Current Scenario of Supply Chain for Manufacturing Bags in Bulk

State of the supply chain for manufacturing bags in bulk

 

Overview:

When we talk about the manufacturing large bulk bags there are many circumstances that affect the course of production with effects on the supply chain. The FIBCs industry is a global export industry, with more than 60% of bulk bag delivered in Europe and 80% in the USA coming from Asia. With such a high demand for FIBCs, each producer plays a vital role for the production of these bags in bulk.

Main Production Countries:

The main countries that produce large bulk bags for the EU market are India (55%), Bangladesh, Turkey, China, and Eastern Europe. From these countries, approximately 90% of the manufactured large bulk bags are imported into the European Union.

For US Market, the main countries which produce bags in bulk are China, India, Vietnam, LATAM. US imports ~80% of the large bulk bags from these countries.

Global Supply Chain Market Update:

EU:

The current Covid situation in the EU region is stable and improving day by day, the bad news is that XBB.1.5, also known as Kraken, is spreading quickly. Most likely, this is because it has some big advantages over the currently dominant Omicron strains. The good news is that Europe has some time to prepare for if and when cases go vertical. However, the recent increase in labour costs, transportation costs, and energy consumption has affected bulk bag producers massively.

Eastern Europe:

The Covid situation in Eastern Europe has been relatively stable compared to other regions of the world. However, the conflict between Ukraine and Russia has had a devastating effect on Eastern Europe’s bulk bag producers. This has led to increased labour costs, energy costs, and transportation expenses, which has in turn led to adjustments and reorientations in bags in bulk production.

Turkey:

Turkey has stabilized the Covid situation. The Turkey Producer Price Index (PPI) for October of 2022 saw a YoY growth of 157.7%, which was a slight increase from the 151.5% growth seen in September. This put the annual inflation rate in Turkey at a record high of 85.5% for October, although it did see a small decrease in November. Producer inflation saw a more significant monthly increase in November, rising by 0.74% to reach an annual rate of 136%. The primary drivers of inflation are costs related to energy and labour, which have been intensified by the global rally in commodities and the ongoing conflict between Russia and Ukraine.

China:

China’s Producer Price Index (PPI) dropped by 1.3% in October of 2022, compared to a growth of 0.9% in the previous month. This marks the first time in nearly two years that China’s producer prices have fallen into deflation, which mirrors a slow-moving economic environment that is due to the Zero Covid policy. China is lifting COVID related transportation restrictions slowly among protests happening in several cities. Also, competition has increased among the bulk bag suppliers for the local market due to global demand and local economy reduction.

India:

India’s Producer Price Index (PPI) grew by 8.4% year-on-year in October 2022, compared to a growth of 10.7% in the previous month. Inflation plunged to its lowest level since July in October as prices for fuel and electricity rose at a moderate rate.

Conclusion:

In conclusion, after two years of pandemic and global economic challenges accelerated by the Russia – Ukraine conflict (energy crisis in Europe), the FIBC market, bags in bulk production, producers and traders become unstable and chaotic, generating risks to deliver expected quantities, quality and service and meet customers’ emerging needs (partly tied to new regulations). Customers’ business visibility has reduced, and they need a flexible supply chain to meet their emerging needs.