Self-adhesive Label Sector Back to Pre-Crisis Volumes in 2010
Industry Concerned about Severe Pressure on Raw Materials
Underlying this growth was the strong, 9.5% recovery of the demand for rolls of paper based label materials, representing some 70% of total demand for self-adhesive label materials. Exceeding this growth, however, was the increase in demand for filmic roll label materials (PE, PP, others), which amounted to 15.3% over the previous year. Filmic materials thus resumed their rise in the share of European self-adhesive materials demand and this from just over 15% at the beginning of the decade to over 22.5% in 2010.
Geographically, growth in demand was driven by Eastern and Southern Europe (including Turkey). Both regions recorded healthy double digit growth figures of 20.6% and 13% respectively. Within these regions, Turkey, Russia, Bulgaria and Romania stood out with annualized growth (well) in excess of 20%, a sign of strong economic development in this emerging region. In the more matured regions, growth of self-adhesive label demand was more modest at around 4.5 - 8.5%, although double digit growth figures recorded for Germany, The Netherlands, Italy and Spain ranked above the top end of this range.
This healthy recovery does not come without significant future risks and concerns however. Already in the late summer of 2010, FINAT members expressed concerns about disturbances in the supply chain that were building up pressure on raw materials' market conditions. According to FINATs quarterly member survey, this prospect tempered the optimism of executives at the beginning of 2011, although the balance of respondents continued to be positive about business prospects for the industry.
Over the past three to four months, the pressure on raw materials has aggravated. Between January 2010 and January 2011, the benchmark pulp prices increased between 20-25%, while resins for LDPE, PP and PET, crucial to filmic label materials, increased between 25-35%. Polymers necessary for the production of adhesives, even increased by 65-75%. Also ink suppliers are being faced with the impact of tight raw materials' markets and have announced price increases ranging up to 30%. The rise of crude oil, driven by the uncertainties in the Arab world, is further intensifying the pressure, not in the least because of the increase of related transportation costs.
According to FINAT Managing Director Jules Lejeune, "capacity limitations cause a gap in supply versus double digit growth in demand. A gap that is only closing slowly. Our members are confronted with quarterly price adjustments or even 'spot' prices on materials not yet delivered. Under such market conditions and because of the time lapse, contractual raw materials clauses only offer limited shelter. Ultimately this could affect the financial stability of label businesses."
FINAT, founded in Paris in 1958 and headquartered in The Hague (The Netherlands), is the world-wide association for manufacturers of self-adhesive labels and related products and services. With 600 members in over 50 countries around the world, FINAT has much to offer to label converters and all suppliers to the labeling industry in terms of information exchange and the opportunity to network internationally. www.finat.com