VDW: Market in a state of emergency - Corrugated board industry produces at high pressure under extreme conditions
News General news
Paper prices have been skyrocketing for months. In addition, considerable energy price increases are burdening the corrugated board industry. Meanwhile, the industry is producing at full speed to meet the demands of its customers despite all the challenges. Particularly with a view to the Christmas business, both manufacturers and customers are preparing as well as possible for the current exceptional situation on the market, explains the Verband der Wellpappen-Industrie e. V. (VDW).
"Corrugated board is increasingly in demand as an environmentally friendly packaging material - actually a very positive development. Nevertheless, our industry is currently coming under increasing pressure, particularly due to the never-ending price increases for our most important raw material, paper," warns VDW Chairman Dr. Steffen P. Würth. According to Würth, the corrugated board industry has already been confronted with an increasingly dramatic development since September 2020: "According to VDW calculations, there was a price increase of 57.7 percent for waste paper-based corrugated board base paper from September 2020 to September 2021," Würth emphasizes. This value is a decisive indicator for the industry because corrugated board packaging consists of an average of 80 percent recycled material. However, the weighted total price level for corrugated base paper, which takes all grades into account, also showed a significantly higher cost burden from September 2020 to September 2021, with an increase of 51.3 percent. According to EUWID Europäischer Wirtschaftsdienst GmbH, there were even higher spikes for individual paper grades: For example, the price of corrugating medium climbed 71.4 percent in the period from September 2020 to October 2021. The situation, which is extremely stressful for manufacturers, is related to economic after-effects of the pandemic. During past lockdown periods, less recovered paper was collected from commercial suppliers, resulting in shortages and an increase in recovered paper prices.
The corrugated board industry is experiencing additional pressure from energy price curves that are also pointing steeply upwards: According to the German Federal Statistical Office, for example, gas prices rose by a whopping 159.7 percent from August 2020 to September 2021. Prices for light heating oil rose by 84.9 percent from September 2020 to September 2021.
With a view to the approaching Christmas business, VDW Chairman Würth assures: "The corrugated board industry is producing at permanently high capacity utilization in order to meet the strong demand. Our industry is doing everything it can to supply its customers as quickly as possible and avoid bottlenecks in the Christmas business." Packaging for this seasonal peak phase is usually ordered several months in advance. However, the current market situation in various areas - not just paper - is characterized by such raw material shortages that many customers have already adjusted their ordering behavior and acted earlier. "All sides are therefore trying to adapt as well as possible to the current exceptional situation," says Würth. The extreme cost pressure to which the corrugated board industry has been exposed for many months now is not being passed on to customers to the extent that is actually economically necessary, the VDW Chairman also emphasizes. This is clearly reflected on the revenue side: the average revenue per m2 of corrugated board calculated by the VDW rose by only 10.3 percent between September 2020 and July 2021. "Measured against the cost explosions for paper and the energy price increases, we are therefore in a drastic imbalance," Würth summarizes.
