Page 24 - Packaging News Magazine Sep-Oct 2019

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INDUSTRY INSIGHT
PAPER & BOARD www.packagingnews.com.au
Soft economy, hard growth
September-October 2019
IndustryEdge managing director Tim Woods says the soft economy is making growth hard for fibre-based packaging.
Demand for fibre-based bags and sacks appears more robust than has been the case for the other fibre packaging formats. Figure 2 shows that demand has continued to trend upwards. At almost 71 kt in 2018-19, demand for bags and sacks is growing at a modest 1.3 per cent per year over the last five years.
Perhaps what is most signifi- cant about supplies of bags and sacks is that nearly two-thirds are fully converted imports. The detailed data shows most of those imports are smaller sized bags – the types that hold fast food or that might be used by the motor- cycle rider delivering dinner. It is important to note that local pro- duction of bag and sack paper is significantly higher than just the amount consumed locally.
Exports of Australian-made bag and sack paper are strong, just as imports of finished bags is also strong.
HAVE THESE SAME DRIVERS IMPACTED THE CORRUGATED BOX SECTOR?
It seems likely that corrugated boxes have been impacted by the same factors and driv- ers that have seen a softening in demand for the other fibre packaging formats. Confir- mation must wait until September, when all of the data is assembled and IndustryEdge’s annual Pulp & Paper Strategic Review is shipped to subscribers.
Meantime, here is what we know about markets for corrugated boxes:
• Drought reduced packaged meat exports • B2B transfers requiring corrugated box-
es have declined in line with softness in
the general economy
• Growth in e-commerce deliveries report-
edly slowed in the first half of 2019
SLOWING economy slowed fibre-based packaging consumption growth in the first half of 2019.
That is a carefully worded state- ment. It does not mean consumption declined in 2018-19. Rather, after three successive years when corrugat-
ed box consumption grew a total of around 30 per cent, the growth rate slowed, and it also slowed for the other major fibre packaging formats: bags & sacks, and folding boxes such as cereal boxes and fast-food noodle containers.
The attention is usually on corrugated boxes. That is because they are an impor- tant element of the Australian economy. Utterly ubiquitous, they ship our goods from B2B and B2C, both domestically and globally. Is there a business or household without a corrugated box in it? Doubtful.
So, more than most other packaging for- mats, corrugated box consumption growth is tied directly to the health of the general economy.
EMPHASIS SHIFTS TO OTHER FORMS
OF FIBRE PACKAGING
Beyond corrugated boxes, there are three main fibre packaging formats of interest.
The fortunes of each of these formats was quite different over 2018-19.
The table shows consumption of bags and sacks, folding boxes, and moulded fi- bre products (for example, egg cartons) for the last two years, and how that consump- tion has changed from year-to-year.
The big change in consumption of fold- ing boxes, and the cartonboard from which they are made, will be of surprise to a sector that has continued to see its con- sumption grow at a quite stable rate over recent years. In fact, total consumption of this material fell to its lowest level in five years, as Figure 1 (facing page) shows.
At a little more than 195,000 tonnes in 2018-19, the decline in folding box con- sumption is probably overstated. Draw- downs from producer inventories, other timing factors, and lightweighting could all have amplified what may only be a modest fall in consumption.
More worrying for the local industry, the value of imported processed foods was up 7.5 per cent in 2018-19. While some of that rise is accounted for by the depreciation of the Australian dollar, any increased import volumes also results in increased packaging imports.
PROJECTED DEMAND FOR 2019-20
IndustryEdge’s headline demand expectations* for fibre packaging in Australia in the 2019-20 financial year:
• Corrugated Boxes – low single digit
percentage growth
• Folding Boxes – mid single digit
percentage growth
• Bags & Sacks – mid to high single
digit percentage growth * By material volume