This is one conclusion from the report The Future of Paper and Board in Central and Eastern Europe by Pira International. The study outlines CEE market sizes for paper and board by grade, end-use application and country, with five-year forecasts projected till 2014.
But the packaging consultants said that while the situation may be difficult in the near future, the region still offers real prospects for growth in the long term.
The research said that demand for paper and board packaging in 2009 was likely to drop slightly compared to the previous year - when consumption was just under 8m tonnes, with a value close to US$11bn. For both these segments in 2008, Russia, Turkey and Poland were the main markets, Pira consultant Stephen Harrod told FoodProductionDaily.com
In 2009, corrugated demand reached 5.5m tonnes – with 33 per cent of this for the fruit sector. Some 56 per cent of the 1.2m tonnes of folding cartons sector, and a further 320,000 tonnes of paper packing was used in the food industry, he added.
The majority of countries in central and Eastern Europe are expected to see GDP growth in future, albeit at a slower pace due to the current economic slowdown. This is expected to boost the market.
The study outlines that another driver will be increasing demand for more value-added packaging as consumers become more affluent and possess larger disposable incomes.
But as markets in the region become more mature, rising production costs are also becoming an issue, which is also dampening growth. There has also been migration within the region as companies move from one CEE base to another where costs are lower.
“The market is moving from a commodity to value-added products, with high quality printing and finishes on the increase,” said Harrod. “Manufacturers that moved from, say, the UK to Poland are now looking at moving again to Bulgaria and Romania in search of lower-cost production.”
Major players in the region include Mondi, SCA and Stora Enso, as well as Hungarian company Dunapack and Model, of the Czech Republic. The top six firms have more than 30 per cent of total market share, said Harrod.
The Pira consultant predicted the best case scenario for the paper and board industry in the region would see a slow recovery from the drop in 2009 back towards the higher levels experienced in recent years. Under this scenario, incremental demand for a further 2.6m tonnes of paper and board will also be generated by 2014 – with Hungary and Ukraine hardest hit.
A bleaker scenario outlines a forecast of a two per cent consumption drop in the short term followed by “static to slightly negative growth prospects for the medium term”.
“If this scenario plays out, paper and board consumption will reduce by over a quarter of a million tonnes in 2009 alone, with volumes declining by over 600,000 tonnes per year by 2014. Hungary and Russia will again be expected to fare the worst over the medium term,” said the report.
Key opportunities in the region include overall growth despite the economic downturn, as well as upgrades in the printing and warehousing segments. The introduction of automated systems and expansion of production capacity, and promising growth for packaging applications like corrugated and microflute, folding cartons and Kraft paper are also foreseen.
While the packaging experts note some threats, including competition from other materials and overcapacity in printing sectors, its overall prognosis is broadly positive.
It said it was “hopeful that the fundamental drivers behind the region's previously high growth rates are still in place and will re-emerge as the recovery process gets underway. Suppliers already active in this region should batten down and weather the short-term difficulties, while those yet to involve themselves should seriously consider the opportunities presented by the region in the longer term.”
The Future of Paper and Board in Central and Eastern Europe is available from Pira International for £3,500.