ERA Group's quarterly insights regarding market conditions; potential impacts on procurement; and supply chain planning.General supply chain observations & updates
Supply chain & freight 2025 predictions
Keeping supply close to home U.S. efforts to reduce reliance on foreign trade have gained momentum due to political incentives; tariffs; and global disruptions. According to a survey conducted by Bain & Company; 81% of 166 CEOs/COOs surveyed plan to bring supply chains closer via reshoring and nearshoring. Domestic manufacturing is further incentivized via the CHIPS Act; and Inflation Reduction Act.1The role of AI In his article; “Industry Leaders Weigh in with 2025 Predictions;” Editor in Chief of Supply Chain Management Review; Brian Straight; includes a quote from IBM: “While some skepticism around AI in supply chain remained in 2024; in 2025; AI will be embedded across the supply chain; as leaders prioritise end-to-end visibility and faster decision-making.” Similarly; Richard Barnett; the CMO of Supplyframe; adds: “In 2025; organizations will focus on new applications for [AI] that allow them to quickly parse supply chain intelligence or automate manual tasks in design; sourcing; and procurement.” 2Preparing for possible tariffs Government legislation and policies changing— or not changing—have moved to the forefront of considerations for supply chain leaders. “Supply chains have more recently become a larger part of political conversation following major events and disruptions such as the pandemic; Panama Canal drought; labour challenges; and geopolitical tensions abroad.” 3Sustainability and responsibility 2025 is expected to be a highly progressive year for Extended Producer Responsibility (EPR) implementation; with extra focus on packaging. Robust attention to Life Cycle Assessments (LCAs) will be used to determine how much producers will pay into the EPR program. Five states in the U.S. have already passed laws; and Oregon will be the first state to “officially kick off a program this summer.”4
Freight It’s more expensive than ever for new carriers to enter the marketplace; thanks to higher insurance premiums and the financing costs associated with the inflated used truck market of 2021 and 2022. Since fewer new carriers are replacing exiting trucks; truckload capacity will tighten; and rate increases are expected to follow.5KEY TAKEAWAYS: Where to start? There is so much happening across the globe; whether it be driven by politics; industry; or technology. We suggest prioritization of the above areas based on your company’s greatest needs. If tariffs are of concern; then exploration of alternate sources; especially North American ones; should be at the top of your list. Shoring up relationships with your freight carriers is likely of prime importance as well. Depending on the state where your company is based; you should assess the necessary timing for sustainability initiatives. Lastly; an exploration of technology and how AI can be harnessed by your company may be worthy of a sub-team assignment.
Valoviti
Many containerboard producers attempted to raise prices on various products at least twice in 2024. Now; proposed to begin January 1; 2025; Packaging Corporation of America (PCA) announced a $70 per ton (7.7%) increase for linerboard and a $90 per ton (11.3%) increase for medium; followed quickly by International Paper; Georgia-Pacific; Smurfit Westrock; Pratt Industries; Cascades; and Grief echoing their own increases. These price increases were announced amid flat demand; but demand increases are probably on the way. “Overall; we believe the [price] increases to be driven by increasing market demand and persistently elevated input costs;” said Michael Roxland; senior paper and packaging analyst at Truist Securities.6 Bob Cohen of Acme Corrugated Box Co chimed in that “[the] pending price increase seems to be ill-timed; but I think it would be naïve to think that something won’t be recognized by the end of the first quarter. While RISI has cut back on their prediction of box demand; I think independents… will increase sales well beyond the cautious forecast they have announced.”7 [caption id="attachment_12417" align="aligncenter" width="581"]
Chart Data: Pulp and Paper Weekly RISI Index[/caption] KEY TAKEAWAY: While a RISI increase was rumored in December; it did not materialize; but one seems likely to occur in Jan. 2025. If your suppliers try to increase prices prior to an index increase; we suggest pushing back strongly and/or finding other sources. If you do not have contracts/agreements in place that hold your suppliers accountable for price movement; we cannot stress strongly enough the negotiation of such arrangements.
Drvna građa/Palete
Tight logging conditions due to a wet winter and fluctuating regional demand continue to impact lumber prices.8 Shipments of Canadian lumber to the U.S. have slowed due to the increase of the tariff and reduced construction activity.9 Lumber prices are 17.2% higher than they were at this time last year. An 11% expected rise in housing construction in 2025 will continue to drive lumber prices higher throughout the year.10 Changes in lumber prices; labour challenges; and transportation costs continue to plague the pallet market. However; the wooden pallet market is expanding due to the increased use of wooden pallets across multiple industries. There are plenty of core pallets available; and prices for Grade A and Grade B pallets remain steady; with some price pressure on Grade A pallets.11 [caption id="attachment_12419" align="aligncenter" width="603"]
Chart Data: Producer Price Index by Industry: Wood Container and Pallet Manufacturing[/caption] KEY TAKEAWAY: Early procurement will be essential to managing costs in the lumber sector this quarter. For pallets; steady pricing on Grade A and Grade B options presents an opportunity to secure supply before any potential price increases. To optimise expenses; consider diversifying suppliers; locking in contracts for predictable pricing; and leveraging the availability of core pallets to meet demand efficiently.
Hemikalije i gasovi
High inventory levels; lagging effects of interest rate cuts; and a manufacturing recession will keep demand flat and operating rates low in 2025; with capacity investments likely delayed until late 2025 or 2026. Tariffs; trade tensions with China; and Middle East volatility will disrupt exports; raise costs; and keep protectionist measures at the forefront of the U.S. chemicals market in 2025. Asian overcapacity; particularly from low-cost Chinese producers; will pressure global prices and force U.S. producers to compete on reduced margins amidst increased imports.13 [caption id="attachment_12420" align="aligncenter" width="595"]
Chart Data: Producer Price Index by Commodity: Chemicals and Allied Products: Industrial Chemicals[/caption] KEY TAKEAWAY: Take advantage of inventory drawdowns by negotiating favorable terms with suppliers. Stay alert to geopolitical and trade developments; as new tariffs or supply chain disruptions could impact pricing and availability. To mitigate risks from global overcapacity and potential price volatility; consider diversifying your supplier base and exploring cost-saving opportunities; such as bulk purchasing or leveraging long-term contracts.
Plastika
All signs point to higher polyethylene (PE) and polypropylene (PP) contract prices in January 2025;14 and; as noted by ThePlasticsExchange; PE Producers have nominated a price increase of $0.05- $0.07/lb for January.15 North America; the Middle East; and China are expected to fiercely compete for international (PE) market share. “Tariffs; freight costs; and shifting trade balances are narrowing traditional arbitrage opportunities; making it more challenging for producers to rely on long-standing pricing and market strategies.”16 Also at the forefront of the plastic market is sustainability. The panic and frantic pace towards “eliminating all plastic packaging” has slowed; but plastic packaging reduction and sustainability efforts are still a major priority around the world. New plastic-reduction laws are set to launch throughout many states within the U.S.; and the Global Plastic Pollution Treaty remains on the agenda of the U.N. 17 [caption id="attachment_12421" align="aligncenter" width="367"]
Chart Data: ThePlasticsExchange Market Update – December 20th; 2024[/caption] KEY TAKEAWAY: Prepare for higher polyethylene (PE) and polypropylene (PP) contract prices by locking in supply agreements early to mitigate the impact of the announced price increases. Assess your supplier network and explore local sourcing options to control costs. Stay proactive in adapting to emerging sustainability regulations and laws; which may require adjustments in your procurement strategies and packaging materials to remain compliant and competitive.
Metali
Prices for stainless steel futures in China have dropped to four-year lows due to reduced costs of major raw materials like ferrochrome and nickel pig iron. However; anticipated growth in infrastructure and energy projects; along with aerospace and defense demand; could stabilize or increase prices in 2025. Tariffs on Canadian imports (potentially up to 25%) could disrupt the supply chain and increase costs for aluminum. New capacity from U.S. facilities is expected in late 2025; which might ease some aluminum supply constraints. Demand in sectors like semiconductors and aerospace could rebound late in the year. Hot-rolled coil (HRC) U.S. prices are at their lowest since July 2024; but there could be a rebound in early 2025. Rebar and busheling scrap prices are stable but could shift quickly depending on new tariff policies under the incoming administration. For copper; nickel; and other base metals; moderate price fluctuations are expected; with potential upward trends influenced by geopolitical developments and EV demand for nickel.18 [caption id="attachment_12423" align="aligncenter" width="408"]
Chart Data: BusinessAnalytiq[/caption] [caption id="attachment_12422" align="aligncenter" width="423"]
Chart Data: BusinessAnalytiq[/caption] KEY TAKEAWAY: Anticipate potential price increases driven by geopolitical factors like tariffs and infrastructure-driven demand. To minimise costs; secure contracts early for stainless steel and aluminum; especially as supply constraints and demand rebounds loom later in the year. Monitor global trade dynamics and leverage stable pricing in rebar; HRC; and scrap markets for cost-effective procurement strategies.
Sources:1 - Supply Chain Management Review; “Straight Talk;” December 22; 2024; by Brian Straight; 2 - Supply Chain Management Review; “Industry Leaders Weigh in with 2025 Predictions;” December 24; 2024; by Brian Straight; 3 - 6 Steps to Prepare for 2025 Tariffs and Minimise Disruption - Supply Chain 24_7; 4 - “Life Cycle Assessments Loom Large for the Outcome of EPR Programs;” Packaging Dive; January 7; 2025; 5 - What to expect for freight in 2025; DAT.com; 6 - "2025 Containerboard Outlook: Price Increases; Index Exits; and Tariff Threats;" PackagingDive.com; 7 - Board Converting News; January 1; 2025; 8 - Pallet RFP & Market Update from epalletinc.com; December 2024; 9 - TradingEconomics.com; 10 - Barden Building Products; 11 - Pallet RFP & Market Update from epalletinc.com; December 2024; 12 - Producer Price Index by Industry: Wood Container and Pallet Manufacturing; 13 - ICIS 2025 Key Trends – Global Chemicals and Energy; icis.com; 14 - PlasticsToday.com; December 29; 2024; 15 - ThePlasticsExchange Market Update – December 20; 2024; 16 - “Trump Tariffs and What to Watch for in 2025 for Polyethylene;” November 26; 2024; ThePlasticsExchange.com; 17 - “The Known Unknowns Confronting the Plastics Industry in 2025;” January 3; 2025; PlasticsToday.com; 18 - Ferguson Weekly Newsletter -- Week of December 9; 2024
