Report on the state of packaging – Data 2018 (2)

Quarterly observatory of the packaging supply chain: situation in May 2019. Consolidated data and developmental hypotheses for the two-year period 2019-20. Barbara Iascone

The Report describes the performance of the manufacturing industry sectors (which remains the most significant indicator to understand the direction the packaging industry will take), where packaging consumption is more intense.
The evolutionary frameworks of the manufacturing sectors derive from the sectorial analyses done by trade associations, from the database of the Italian Packaging Institute or from Prometeia.
A reminder though that the data shown in this issue is that available at the time of writing (May 2019).
More up-to-date and complete information on all the sectors can be found in the  next Report.
 
FOOD
Food and beverage
According to Federalimentare’s analysis, the large food and beverage sector closed 2018 with a 1.1% increase in production. The turnover reaches 140 billion euros (+2% compared to 2017).
The sector is still driven by exports, reaching 33 billion with a surplus of over 1 billion, while domestic consumption is relatively stable.
Based on recent calculations for the first few months of 2019, growth was around 0.5% while forecasts for the entire year are still very cautious.
GDP growth forecasts and low consumer confidence are the main causes of a close to zero growth in the food sector, both in terms of volumes and turnover. However, according to Prometeia, the development trend of the sector should be strengthened for the biennium 2020-2021, with an average annual growth of 1%.
As regards exports, 2019 should confirm the trend already registered in 2018 (+3%).
 
NON FOOD
Cosmetics and perfumery
As far as the cosmetics sector is concerned, the global turnover of 2018 is confirmed at +2%, to which exports in constant development (+3.5%) have certainly contributed, compared to a domestic market with a modest 0.9%.
Based on the analysis relating to the first few months of 2019, a +2.6% is assumed for global turnover, with an export trend similar to 2018 (thus confirming +3.5%). But it is on the domestic market that the situation could improve, with growth that should settle at around +1.3%.
 
Chemical products
According to Federchimica, after a decidedly brilliant 2017, 2018 closed with growth rates down on the previous year: +1% for the sector total, a number also perfectly in line with the European average.
The chemical sector is confirmed as a sensitive thermometer of the general economic trend, as it includes various categories of intermediate products, used in the most diverse industrial sectors.
There are many elements to be considered for the slowdown in growth in this sector, above all the oil price increases registered in 2018.
The not so good prospects in terms of the economic trend are also of some concern for 2019.
 
First developmental hypotheses for 2020
Starting from 2020 and for the following years there will be a recovery of manufacturing activity standing at +0.9% (turnover at constant prices).
The consumer goods (+2.2%) and motor vehicles and motorcycles (+2.5%) sectors should feature among the best performances - the latter should reposition itself at the levels of 2018, after two years of contraction in the volumes of activities.
Manufacturing activity will also be driven by mechanical engineering, with an average annual growth in turnover at constant prices that will be around 1.7%, a trend determined not only by exports but also by the recovery in domestic demand.
The electrotechnical sector should also reach about +1.9%, driven by the automotive sector and building infrastructures.
The pharmaceutical sector will maintain growth rates above the manufacturing average (+1.8%).
Building industry related sectors should put in a good showing, with metal products at +1.5% and construction products and materials at +1.2%. Chemical and other intermediates will feature in this uptrend, where, however, foreign markets will make the difference.
Medium-term growth, on the other hand, is more limited for food and beverages (+1%): it is presumed the sector will consolidate the expansion cycle that has characterized it since 2015 thanks to the Ho.Re.Ca channel and the growing international component.
Metallurgy should put in a modest growth (+0.9%), likewise fashion as well as furniture & furnishings, which will register +0.8% each.
Bringing up the rear one has electronics (+0.7%) and household appliances
(+0.4%).                                              

General economic framework
According to the latest IMF calculations, in 2019 the world economy will grow by 3.3%, down however by -0.2% compared to forecasts.

The downsizing concerns all the main countries and the elements that have influenced include commercial tension caused by the duties between the US and China .
In the United States, GDP will rise from + 2.9% in 2018 to + 2.3% in 2019. Same thing for China, which would go from +6.6 in 2018 to +6.3 in 2019. As for the Eurozone, growth will increase from 1.8% in 2018 to + 1.3% for 2019.
In relation to Italy, the IMF reduces the growth of Italian GDP to + 0.1% for 2019, lowering it by 0.9% compared to forecasts.
By 2020 the OECD expects growth of 0.6%.
 
According to Confindustria
According to the analysis of the Confindustria Study Center, in 2018 the world manufacturing sector underwent a marked slowdown in all the main countries, attributable both to cyclical considerations - namely slowing demand, restrictive financial conditions, falling investment, etc. - but also considerations of a structural nature.
It is nevertheless established that, in the global context, Italy appears to be the seventh manufacturing power.
In this context, Italian industry confirmed the general trend in 2018, with a marked slowdown after a more dynamic two-year period. During the year, and precisely after the summer, the negative effects of the slowdown were highlighted and confirmed, which contributed to closing 2018 with a modest + 1.4%, a trend influenced not only by domestic demand but also by the slowdown in exports.
 
According to Prometeia
Based on the latest available Prometeia report (updated May 2019), the Italian manufacturing sector closed 2018 with a growth rate of 1.4%. Slowing down the manufacturing activity compared to the previous year, one aboveall has the auto sector which, in 2018, dropped by 1.7%. In Italy the electronic, pharmaceutical and mechanical sectors are the best performers in manufacturing. The slowdown, which intensified especially in the latter part of the year, was influenced by an economic brake on a global scale.
The first data of 2019 are closely linked to the international scenario, characterized as we have seen by a moderate slowdown.
It is assumed that the manufacturing activity will remain in line with the main macroeconomic indicators and turnover, at constant prices, should register a certain stability with a growth rate at 0%.
However, this can only happen thanks to some recovery during the second half of the year, which will offset the losses of the first few months.
The trend of the various sectors of industrial activity will be very diversified and in 2019 the sectors strongly tied to the cycle of investments in machinery will suffer the most: vehicles and motorcycles, mechanics, metallurgy and metal products will be the sectors that will register the least brilliant performances.
Italy’s manufacturing industry will be able to find a good expansive rhythm starting from 2020, when turnover should register a growth close to 1%.

NOTE. The data used to draw up the Report has been taken from the database of the Italian Packaging Institute.

The packaging sector
Based on the processing of the Italian Packaging Institute, in 2018 the turnover of the packaging sector in Italy should exceed  33.4 billion euros, registering am approximate +2.6% (data at the time of preliminary results).
 
Foreign trade is also on an upturn, although downsized compared to last year, with a growth hypothesis that should settle at around +3.2% for exports, and 5.2% for imports.
The balance of trade continues to remain positive, exceeding 2 billion euros: in practice Italy continues to export more than it imports.
 
Production
In quantitative terms, analysing the tons of packaging produced in 2018, a growth of 2.4% is assumed, which leads to the production of empty packaging in Italy to exceed 16,700 t/000.
In 2018, domestic demand led to the increase in production (+2.6%), a trend confirmed by data on imports (+1.9%), which recorded better performances than exports (+0.8%), up less than in previous years.
In terms of weight, among the different materials,  the performance of wood stands out (+4.5%), driven essentially by pallets and industrial packaging in the face of a constant drop in the production of crates for fruit and vegetables.
This is followed by glass packaging, with a global production of +2.9%: in this case, bottles are driving the positive trend, with a presence that is close to 88%.
Flexible converter packaging (+2.5%) is continuing on the upward trend shown the previous year, while cellulose packaging, excluding rigid laminated paper-based packaging, is up by 2%.
Corrugated cardboard, which alone accounts for more than 73% of cellulosic packaging, leads the trend, with an increase of +2.5%, to be largely attributed to the expansion of online sales, which generates more and more requests for this material.
Also in 2018, plastic packaging showed a trend of +1.1%, in line with the trend in manufacturing, followed by metal packaging (steel and aluminium) which increased production by 0.5%.
Rigid laminated paper-based packaging is seen to be stable.
 
Turnover
As far as the trend in turnover is concerned, aluminium packaging drives the growth of the entire sector with +4% compared to 2017, followed by glass packaging (+3.5%).
The other types of packaging show trends of around 2%, with the exception of rigid paper-based laminates, which remain stable, and of steel packaging that is in decline.
 
Raw material prices
As regards the trend in raw material prices at the international level, many movements towards the end of the year determined and influenced all of 2018.
Starting from oil, based on the analyses prepared by Prometeia, it is noted that Brent, after the October levels in which prices reached 80 dollars per barrel, fell to 60 dollars in the last two months constituting a drop of  around 30%.
Entering into the analysis of the international prices of the materials used to produce packaging, we note a sharp decline between November and December in steels. It was the hot rolled products, those of interest to the packaging industry, that recorded the most significant dips on the European market: -5% in euro quotations in October, a trend confirmed both in November (-4%) and in December.
Plastics, aluminium and cellulosic quotations were more stable.