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How has the pandemic impacted the raw material demand in the FIBC industry?

Date: 20th October 2021

How has the pandemic impacted the raw material demand in the FIBC industry How has the pandemic impacted the raw material demand in the FIBC industry

The year 2020 will be ever marked in the history of the entire world due to several reasons, and the catalyst behind it was the COVID-19 pandemic. It took away thousands of lives, created doldrums in the global medical fraternity and made millions of people jobless and helpless. The world economy was almost crippled and global supply chains were massively affected, thereby putting pressure on the corresponding industries.

Even the FIBC industry was not immune to the harsh effects of COVID-19 pandemic. The demand declined and supply chain irregularities created negative consequences on the availability of raw materials.

Below is a snapshot of what happened in the FIBC industry last year under the effect of the Coronavirus pandemic.

The supply chain struggle continues

As already mentioned, COVID-19 created a negative impact on the disposable income of the average middle class, made the lower class financially broke and financial inflow came to a standstill for the upper-class population. Overall demands in the consumer market dropped. As orders declined, the demand for FIBC bags for bulk packing of the goods to be shipped also declined.

Thus, in order to cope up with the situation, the FIBC industry had to decide in terms of decreasing the volume of production. The volume of cargo carried by the shipping industry also decreased.

But the real challenge came when the economy gradually recovered and the FIBC industry could not keep a balanced pace with it due to the disturbances created in the corresponding supply chain in pre COVID situation. Thus, the present situation has become even more critical for the FIBC industry because the demands have been reinstated to their original state, but the problems in the corresponding supply chain remain unresolved.

Dual demand for plastic worsens matters

The basic raw materials that are needed for FIBC bags and liners are polypropylene and polyethylene. Supply chain disturbances have already created a shortage of supply of these two basic components, which, in turn, has created problems in the adequate production of FIBC bags and liners.

To make matters worse, the polypropylene and polyethylene production industry felt doubly burdened due to the rising demand for these components by other industries like plastics and electronics, where they are used as chief raw materials. This was literally a shock for the FIBC industry because the availability of polypropylene and polyethylene in the industry dropped further.

The final blow to the FIBC industry came from the American South because this region is the major producer of resins that form the raw material for these bags. The dreadful ice storm that occurred in the region in February 2021 led to the closure of approximately 80% to 85% of the resin producing units of the area. Eventually, the production of resins dropped by 80% and its effect was felt by the FIBC industry.

The FIBC industry is struggling with a shortage of available volume of raw materials that are needed for adequately meeting the teeming demand for FIBC bags in the post COVID phase. There has been a corresponding price increase in the FIBC bags due to this supply chain discord and low supply-high demand curve, the impact of which has eventually passed on to the consumers.