Disruptions in the global packaging industry in 2021 - mostly due to Covid - will remain in force this year as well. What exactly is happening? What causes these changes? In this article we examine the developments as well as the prospects going forward.
Demand for paper and cardboard (over a third of the €900+ billion global packaging market) is soaring and will this year also be much larger than supply. Several key driving forces are behind this:
- Increase of sanitary paper use in emerging markets such as India and China. A growing middle class consuming more toilet paper requires vast amounts of virgin and recycled fibres.
- The Covid pandemic has caused a surge in worldwide use of sanitary paper.
- The European ban on single use plastics (SUPD) is causing a shift from plastic to paper, board and wooden products.
- During lockdowns the already rapidly growing market for takeaways meals, to-go and delivery is growing even faster.
- Growth of online shopping has accelerated tremendously throughout the pandemic. In the Netherlands alone, 524 million parcels were delivered in 2020. Delivery boxes of Bol, Amazon and practically every online store are all made from (recycled) cardboard.
The consequence of all this is a serious shortage on the global market for paper and cardboard. Increasing supply in the short term is relatively difficult. Managed forests need to maintain their size or ideally grow. This cannot easily be stretched in the short term. Besides, the harvest age for paper manufacturing of a birch or poplar tree is around 30 years. Recycled post consumer paper is a very sustainable choice - but this resource is fully tapped as recycling rates remain high.
As a result, book publishers are forced to either delay or cancel publishing of new books altogether. Delivery times for paper and cardboard are soaring at an alarming rate. Products are out of stock for long periods of time. Converters (who make paper cups out of pulp) must decide swiftly to get certain conditions. Yet this is often impossible as their customers in turn need approval from their customers. The result is a sportmarket with volatile pricing. Similar shortages and price pressure applies for (bio)plastics, chemicals, adhesives and pigments too. All raw materials that go into packaging products.
On top of this come - to put it mildly - severe logistical challenges and price increases. The cost of shipping a container from Asia to Europe has increased fivefold. Shipping companies in 2021 earned more than in the twenty years prior and see their customers coming back regardless. The demand remains, stocks are to be replenished and production cannot be moved elsewhere overnight. Last but not least, sourcing from Asia has seen longer lead times but also shipping transit times as ports are regularly (partly) closed or face staffing shortages (due to local outbreaks).
Thus it is hardly surprising companies source away from China back towards the EU. This is a positive development and saves both shipping costs as well as passage through two busy seaports. The regional outlook here is, however, hardly better. Shortage of personnel, high energy costs and rising raw material pricing all add to a building price pressure. Some cardboard packaging factories (most notably paper cups) do not take on new customers and are fully booked for this year already.
Fact is that the EU legislation SUPD has further stimulated the market for sustainable alternatives. Use of polluting single use plastics is being cut back at a high rate. This is good news. The EU campaign introducing this program however wasn't exactly smooth and has caused confusion with many involved. Most illustrative are following two developments:
1. The ‘Turtle’ logo has fairly rapidly become a regular on mainstreet. Good to raise awareness and it’s of course true the 5% (bio)plastic coating share of a paper cup is not conducive to recycling and harmful when littered. Bio Futura has accepted that bioplastics - despite their added value - are treated equally to conventional plastics in this legislation. This means compostable paper cups (with PLA coating) have to show the turtle logo. The awful logo and extra (printing) costs passed on to producers and their customers has sparked development of a new generation of ‘plastic free’ paper cups. Key question here is: what exactly is plastic? This is mostly a matter of definition and currently - according to the EU - in case a polymer is not a structural component of a product no plastic is involved. Consequently, a wave of paper cups and cardboard packaging emerges that do contain fossil additives (to prevent leakage) but are in fact marked as free from plastic because the additive is not regarded as a structural component of the product. Bio Futura supports the development of paper cups without a coating as these cups are much better recyclable and easier to certify as (home) compostable. More monomaterial and better recyclability of packaging is something to be very much welcomed. We would however like to see biobased rather than fossil additives and are quite positive for the prospects going forward.
2. Another peculiar development is single use products (such as cutlery) which have suddenly been rebranded as ‘reusables’. Possibly a few percent of (bio)plastic was added to the spoon but really only the packaging label has been replaced. Bio Futura strongly rejects this phenomenon. We assume someone who’s always bought single-use cutlery will not all of a sudden reuse a fork 20 times and continue to wash it up. Let alone utensils delivered along with a takeaway meal. The consumer is just not going to reuse this for a long period of time. This marketing qualifies for proper greenwashing. Besides offering no good alternative to decent reusable cutlery this also slows down development of true sustainable alternatives and renewable resources.
In conclusion, shortages and logistical problems will lead to further price increases and inflation. Similarly, we foresee vast opportunities to make takeaway packaging more sustainable, start regional production and development of a whole new generation of plastic free packaging and mono materials.