Industrial Goods

Expensive Paper

2018-04-13


SHORTAGE OF RAW MATERIALS

Prices on the global paper market have shot up in 2017 due to raw material shortages with knock-on effects for the corrugated paper and card industry and the related packaging sector. Recycling paper has risen in price by some Euro 100 per ton, and in the meantime the price rise for kraftliners has been as much as Euro 150 per ton. Price rises for corrugated containerboard are correspondingly high. This is now subject to a hike of up to 27% – a pretty dramatic rise considering paper costs make up about half the entire production costs.

Germany's corrugated board association Verband der Wellpappenindustrie e.V.(VDW) has made it clear that to compensate for the increased raw material prices alone a price increase of some 14% would be necessary for corrugated board products. An improvement does not appear to be in view, according industry stakeholders. The announced easing of existing import restrictions for waste paper in China to apply as we go into 2018 is instead fuelling more demand for waste paper in Europe. The consequences could have a further price impact on recycling paper and consequently also on packaging.
 
Raw material prices for paper production have risen starkly. Photo: File: #178805760 | Copyright: industrieblick / fotolia.com

IMPACT OF MEGATRENDS
But how have such circumstances come about? Like any other industry the paper and packaging sector is affected by the changing global circumstances and has to adapt early to the so-called megatrends. Since the 50s urbanisation has played an ever more important role. While early on only 30% of the world population lived in cities, now many more people have made towns and cities the centre of their lives. It is estimated that by 2030 half the world population will live in urban areas. The United Nations (UN) anticipate this will amount to a total of 4.9 billion people. Experts have registered high growth rates in developing countries, especially in Asia. Consequently, purchasing power there has developed strongly over the past few years. An example: according to the UN in 2014/2015, India became the fifth-largest producer of paper and card. With increasing urbanisation there is not only a growing need for infrastructure and living space but also for food supplies that have to be safely packed.
Consumers increasingly demand packaging that is recyclable. Photo: Coconut water in Tetra Prisma® Aseptic carton packs. Photo: TetraPak

Furthermore, world population needs to take a greater role in climate protection and resource saving. One of the burning issues of the future is how to use water and other natural resources more carefully. According to Smithers Pira, recycling will therefore constitute an even more important factor in the packaging sector. In the United States and Canada alone the recycling rate for paper and card has risen by 81% since 1990 and now stands at 70% in the USA and in Canada as much as 80%.

Another factor triggering the increased spread of paper and card as packaging materials lies in the increase use of online shopping. Young shoppers, i.e. millennials, have enormous purchasing power, details the research institute.
The growth of online shopping is fuelling a rise in the use of paper and cardboard packaging materials. Photo: Stora Enso

Last but not least, a key role is played here by technological development. 3D printing, robot-guided production and processing, the Internet of Things (IoT) and drones have become revolutionary for the industry, especially for the paper and packaging industry. One example is Smart Packaging. Smithers Pira anticipates growth in the smart packaging industry of 8% by 2021 – which corresponds to a market worth US$ 7.8 b. IoT packaging is expected to grow by an impressive 18% to just under US$ 2.2 b. Companies that adapt early to macro-global changes and to the new consumer needs will benefit enormously from these promising markets.
 
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