A MARKET RECAP FOR EUROPEAN CONTAINERBOARD AND CORRUGATED BOARD MARKET 2017 / 12 Feb 2018
Blog: European containerboard and corrugated board market review 2017
Solid and steady development continued in the European corrugated board markets throughout 2017. A lot A lot happening in the US and China – implications on Europe to be observed
The positive note that obtained the European containerboard and corrugated board markets in 2016 continued to prevail even more robustly throughout the whole year 2017. The main contributors have been the solid development in retail and especially in industrial production. The latter has continued strong during the whole year, reached highest levels since 2000 and made even historical records in some countries like Netherlands and Austria.
The growth has taken place both in non-durables and durables, the latter has kept demand for virgin fibre based containerboard, kraftliners and SC fluting, very strong. At the same time supply has remained tight and operating rates high allowing virgin containerbord producers to announce prices increases; first in March and then again in July/August. The strong corrugated box demand has impacted also white-top liner prices and price increases were reported eg. in France and Italy during the autumn months, which is the high season for fruit packaging.
Statistics (until end October 2017) indicate a very positive year for the European containerboard producers and corrugated box makers; close to four percent increase as compared to 2016 in both box deliveries and containerboard production.
for the European containboard producers and corrugated box makers in production and deliveries compaired to 2016
The most gratifying feature is that all European markets have developed positively; Poland once again very strongly over six percent, but good performance in Spain (5.5% during the first ten months) and the UK (4.4%) as delightfully also in France (2.7%) thanks to overall positive economic development and gradual pick-up of consumer confidence and retail.
Investment activity in Europe slowing down, but consolidation continues
Despite of the favourable market development and fairly rosy future outlook, at least some European containerboard companies have been cautious in their investment plans and expansions have been postponed or even cancelled. In June 2016 Stora Enso announced that it is pondering a new testliner/fluting machine on its Ostroleka mill in Poland, but then in late April 2017 the plan was scrapped. In July this year Mondi reported that it will postpone its new white-top linerboard project in Ruzomberok Slovakia to 2020 instead of early 2019.
On the other hand few European companies have been focusing on growing business outside the continent; in October Austrian Prinzhorn published that it will build a completely new greenfield mill in Turkey; start-up scheduled in 2020. SmurfitKappa again continues to invest in Americas as a new machine will be installed to Mexico to support corrugated box operations, which will have recently been modernized. The Group also strengthened its position in the European packaging markets and acquired Soyuz in Russia and a display company in Greece.
Since purchase of SCA Packaging in 2008 DS Smith has had a very determined and swift acquisition strategy which has made it a true pan-European packaging player. In summer 2017 DS Smith entered the US corrugated market by acquiring Interstate Resources, which is an integrated containerboard and corrugated board producer operating in the East coast. In January the company also completed acquisition of bag-in-box packaging company Parish Manufacturer based in Illinois. DS Smith continued its European expansions as well by taking over EcoPack and Ecopaper in Romania and DPF Groupe in France.
SAICA is planning to boost its position as the leading Southern European player and news on its intention to acquire French Emin Leydier started to spread in late September. Belgian VPK on the other hand is focusing on the Northern European markets and in April the company announced that it together with Klingele will invest on Peterson, operating in Norway, Denmark and Sweden. VPK acquired Peterson in late 2016. Furthermore VPK strengthened its position in the UK markets and purchased 30 per cent stake in CorrBoard UK, a sheet company in North Lincolnshire.
All these movements bespoke for the two key trends that have been prevailing in European containerboard and corrugated board industry. The first one is geographical focus, which for the two largest players, SKG and DS Smith means wide pan-European presence whilst the others seem to target certain regions and countries in Europe. The latter trend is be more and more balanced between containerboard and corrugated board production in order to increase value and visibility on market movements as well utilize synergies in eg. logistics and product development
A lot happening in the US and China – implications on Europe to be observed
For the US containerboard industry year 2017 has turned out to be a year of big investment and expansion news. IP, PCA, Pratt and Boise have all announced significant expansions; either new machines or conversions that will come up on stream in 2018 or 2019. Furthermore Kruger already started its lightweight recycled containerboard PM10, conversion from newsprint, in its Trois-Rivières mill in Quebec during this year. All in all the announced projects mean a significant, nearly 1.5 million tonnes, addition in the North American supply. Based on the published information this capacity will be almost equally divided between recycled containerboard and kraftliner and will no doubt impact on both global and European OCC and kraftliner trade and prices.
The global containerboard industry will be affected by recent movements in China as well. In July China banned imports of mixed waste paper and so far this decision and especially its unclear rules and conditions as well behavior of the Chinese buyers have created fluctuation in many European markets particularly in the UK and Italy.
(Published as an article in the PITA Annual Review December 2017)