Report on the state of packaging – Data 2018 (3)

Oct 15, 2019

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Quarterly observatory of the packaging supply chain: situation at the end of July 2019. 2018 consolidated data and first year end forecasts.

Here we show a cross-section of the trend in the manufacturing industry sectors where packaging consumption is more intense, divided into food and non-food macro areas.

Food and beverage
Source: Federalimentare, Iri, Istat

As already highlighted in the previous report, in 2018 the food sector (food + beverages) reached a turnover of 140 billion euros with a growth rate of 2%, as regards production expressed in quantitative terms; according to Istat calculations, the growth rate is 1.1%.
As regards 2019, according to Federalimentare surveys, the Italian food industry is seen to run faster than any other industrial sector. In April, the food area in fact registered an increase of 4.9% compared to the same month of the previous year (in the 1st quarter, the sector shows a growth of 2.2%) while Italian industry overall put in a -1.5% in April (in the first four months the variation is -0.7%).
From a more detailed analysis on 2018 it emerges that, among the various sectors, ready meals (+9.9%) show the greatest growth; sweets, chocolates etc. also put in good performances. (+7.9%), likewise tea and coffee (+4.2%).
The area related to fish production and processing grew by 2.1%, that of meat processing by 1.7%.
Analysing the beverage sector alone, in 2018, we find a growth of 3.8%, where beer is among the best performing sectors with +4.6%; the fruit juice trend is also excellent, growing by 5.7%. Even spirits grew at a good pace, +17%. Wine, including sparkling wines, was up by 0.9%.

As regards 2019, analysing the first four-month period of the various sectors, it can be seen that the best performances are bread and pastry products, with an 8.4% and the chocolate and chocolate candy segment with +5%. The beverage industry grew by 9% in the first quarter of 2019, where beer continues its excellent performance accompanied by wines, the former growing by 5.9% the latter by 5%.

Cosmetics
Source: Centro Studi Cosmetica Italia and Istat
On the basis of the Istat data for the first half of 2019, there was an increase in production of around +3.8%, with exports at around +2.5%. The Cosmetica Italia trade association also attests to the growth rate in the first months of 2019: a positive trend which - with the exception of 2009 - has been repeated since 2007.

Pharmaceuticals
Source: Federfarma, Prometeia

In 2018, pharmaceutical spending fell by 4.1% compared to 2017, confirming the negative trend that has persisted for a few years, which sees the reduction in spending on pharmaceuticals supplied by pharmacies under the normal conventional regime. In detail, this decrease was determined, on the one hand, by the decrease in prescriptions (in 2018 they fell by 0.7%), and on the other by a substantial reduction in their average value, due to a decrease in average prices of prescribed pharmaceutical products (-3.4%).
The decrease in pharmaceutical spending in the conventional regime also corresponds, for 2018, to an increase in pharmaceutical spending and the number of pharmaceutical products distributed on behalf of the ASL.
In 2018, prescriptions were over 576 million, averaging 9.51 prescriptions for each citizen. The packs of medicines provided by the SSN amounted to over 1,106 million (-0.7% compared to 2017).
For the first few months of 2019, Prometeia registers a negative run in the turnover trend, which however is not reflected in the various economic indicators on the sector, which in fact is enjoying excellent health both on the domestic and foreign market. In all probability the trend can be attributed to the decline in the average value of the recipes.

Furniture and furnishings
Source: “2019 Furniture Furnishing Forecast Report”

In 2018, the domestic furniture market recorded minimal growth compared to 2017 (+0.8%). The resilience of internal consumption was certainly influenced by the government’s extension of incentives for the sector through the “furniture bonus”. In terms of foreign demand Italian exports grew by 2% compared to 2017.
Based on the initial analysis, 2019 should still be characterized by uncertainties and national production will be supported once again by foreign demand rather than by the domestic market.
Production growth should be around +1%. Domestic demand should be fairly stable, with perhaps a small growth of around +0.5% supported by the extension of the “furniture bonus” also in 2019. Exports, based on initial calculations, should register a growth rate of around 1.6%.

Chemical products
Source: Federchimica

The Italian chemical sector is experiencing some stagnation, after a small growth in 2018 (+0.5%). According to the assessments of the first months of 2019, the sector should remain stable. The partial recovery of the first quarter, due above all to a re-accumulation of necessary stocks after their use at the end of 2018, does not see a consolidation in the following months. The same situation occurs at European level, with 2019 stable compared to the previous year.
However, the weakening does not only affect domestic demand but also extends to exports, which fell by 0.3% in the first quarter of 2019.

Fashion System
Source: SMI Italian Fashion System

According to the analysis of the Confindustria Moda-LIUC Study Center, the Italian Textile-Fashion sector registered growth of 2.1% in 2018, despite a certain slowdown caused by a drop in demand in Europe and Asia: Textile - Italian Fashion has inevitably suffered from the less favorable economic situation, showing, as indicated in the pre-final balance sheet, some criticality.
Imports grow by 3.3%, with diversified trends in textile imports (-0.1%) and clothing imports (+4.9%).
As regards 2019, according to a survey of the market situation carried out by the Confindustria Moda Study Center, given the economic uncertainty, there is also a change of trend for the fashion system. In a panel of about 80 companies operating in the sector it appears that, in the first few months of the year, turnover should fall by -2.8%. In this analysis the domestic market would be in greater decline than the foreign one, the former should fall by -6% while exports should maintain a positive trend, albeit to a very small extent (+0.9%).

NOTE ON THE SOURCES
The picture of the manufacturing sectors derives from elaborations by the Italian Packaging Institute on Confindustria, Prometeia and the main category associations of the various sectors. Information on the global economic situation is taken from the analyses developed by Confindustria and Prometeia.
The relative evolution of the packaging sector is taken from the Data Bank of the Italian Packaging Institute.
For information on raw materials, the sources are the quotations of the Milan Chamber of Commerce and Assomet for aluminium.

General economic picture
In 2019, GDP growth should slow down compared to the previous year (+0.3%), supported exclusively by domestic demand net of stocks which, together with foreign demand, should have almost no influence on GDP.

Household consumption (+0.5%) will be the main component supporting growth, while investment spending will show a marked deceleration. The moderation of world trade would lead to a reduction in the volume of exports and imports, with a consequent zero contribution from net foreign demand. As regards employment, it will certainly be affected by the slowdown in production rates, registering a probable +0.1% in 2019 (the unemployment rate should settle at around 10.8%).
Inflation should register a rate of 0.9%.

On the basis of the ISTAT analyses relating to the manufacturing sector in the second quarter, the business confidence index marked a slight decrease, the assessments on the level of orders and on production expectations deteriorated, highlighting a decrease in the balance relating to inventories . The leading indicator has registered a less marked decline compared to those of the previous months, suggesting however the continuation of a phase of moderation of production rates.

According to Confindustria
In the early months of 2019 the Italian economy registered zero growth. In the second quarter, Italian GDP, as expected, remained at a standstill. The negative dynamics of the industrial sector weighed: declining production and PMI (Purchasing Managers’ Index) in contraction. The employment trend was instead positive (+0.5%), but this may indicate that low value jobs are being created in services.
Italy started the third quarter with some signs of improvement, but accompanied by several negative factors. The first signal is that in services, the GDP has returned to growth, while in industry the Centro Studi Confindustria estimates a production still down in July (-0.6%).
Another positive element is the confidence of households, which rose sharply in July. Furthermore, consumer goods producers’ domestic orders recovered in June-July, albeit at low levels.
The second quarter, on the other hand, was weak, with retail sales down
(-0.8% in May), also for food.
As for exports in May, Italian sales grew by 1.3%. Non-EU exports were good in June, favored by the weak euro and other factors (the trade agreement with Japan, US duties on Chinese goods). Exports to EU markets have also improved. These data were driven by consumer goods (food, pharmaceuticals, clothing). However, the indications for the summer months are negative: foreign manufacturing orders signal a weakening of demand.

According to Prometeia
Based on the updates published at the end of July, a 2019 start-up with a slowing down in manufacturing activity is confirmed, registering just +0.5% for turnover at constant prices. Domestic demand registered a +0.3% for the first few months of the year but with an improvement margin expected for the following months. The small growth is influenced by both internal and international uncertainty.
The trend of the foreign market is decidedly better, 2019 in fact registers a +3.5% in the first months of the year for manufacturing activity. As regards the April figure for the industrial production index, the reduction is widespread in almost all the main industrial groups; only the production of energy goods registered growth compared to March of +3.6%. Considering the dynamics of the industrial sectors compared to the same period the year previous, in April the growing sectors decreased from 41 to 33%, with a trend very similar to that that of Germany.
For the second quarter, Prometeia assumes a sharp slowdown in production with -0.9% on the previous quarter and -1.4% on the corresponding period for 2018, compatible with a stagnation/contraction of the Italian GDP.

The packaging sector
According to the elaborations of the Italian Packaging Institute (final data), in 2018 the global production expressed in tons has grown by 2.3%, settling at 16.673 t/000.
Exports grew albeit in a reduced manner compared to 2017, registering a +0.8%, a decidedly lower rate compared to +4.2% in 2017. Production was supported by domestic demand (+2.6%). Imports also grew (+1.9%).
In terms of turnover, the packaging sector in 2018 grew by 1.9%, registering over 33 billion euro.
74% of packaging production is destined for the food area (including beverages).
For 2019, production growth is expected to reach around +0.8% (latest estimates), which would bring the tons of packaging to around 16,800.
As far as foreign trade is concerned, according to the first analyses, there could be a recovery in the export trend with +3.5% and an increase in imports of around 5%.

Raw material prices
As regards the prices of the raw materials used to produce packaging, in the first six months of 2019 there were diversified trends for the different materials.
As far as steel is concerned, with quotations stopped for over a year, it is not possible at the moment to make assessments.
Aluminium shows an average drop of around 1.5% both in terms of virgin raw material and scrap.
In cellulose packaging, corrugated cardboard registers an average decrease of around 9%; the average prices of the paper used for the production of bags instead increased by 3%, as well as the average price of paper for wrapping (+2.4%). And if the prices of coated papers are stable, the average prices for recycled paper have grown by 1.6%.
Plastic polymers tended to fall, with the exception of +2.3% for PET quotations and +5% (average price changes) for Nylon. The price of rPET from recycling also increased in the first six months of 2019 (approximately +7% on average). The prices of the other polymers coming from recycling are fairly stable.
The quotations for wood are also falling.