 3.0% range seen in the two years before the pandemic.
Berlin Packaging's mission is to improve our customers' net income through our packaging products and services. We help to increase their sales, reduce costs, and/or improve productivity. Along with having a positive impact on their income, we are committed to providing accurate and timely information and products.
Inflation and Interest Rates
The U.S. consumer price index (CPI) rose 0.3% in November, after rising 0.2% in the previous four months, according to the Bureau of Labor Statistics. Food at-home prices rose 0.4% in November, while food away-from-home costs increased 0.5%. Energy prices increased 0.2% in November, while the cost of personal care products also grew. On an annual basis, the CPI rose 2.7% for the 12 months ending in November.
The annual inflation rate in Canada rose to 2.0% in October, up from a 1.6% increase in September, according to Statistics Canada. Monthly, the CPI rose 0.4% in October following a 0.4% decline in September. Prices for food purchased from stores accelerated YOY in October (2.7%) compared with September (2.4%). This was the third consecutive month grocery prices outpaced general inflation.
At its November meeting, the U.S. Federal Reserve reduced interest rates by 0.25% to settle at 4.50% – 4.75%, the second rate cut in two months. Some financial analysts believe the U.S. central bank will further reduce rates by 0.25% at its mid-December meeting. In Canada, the Bank of Canada cut its benchmark interest rate by 0.5% in December, lowering the rate to 3.25%. Since June, rates have declined by 1.75%.
U.S. GDP Rose 2.8% in Q3
In the third quarter, U.S. gross domestic product (GDP) climbed 2.8%, reflecting increases in consumer spending, exports, federal government spending, and nonresidential fixed investment. GDP growth has exceeded 2% for eight of the last nine quarters.
In Canada, the real GDP advanced 0.3% in the third quarter, following 0.5% gains in the first and second quarters. Higher household spending and increased government expenditures contributed to the rise in Q3 GDP, while slower non-farm inventory accumulation, lower business capital investment, and lower exports moderated overall growth.
Holiday Weekend Sales Beat Expectations
The five-day holiday weekend from Thanksgiving through Cyber Monday attracted an estimated 197 million U.S. shoppers, according to research from the National Retail Federation (NRF). While the figure was below last year's record of 200.4 million shoppers, it beat NRF's initial expectations of 183.4 million.
About 126 million consumers shopped in-store, up from 121.4 million in 2023, while online shoppers totaled 124.3 million, down from 134.2 million shoppers last year, reported NRF. The leading shopping destinations during Thanksgiving weekend were department stores (42%), online (42%), grocery stores and supermarkets (40%), clothing and accessories stores (37%), and discount stores (32%).
Consistent with last year, 86% of shoppers purchased gifts and spent $235 on average — $8 more than last year, noted NRF. The top gifts purchased were clothing and accessories (bought by 49% of those surveyed), toys (31%), and gift cards (27%). Nearly a quarter of shoppers (23%) bought food, candy, personal care, and beauty items.
Online shopping from Thanksgiving through Cyber Monday (Cyber week) totaled $41.1 billion in the U.S., an 8.2% YOY increase, according to data from Adobe Analytics. Consumers spent $13.3 billion online on Cyber Monday, up 7.3% YOY and surpassing Adobe's initial projection of $13.2 billion.
From Nov. 1 through Dec. 2, consumers have spent $131.5 billion online, up 9% YOY, reported Adobe. The company expects the full holiday season (Nov. 1 to Dec. 31, 2024) to rack up $240.8 billion in online spending, an 8.4% jump over 2023.
As the world's largest Hybrid Packaging Supplier, Berlin Packaging continually tracks consumer behavior, product trends, macroeconomics, geopolitical events, and packaging innovation to fully understand what is happening in the market so we can best help our customers succeed.
Ocean Freight
Ocean freight spot rates have moved upward since October. Prices are buoyed by Red Sea diversions around Africa, container demand, strong import volumes, and frontloading of orders in anticipation of a potential strike at U.S. East Coast and Gulf Coast ports in January and the possibility of new and additional tariffs on imported goods by the incoming Trump-Vance administration.
In early December, global spot rates for forty-foot containers averaged nearly 150% higher than 2019 (pre-pandemic) levels, according to Drewry's World Container Index. Schedule reliability is poor, averaging 50–55% for the first 10 months of the year, according to data from Sea-Intelligence. Global average delays for late vessel arrivals reached 5.7 days in October, a figure only surpassed by October 2021 during the pandemic.
The rush by shippers to get their orders in before the Lunar New Year Holiday (January 29 to February 15) should help to maintain or increase spot rates in late December and early January. Celebrated in China and other Asian countries, the holiday will shut down manufacturing and exports from late January through February as workers take time off to travel and visit their families and friends.
As volatility persists in many global trade lanes, Berlin Packaging continues to proactively provide alternate routings and real-time visibility of the global freight market to help our customers minimize any disruptions to their supply chains. We partner with all major ocean carrier alliances to help mitigate delays due to route changes or blank sailings from a single carrier.
Import Volumes Remain Strong
October imports topped 2.4 million twenty-foot equivalent units (TEU), marking four consecutive months of U.S. container volumes exceeding 2.4 million TEUs — a threshold that has typically overextended America's maritime freight logistics with port congestion and delays, according to Descartes. China accounted for 38.5% of total U.S. container imports in October. For the first 10 months of the year, import volumes have increased by 13% over the same period in 2023.
With a possible strike at U.S. ports in January and the prospect of new tariffs from the incoming Trump-Vance administration, major U.S. container ports expect to see a continued surge in imports through next spring, according to the National Retail Federation (NRF) and Hackett Associates.
The NRF predicts import volumes will reach 2.17 million TEUs in November, a 14.4% YOY increase. December import volumes are forecast at 2.14 million TEUs, up 14.3% YOY. That would bring 2024 import volumes to 25.6 million TEUs, a nearly 15% jump over 2023. From January through April 2025, monthly import volumes are expected to exceed the prior year in all months except February. The Lunar New Year Holiday and subsequent factory shutdowns in Asian countries will slow U.S. February imports.
Port Activity
In early October, tens of thousands of union dockworkers along the East and Gulf Coasts walked off their jobs, effectively shutting down dozens of commercial shipping ports from Maine to Texas. These ports handle over half of U.S. containerized imports. After three days, the International Longshoremen's Association (ILA - dockworkers' union) and the United States Maritime Alliance (USMX - representing port terminal operators and ocean carriers) reached a tentative deal to extend the master labor contract, ending the work stoppage.
The tentative agreement, which will expire on January 15, reached a consensus on wages (a 62% increase over six years) but did not address other issues like technology and automation. Talks between the two parties broke down in mid-November over the USMX push to implement semi-automated cranes.
In early December, a coalition of shippers representing over 250 trade associations led by the NRF, sent a letter to the ILA and USMX urging the groups to return to the bargaining table to reach a new labor contract before the January 15 deadline. With both sides now posturing in the media, it's looking more likely every day that another strike is on the horizon.
In mid-November, the Canadian government stepped in to temporarily resolve a labor dispute between dockworkers and their employers that shut down port operations in Montreal (72-hour dockworkers strike in October and employer lockout in November) and British Columbia (employer lockout in November at the Ports of Vancouver and Prince Rupert).
In Montreal, the port operators and union agreed to a 90-day mediation process to reach a new collective bargaining agreement. Without the mediation arrangement, the two sides would have been subject to binding arbitration. In British Columbia, the union is challenging the constitutionality of the government's back-to-work order and binding arbitration.
Air Freight Soars
Booming e-commerce sales and frequent disruptions in maritime shipping have been a boon to air freight. Peak season volumes and rates exceeded last year. Air cargo volume is estimated to increase by nearly 12% in 2024 and is forecasted to grow by 6% in 2025, according to the International Air Transport Association.
Air freight shipping volumes are predicted to grow 4% annually through 2043, according to Boeing's World Air Cargo Forecast 2024–2043. Currently at 18%, express shipments will account for 25% of all air cargo business by 2043. The growth in shipping volumes will increase the global air cargo fleet from 2,390 units today to 3,900 units by 2043.
As a Customs-Trade Partnership Against Terrorism (C-TPAT) certified importer, Berlin Packaging and our customers reap multiple benefits, such as reductions in customs freight examinations, "front of the line" status during inspections/exams, shorter wait times at the border, and more.
Domestic Transport
While shippers have generally been in the driver's seat regarding transportation costs in North America for much of the year, recent upticks in linehaul rates and load volumes indicate the market is shifting beyond the typical end-of-year increases. However, lower fuel prices help keep shippers' "all-in" rates suppressed or favorable.
Overall market sentiment suggests that 2025 will gradually shift toward higher prices, although at a much slower and steadier pace than the sudden and drastic increases seen during the previous cycle.
The November 2024 Logistics Managers' Index report showed expansion in transportation prices, while transportation capacity delivered mixed results. Smaller firms reported a contraction in available capacity, suggesting these firms may be having difficulty securing freight on the spot market. Larger carriers reported an expansion in capacity.
With a dedicated and accomplished team of logistics specialists, Berlin Packaging excels in all modes of transportation to ensure our customers benefit from competitive rates and freight expertise. We are flexible and agile, ready to tackle urgent and expedited shipments and special requests like drop trailer services for customer convenience.
Nearshoring, Trade, and Tariffs
Nearshoring gained popularity during the pandemic as domestic companies rerouted their sourcing and manufacturing to avoid global supply chain disruptions and skyrocketing ocean freight rates. Consequently, Mexico became the top trading partner to the U.S. last year, with $798 billion in cross-border trade. More than 7.35 million cargo trucks traversed the U.S.-Mexico border in 2023.
Through the first nine months of this year, trade between the U.S. and Mexico totaled $632 billion, followed by U.S.-Canada trade at $572 billion, and U.S.-China trade at $436 billion. However, that could change with the possibility of new and additional tariffs on imported goods from the incoming Trump-Vance administration.
Truckload Rates & Shipments
In late November, line-haul costs per mile for the dry van spot market averaged $1.89, about 4 cents higher than rates 12 months ago, according to data from Uber Freight. Costs have been steady since the Labor Day holiday. In mid-November, the weekly count of dry van spot shipments declined 6.7% compared to one year ago. Spot rates averaged 33 cents less per mile than contracted rates.
Van load-to-truck ratios, which serve as a measure of demand (the number of loads) and capacity (the number of available trucks to carry those loads), have risen slightly since September. The ratio was 3.63 in September, 4.13 in October, and 3.85 in November, according to DAT Trendlines. Rising ratios suggest more demand or competition for available trucks, boosting rates.
Diesel Fuel Prices Drop to 3-Year Low
In early December, U.S. diesel fuel prices stood at $3.54 per gallon, hovering near their 2024 lows. The gallon price is about 55 cents lower than 12 months ago. In mid-November, diesel fuel prices dropped to $3.49 per gallon, their lowest level since October 2021. Lower crude oil prices, moderate global demand, and adequate inventories keep diesel fuel prices in check.
Average price for diesel fuel (per gallon)
$4.09
December 2023
$3.49
November 2024
$3.54
December 2024
U.S. Manufacturing Stuck in Neutral
Economic activity in the U.S. manufacturing sector contracted in November for the eighth consecutive month and the 24th time in the past 25 months, according to the November Manufacturing ISM Report On Business. "Demand continues to be weak but may be moderating, output declined again, and inputs stayed accommodative," stated the report.
Customers' inventory levels in November were marginally above 'too low.' Surveyed companies report that the product volumes in their customers' inventories suggest a demand level that is neutral for future new orders and production. Only two of 16 industries registered growth in November: food & beverage products and computer & electronics products.
For products like aluminum cans and bulk glass containers, Berlin Packaging can utilize partial truckloads, which streamline the handling and delivery of packaging at competitive market rates and avoid using LTL networks with preset carrier rates.
E-commerce Sales Grew 2.6% in Q3
According to recent government data, U.S. retail e-commerce sales topped $300 billion in the third quarter — a 2.6% increase over the second quarter and a 7.4% jump from the third quarter of 2023. Retail e-commerce sales in Q3 accounted for 16.2% of total retail sales.
Parcel carriers FedEx, UPS, and the U.S. Postal Service (USPS) have announced general rate increases (GRIs) for 2025. FedEx and UPS will increase rates by 5.9%, on average, for package and freight shipping, while the USPS will raise rates by 9.2% for its Parcel Select service. Along with the GRIs, customers will likely see additional handling fees and higher surcharges.
In Canada, postal workers have been on strike since November 15 after negotiations between the postal company and the union workers broke down over wages, safety, and automation. According to the Canadian Federation of Independent Business, the work stoppage has cost small- and medium-sized businesses nearly $77 million per day in lost orders, more expensive delivery alternatives, and late payments.
On December 15, the Canada Industrial Relations Board ordered the postal workers to return to work on December 17 and extended the existing collective agreement to May 22, 2025. The postal workers will receive a retroactive 5% pay increase.
As a member of the U.S. EPA's SmartWay Transport Partnership, Berlin Packaging continually looks for ways to advance its supply chain sustainability by measuring, benchmarking, and improving our freight transportation efficiency and reducing our environmental impact.