Page 18 - Packaging News Magazine Sep-Oct 2018

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WHY DEMAND FOR BOXES HAS RISEN SHARPLY
BOX consumption is driven by growth in shipments of food (especially fresh fruit, vegetables and meat) and beverages. Demand is also fuelled by business-to- business transfers of completed and partially completed goods. In short, box consumption is typically driven by general economic conditions.
Australia’s general economic growth and activity levels of the last three years certainly support some of the growth
in box consumption, but not all.
More recently, disruption in the retail sector appears to have fuelled demand for
corrugated
boxes.
E-tailing
and
internet
purchases
that are
delivered to the
home have caused a
significant spike in box demand.
In the short-term, industry consensus
is that this activity is quite inefficient, implying that future growth may be softer than the experience of the last three years.
INDUSTRY INSIGHT www.packagingnews.com.au September-October 2018
Unpacking the box market
Increased demand for boxes of all kinds is causing prices to rise.
Tim Woods of Industry Edge considers market conditions driving the hike.
BOX prices are rising. Whether corru- gated boxes or folding boxes like those used for cereal or pharmaceuticals and other goods, the price of boxes is increasing.
While rising prices are an interna- tional experience, box prices are rising in Australia mainly because demand has grown strongly over the last year. In fact, demand has been growing
strongly for the last three years.
The role of growth in domestic demand
in moving box prices higher is supported by stronger global conditions, rising input prices and domestic capacity constraints.
The result is that the prices of corrugated and folding boxes are already rising, and are expected to rise further over 2018-19.
CORRUGATED CONSUMPTION UP
Over the last three years, Australia’s con- sumption of corrugated boxes rose more than 30 per cent, to reach 1.392 million tonnes over the 2017-18 financial year. The consumption growth, based on analysis of trade data and field production surveys In- dustryEdge has conducted each of the last twenty-seven years, is evident in Figure 1.
In 2017-18, we can confirm that domesti- cally produced paperboard accounted for almost 91 per cent of all corrugated boxes manufactured in Australia. That paper- board was produced by three companies: the fully integrated Visy, which manufac- tures the virgin Kraftliner as well as Recycled Liner and Corrugating Medium, the partially integrated Orora (Recycled
Liner and Corrugating Medium only) and the market producer Australian Paper (Kraftliner only).
New Zealand stays as the main importer into Australia, with Oji Fibre Solutions supplying its own box plants in New South Wales, Victoria, and now Queensland.
PRODUCTION CAPACITY STRETCHED
Growth in demand for corrugated boxes has been so rapid that Australia’s produc- tion capacity is stretched. Our ongoing analysis of the sector indicates that production is limited at something close to 2.200 million tonnes per annum. In 2017- 18, production was just short of 2.100 million tonnes.
The implied capacity utilisation rate was a high 95.5 per cent, across the sector.
As a result of production being under pressure, 2017-18 saw the major producers curtail exports of paperboard used to man- ufacture corrugated boxes.
Figure 2 demonstrates that the curtail- ment has continued to impact Kraftliner, exports of which were 45,000 tonnes lower in 2017-18 than in the prior year.
CARTONBOARD IMPORTS RISE SHARPLY
Australia’s supply of cartonboard, used to manufacture folding boxes, is fully imported.
After several years in which imports had been quite consistent, they rose close to 20 per cent in 2017-18, totalling more than 145,000 tonnes, a new record, as Figure 3 shows.
IMAGE: OJI FIBRE SOLUTIONS, YATALA PLANT