Energy Markets May Be Calmer, But Paper Tube Costs Are Not Back to Normal

The latest Bank of England vote is a useful reminder that, although some parts of the inflation picture look calmer, the cost pressures facing UK manufacturers have not disappeared.

The Bank of England voted to hold interest rates at 3.75%, but the detail behind the decision matters. Two members of the Monetary Policy Committee voted for an increase to 4%. At the previous meeting, only one member had voted for a rise.

That does not mean interest rates are certain to increase. However, it does show that inflation concerns remain very real, particularly around energy prices, wages, supply chains and the wider cost of doing business.

For paper tube and cardboard core manufacturers, this is important. Our costs are not driven simply by headline consumer inflation. They are affected by the cost of paper, coreboard, liners, adhesives, energy, labour, transport, storage and supply continuity.

So while the market may feel less panicked than it did a few weeks ago, the underlying cost base for reliable UK manufacturing remains materially higher than it was previously.

The US/Iran MOU may calm the market

The recent memorandum of understanding between the United States and Iran is clearly worth watching.

If implemented successfully, it should help bring more stability to energy markets. In particular, any reduction in tension around Iran, the Strait of Hormuz and wider Middle East shipping routes should reduce some of the panic premium that has been feeding into oil, gas, shipping and market sentiment.

That is welcome.

Less panic usually means less immediate market reaction. It may reduce the risk of sharp short-term spikes in fuel and energy costs, and it may give manufacturers and customers a more stable platform for planning.

However, this does not mean costs are going back to where they were before.

The agreement may reduce the fear of further escalation, but it does not undo the higher cost base that UK and European manufacturers are now operating under. Energy markets remain exposed, supply chains remain more fragile, and the cost of producing, transporting and storing goods remains materially higher than it was previously.

In simple terms, the market may become calmer, but not necessarily cheaper.

Gas has fallen, but it is still far above previous levels

here has been some welcome relief in European gas prices. Gas has fallen back from recent highs and is currently around €41/MWh.

However, before the recent energy shocks, gas was closer to around €26/MWh. That means today’s price is still substantially higher than the level manufacturers were used to before this period of geopolitical disruption.

This is an important point.

A falling gas price does not automatically mean manufacturing costs have returned to normal. It simply means they have reduced from an even higher level.

For energy-intensive or energy-exposed manufacturing, the difference between €26/MWh and €41/MWh is still significant. It affects factory operating costs, drying processes, heating, electricity generation, transport costs and the wider cost of materials moving through the supply chain.

Electricity prices tell the same story

The clearest evidence that costs have not returned to normal can be seen in wholesale electricity prices.

Year on year, wholesale electricity prices remain significantly higher:

• UK: up 14.14%

• Germany: up 54.13%

• Italy: up 11.96%

These are not small movements. They show that, even after some easing in gas and oil markets, the energy cost base across Europe remains well above where manufacturers would like it to be.

For paper tube and cardboard core production, this matters because electricity and energy costs feed into almost every part of the supply chain.

They affect:

• paper and board production

• adhesives and chemical-based inputs

• factory running costs

• drying and production processes

• transport and haulage

• fuel surcharges

• warehousing and handling

• imported raw materials

• supplier cost bases across Europe

So while the US/Iran MOU may reduce panic and bring greater stability, it does not mean a return to old pricing levels any time soon.

Stability does not mean prices are falling back quickly

In our previous update, we explained that paper tube and cardboard core prices are likely to remain higher for longer.

That remains our view.

We are not currently expecting to announce another immediate price increase. Our base case is still that the market may stabilise around current levels, rather than rise sharply again in the short term.

However, stability should not be confused with a return to previous pricing.

The cost base for reliable UK paper tube manufacturing remains materially higher than it was before the recent period of energy volatility, Middle East tension, European supply disruption and inflationary pressure.

Even where individual costs have eased, they have not necessarily returned to where they were.

Why the Bank of England vote matters

The Bank of England’s latest decision matters because it shows that policymakers are still concerned about inflation becoming sticky.

The fact that two members voted for an interest rate rise suggests there is still concern that higher energy and input costs could continue feeding through into the wider economy.

For manufacturers, this is not a theoretical issue. It affects real costs, real purchasing decisions and real pricing pressure.

Paper tube prices are affected by more than just one input. They are influenced by a combination of raw material prices, energy costs, transport costs, labour costs and the need to maintain reliable supply.

That is why headline inflation alone does not tell the full story.

A lower inflation figure does not mean paper, board, energy, transport or labour costs have returned to where they were. It simply means prices may be rising more slowly than before.

Quality matters more in a difficult market

When costs remain high, there is always pressure in the wider market to protect headline pricing. Some suppliers may try to do this by reducing material quality, using lower-grade board or cutting corners in the production process.

We cannot comment on the decisions made by individual competitors. However, customers should be aware that cheaper does not always mean better value.

A cheaper tube is not cheaper if it causes:

• poor winding performance

• softer or weaker cores

• inconsistent dimensions

• crushed or damaged product

• downtime on automated lines

• rejected goods

• unreliable presentation or finish

• problems in storage or transport

A paper tube or cardboard core may look simple, but its performance depends on the quality of the raw materials and the consistency of the manufacturing process.

The grade of board, the adhesive, the winding process, moisture control and finished specification all affect how the tube performs in real use.

At Just Paper Tubes, we remain cautious about chasing the lowest possible market price by compromising on materials. Our priority is to supply tubes and cores that are fit for purpose, consistent and dependable.

That matters especially when customers are using tubes for winding, packing, storage, transport or production processes where failure can be expensive.

Our current view

At Just Paper Tubes, our current view is:

• the US/Iran MOU is a positive development and may help calm energy markets

• reduced tension around the Strait of Hormuz should reduce some panic in oil, gas and shipping markets

• the market may become more stable, but not necessarily cheaper

• gas prices have fallen, but remain well above previous levels

• wholesale electricity prices remain significantly higher year on year

• the Bank of England vote shows inflation concerns have not gone away

• paper tube and cardboard core prices are likely to remain higher for longer

• we are not currently expecting an immediate further price increase

Our focus remains on dependable quality, honest communication and long-term supply reliability.

Final thought

The US/Iran MOU may help calm the market. That is welcome news for manufacturers, suppliers and customers.

But calmer does not mean cheap.

For paper tubes, cardboard cores and industrial packaging, this means customers should continue to focus not just on price, but on quality, reliability and continuity of supply.

If your current supplier’s tubes feel softer, lead times are stretching, or quality has become less consistent, it may be worth asking whether something has changed in the materials being used.

At Just Paper Tubes, our focus remains on dependable quality, honest communication and long-term supply reliability.

If you are concerned about the quality, consistency or reliability of your current paper tube supplier, contact Just Paper Tubes today. Our team will be happy to review your requirements, discuss your current specification and help you find a dependable solution.