The consequences of the conflict in Ukraine, added to the complex effects of the last two years, in relation to the Covid-19 pandemic, have had and are having a strong worldwide impact and they also are involving the production activities of FAVILLINI GROUP Pharmaceutical Packaging.
Rising prices of raw materials
The soaring costs of paper and cardboard show no signs of stabilizing. From data survey of carton prices carried out by the Milan Chamber of Commerce for the first two months of 2022, an increase of + 25% was recorded over the same period of 2021, and further growth is expected for the months of March and April by + 15%. (Source: INTERGRAF press release March 10th, 2022)
Difficulty in finding the raw material
Already last autumn, considerable difficulties in the supply of raw materials began to appear globally. The situation has become even more complex with the spread of the Omicron variant.
In mid-January 2022, the main European paper mills were unable to deliver before 16/20 weeks from the order and their cutting centers had a lead time of between 4 and 6 weeks. Even this scenario does not foresee any improvements for the moment.
Increase in energy prices
It is clear to everyone how, starting from recent months, a heavy rise in prices is taking place throughout the energy sector.
The costs of natural gas and electricity have increased considerably since the end of 2021 and forecasts for the near future are still uncertain.
These increases have considerable effects both on many aspects linked to the production and transport of raw materials and products.
(Source: The Oxford Institute for Energy Studies, March 2022)
Effects of the conflict in Ukraine on the wooden packaging supply chain and on the FSC® material
Further complicating the picture is the difficulty in finding pallets and wooden packaging.
Russia, Ukraine and Belarus are among the largest timber exporters to Europe. Due to both the drastic reduction in production and the trade and economic sanctions in place, the supplies of timber and pallets from these states are severely in crisis. The Scandinavian and Baltic countries and Germany are unable to meet the demand of all the importing states.
The FSC® International Board of Directors has decided to suspend all commercial certificates in Russia and Belarus and to block all controlled wood supplies from the two countries.
This implies that wood and forest products from Russia and Belarus cannot be used in FSC® products or sold as FSC® certified anywhere in the world as long as the armed conflict continues.
(Source: FSC News 8 March 2022)
The point of the Favillini Group situation
This situation inevitably implies consequences in two main directions: on the one hand, a 20/25% increase in the prices of the usual supplies and on the other, an inability to guarantee the usual lead time.
Delivery times cannot be the same as before these absolutely out of the ordinary conditions occurred and were added together.
The management of Favillini Group is making every effort to find the best solutions and deal with the different problems that have emerged.