Yuri Alpeev, Director for Strategic Marketing, GOTEK Group, Expert Council Chairman, Russian National Packaging Confederation, on the current state and immediate prospects of the local corrugated cardboard packaging market
“In 2020, the corrugated board packaging market grew by 6.2% (more than in 2019) to 7,323 million square meters, largely due to the demand for food, essential goods, and the development of online commerce.
“The new reality factors caused by the COVID-19 pandemic will remain relevant in the first half of 2021, defining the further development vector of the corrugated cardboard packaging market.
“First of all, we are talking about new situations of consumption. The homemade food trend has taken on special significance as we have been at home much longer, with more home deliveries of both ready-to-eat meals and food for cooking.
In 2020, the price of MS-5B (OCC) grade waste paper increased by 84%, of testliner — by 30%, of kraftliner — by 15%
“Changes in consumer preferences have led to a change in the priority of shopping channels. Online sales began to grow very aggressively. Even if they still occupy a small share in the total trade turnover, nevertheless, the growth rate (2 times on a year to year basis) is impressive and still to continue.
“The non-standard situation determined the market dynamics within the year. If in the first half of the year, when everyone was just getting used to the new reality, the increase in production of corrugated packaging amounted to a modest 3.5%, in the second half of the year it has already exceeded 9%.
“High market dynamics at the end of 2020 set high input parameters in 2021. Growth in December 2020 by 11% y/y, preliminary estimates for January suggest that demand for corrugated board products will grow by at least 6-7%.
“Unfortunately, not all participants in the supply chain were ready for such a development in the market situation. Restrictive measures related to the spread of coronavirus have led to a decrease in the collection of various types of waste paper, including MS-5B (OCC) grade waste paper, the main raw material for the production of recycled containerboards (RC).
“Thus, the high demand for raw materials from corrugated board manufacturers turned out to be unsecured due to the shortage of waste paper and the resulting reduction in RC production.
“This led to a decrease in stocks of both producers of raw materials and their consumers, primarily non-integrated companies.
“A natural consequence of the lack of supply was the rise in prices along the entire chain. In 2020 (December to December), the price for MS-5B grade waste paper increased by 84%, for testliner — by 30%, for kraftliner — by 15%, while the price of corrugated cardboard products remained the same, compensating the mid-year fall.
Due to aggressive pressure from MS-5B prices in Q1 2021, prices for RC are expected to rise up to 40.5-41.5 thousand rubles per ton
“The deficit of waste paper and RC, high demand for raw materials from the corrugated market due to high consumer demand for goods in Q1 2021 are still present on the corrugated board market at the beginning of 2021 and determine the price level for waste paper and containerboards.
“There is a high likelihood of an aggressive price scenario, in which the price of waste paper, with an even stronger deficit in February-March, will grow by 45% by December 2020 and will exceed 22 thousand rubles per ton.
“Due to aggressive price pressure from raw material prices (MS-5B), prices for RC are expected to rise in the first quarter of 2021 to the level of December 2020 by 40%, to 40.5-41.5 thousand rubles per ton.
Producers who do not increase packaging prices are likely to face liquidity problems in March-April 2021
“It is not very promising to make forecasts for price developments after April in the context of instability of factors balancing the market and putting pressure on prices. But the upward trend in costs shows that as soon as in the first quarter, prices for corrugated cardboard packaging should increase by at least 20%.
“This is a fairly high level of increase, and those producers who cannot carry it out are highly likely to face liquidity problems as early as March-April 2021.
“Therefore, taking into account the high risks that will accompany the corrugated market in 2021, manufacturers of corrugated cardboard packaging will have to make a lot of efforts and, perhaps, more than once revise the selected strategies and their compliance with the trends that are emerging in the market in order to achieve the target financial indicators.”
gofro.expert by GOTEK Group