Folding carton industry: customers should plan requirements plan ahead

Delivery times for cartonboard and folding cartons have recently extended to an unprecedented extent. Similarly, the price structure has moved markedly upwards. Forward-looking planning of future requirements and sufficient lead time for new projects by customers of the cartonboard and folding carton industry is therefore even more than usual the order of the day.

Supply chain fluctuations: Increased demand meets shortage of raw materials and simultaneous logistics problems

According to industry experts, there are several reasons why the otherwise stable supply chain for cartonboard packaging for consumer goods is currently suffering from fluctuations. On the one hand, the demand for virgin fiber based cartonboard in Asia and North America, as well as the disruptions in international logistics and the exorbitant increase in freight costs in the global trade of goods are responsible for the fact that the European converting market was short of an estimated 300,000 tons of virgin fiber based cartonboard. These could not be compensated for in the short term. On the other hand, the recycled paper side was affected by a Covid-related lower volume of recovered paper volume met with increased demand for many types of recovered paper-based packaging.

With the recovery of the European economy at the beginning of the second quarter, order particularly in markets impacted by Covid, such as food service, premium drinks and cosmetics, and complemented an already stable to increasing demand in many food segments, due to the temporary demand in many food segments.

As a result, folding carton production for numerous customer segments is working to capacity, the supply chains are filling up to the point of building up security stocks. For the latter, the security of supply with packaging materials is seen as the dominant driver. This results in particular in orders and higher order volumes the further you move up the supply chain.

As a result, the order backlog at the cartonboard mills is growing, leading to a significant increase in delivery times. While the lead time for orders depending on the average and usual level of 4-8 weeks in 2020, it increased over the summer to 10-20 weeks - and even more for even longer for special grades.

First forecasts for the European cartonboard and folding carton market in 2021 were recently provided by the British consultant NOA Prism, who was commissioned by the European Cartonboard Association (ECMA) the "European Carton Prospects Report 2021".

Accordingly, the consultancy firm estimates that the European markets will see an exorbitant European markets increase in 2021 compared to the previous year, with an exorbitant growth of cartonboard of 10.9%, with a simultaneous forecast increase in the folding volume growth of folding cartons of "only" 3.7%.

Even though these are only estimates, they do fuel the warnings of industry observers about supply chain disruptions.

Massive cost burden on the folding carton industry

The aforementioned extended delivery times are analogous to several realized price increases for cartonboard. The same applies to other raw materials and supplies for the production of folding cartons as well as, for example, for pallets or transport packaging, which have had a massive impact on the the cost situation of folding carton manufacturers.

Forecasts of customers are important

In the current situation, Andreas Helbig, Spokesman for the FFI board and managing director of SEDA Germany GmbH, realistic forecasts from customers are of great importance: "In the current market situation, good planning is essential. Panic and safety buying lead to additional shortages and are counter-productive. Customers are therefore therefore well advised to plan with sufficient lead time, especially for new projects, to avoid avoid new distortions."