AMG Packaging & Paper Company has pulled back from its plan to produce boxes made from recycled paper, saying the expected cost savings continue to slim.
Around one-fifth of the company’s output was expected to be generated from recycled paper by 2021 to offset the cost of procuring virgin paper and address the shortfall in supply and rising freight costs for paper and paperboard raw materials, but changing market dynamics has resulted in a recalibration.
Since its announcement of the plan two years ago, AMG has commissioned a new factory at Retirement Crescent in Kingston, doubling its production capacity in the process.
But: “With the outbreak of COVID and the paper shortage, over time, there was not much difference in price between virgin and recycled paper, and it came to a point where we were just trying to get whatever paper we could get, and so we are back to focusing on virgin paper,” General Manager Michael Chin told the Financial Gleaner.
“We do have some recycled paper in stock, so it’s not that we won’t ever be using recycled paper if needs be, but the focus is strictly virgin paper now,” he added.
The local packaging market involves a mix of imports and locally manufactured items, with AMG Packaging, Jamaica Packaging Industries, Sterling Packaging and Red River Limited as main operators.
AMG has been in the cardboard box market for more than 15 years, using virgin paper as input, but was trying to make inroads in the market for recycled material, which is largely served by imports from Dominican Republic and Costa Rica.
Chin said AMG has made headway into winning over clients with recycled paper boxes, but paused promotion of the product to allow for a rebalance of the market and education around the sturdiness of the recycled material.
“There is the perception that it’s a weaker box, but that’s not true. You can always use a heavier gauge paper that would give you the same weight as the virgin paper. But it takes time for everybody to understand and accept it,” he said.
For the quarter ending May 2023, AMG Packaging made profit of $32.5 million on revenue of $281 million. Profit rose 19 per cent and revenue 11 per cent year-on-year.
Still, Chin says the company has been facing challenges with timely shipment of its raw materials over the last few months due to delays at the ports.
“The issue is no longer getting the raw materials; it’s having the products shipped. We are monitoring the situation closely, and so our sales haven’t really been affected by the challenges. We typically try to have roughly three months inventory in stock, which keeps us going until the next shipment comes in,” he said.