Ben Markens, president, PPC, delivered a presentation to attendees at the joint European Carton Makers Association (ECMA) and European Association of Carton and Cartonboard Manufacturers (ProCarton) Congress in Sorrento, Italy, last week.
Folding carton shipments
Markens predicted steady growth for the North American folding carton industry, citing key points from PPC’s soon to be released Trends 2014 Industry Outlook and Market Data Report, PPC’s 2014 Business Sentiment Report, and PPC’s latest Market Flash Report.
He also shared insights on the North American legislative landscape and its effects on the domestic paperboard packaging industry.
“After four years of tepid growth, the US economy is poised to sustain 3+% quarterly growth for the foreseeable future, and consumer spending is slated to recover,” said Markens.
“This is great news for the folding carton industry, as the recession and its lingering effects on consumer behavior led to a marked decline in folding carton shipments between 2008 and 2012 (2012 shipments came in at 13.6% below the 2007 peak).
“Many market segments have, until recently, seen only meager recovery from the recession, and business conditions have been difficult for folding carton converters and other suppliers to these markets. However, the US economy appears to be picking up, with real GDP forecast to grow by 1.6% in 2014 and 3.2% in 2015.
“These positive economic trends seem to be translating into some growth for the folding carton industry. Whereas folding carton shipments declined around 3% in both 2011 and 2012, modest improvements in demand in several key end-use markets slowed this decline to only 0.5% in 2013. Folding carton shipments (in tons) are actually expected to increase by 0.9% in 2014 and then accelerate to a growth rate of 1.9% in 2015.”
Looking to the future, Markens said total carton shipments are forecast to grow at a 1.3% average annual rate between 2014 and 2018, with the total value of US carton shipments to reach $9.5bn by 2018.
Rising personal income and increased consumer confidence are expected to lead to increased spending on premium and luxury products customarily packaged in paperboard.
“Economic downturn aside, one of the biggest drags on the folding carton market has been increasing boxboard prices. From 2009 to 2013, paperboard costs rose at an average rate of 3.9%, whereas the average values of folding cartons only increased by 1.4%,” added Markens.
“This disparity between boxboard prices and folding carton values put extreme pressure on carton converters’ profitability, and in 2011-12 converters were forced to raise folding carton prices, increasing substitution pressure from other packaging substrates.
“However: upward pressure is expected to break in 2015 when increased coated cartonboard capacity in China is slated to undermine bleached board prices.
“It is important we keep an open dialogue with our European counterparts in the industry so we may anticipate domestic challenges as well as bolster the global paperboard packaging market.”
CA Proposition 65
Markens ended his presentation by addressing legislative issues such as California’s Proposition 65 and the USDA BioPreferred Program.
Effective from March, 2014,the Office of Environmental Health Hazard Assessment (OEHHA) has added methyl isobutyl ketone (MIBK) to the list of chemicals known to the State to cause reproductive toxicity for purposes of Proposition 65.
The listing of MIBK is based on formal identification by the US Environmental Protection Agency (US EPA), an authoritative body, that the chemical causes reproductive toxicity (developmental endpoint).
“We are in favour of safe food and packaging, the Proposition 65 list is constantly updated ad we keep an eye on it for members,” Markens told FoodProductionDaily.
“Some we object to such astitanium dioxide which makes paper white, which would have meant every carton would have had to have a warning on it, and some we are in favour of.”
The latest update in the USDA BioPreferred Program is paper and wood products have been accepted into the program. However, the USDA is still finalizing its criteria for defining innovation (the program requires that innovative approaches must be used in the growing, harvesting, sourcing, procuring, processing, manufacturing, or application of the biobased product).
In the meantime, the USDA has released interim innovation criteria that should be finalized by November 1.