Barbara Iascone (Istituto Italiano Imballaggio) Report on the state of the packaging August 2020 facts and figures

PACKAGING

Status Report (3)

Four-monthly Observatory of the packaging supply chain: situation updated to August 2020. The analysis obviously takes into account the consequences of the world pandemic, which has blocked activities and heavily influenced everyone’s habits, from many points of view. The recovery is expected to be slow in all sectors.

Barbara Iascone - Italian Packaging Institute

consumption is more intense - with its consequent evolution - divided into food and non-food macro-areas. The evolutionary frameworks of the manufacturing sectors are taken from sector analyses elaborated by trade associations, the database of the Italian Packaging Institute or Prometeia.

Food Area

Negative trend for the food production and only the resumption of Horeca will be able to raise the general situation. In the month of April, according to the latest data available at the time of writing, there is a decrease in production of 8.1% compared to April 2019. This negative figure adds to the -6.5% already recorded in March, again in comparison with the corresponding period in 2019. The trend decrease in the first quarter was -1.5%, while in the first quarter of 2020 the rate was still positive, +0.8%. The decline is essentially influenced by the performance of the Horeca sector, which accounts for about 1/3 of domestic food consumption. It is important to emphasize that although the decline in the food sector has nothing to do with the disastrous trends in other sectors, it is no less important. The sector has always been characterized by countercyclical trends, i.e. even in times of great crisis it did not record trends with great criticality, but the crisis resulting from the pandemic did not hold up. NOTE The data used for the processing of the report is taken from the database of the Italian

Here is a cross-section of the trend in the manufacturing industry sectors where packaging

Packaging Institute. Obviously this trend has also had an impact on packaging, creating some criticality especially for some types of packaging. The glass bottles will certainly be affected, in particular the production related to mineral water.

Non Food Area

Fashion system According to the analysis elaborated by SMI - Sistema moda Italia, in 2019 the sector recorded the following trends: in the “clothing” area, production closed the year at -5.6% while in the “textile” area it was -7.6%. The production of the fashion sector as a whole was therefore at -6.2%.

After a first quarter in slight decline, -0.3%, in the second quarter of 2019 there was a recovery with production up by 1.5%. In the following two quarters the negative trend compared to 2018 was consolidated. With regard to the outlet markets, the domestic market closed with a decrease of approximately 8%, while the foreign market

International economic framework

The International Monetary Fund has updated its forecasts for GDP trends around the world. According to the latest figures, world GDP will fall by 4.9% in 2020. The situation in which we find ourselves is unprecedented and the recovery will be very slow, so much so that world GDP growth in 2021 is expected to be only +5.4%. For the current year, in Italy, the drop in GDP will be -12.8%, while in the Eurozone the expected contraction is -10.2% overall (-7.8% for Germany, -10% and more for the United Kingdom). The evolutionary assumptions for 2021 see Italy recover by 6.3%, while the Eurozone as a whole will reach +6%. The United States will contract by around -8% in 2020, with a positive rebound in 2021 of +4.5%.

According to Confindustria

On the basis of the calculations carried out by the Confindustria (Confederation of Italian Industry) study office, it can be seen that in July - data available at the time of writing - the rise of Italy is difficult due to the still low domestic demand. In June, consumption was down 15% per year. Exports started up again as early as May, but they are still large below pre-Covid levels. Italy, in this sense, recovered better than Germany and the United States, recording acceptable results for exports of pharmaceutical products; exports of food products per-

formed less well. Those relating to motor vehicles and the fashion system were halved. In general, in the Eurozone, the first signs of recovery were recorded in May, thanks to the reopening of many production activities; industrial production recorded +12.4%, even if these are partial rebounds since on an annual basis, and the trend is negative (-19%). China is restarting, recording an expansionary phase of production activity for the second consecutive month. On the other hand, the figures for the United States, which is still in the middle of a pandemic, are still uncertain. According to ISTAT data, in Italy in May there were very positive changes in the main indicators, with industrial production increasing by 42%, exports by 35% and construction by 168%. But how should these data be read? They are certainly not representative of an economic boom, on the contrary. The levels of these indicators had reached very low levels earlier in March, and even more significantly in April. From this point of view, the positive values have a completely different perspective. In March and April more than 40% of industries, the so-called non-essential ones, completely stopped their activity, bringing industrial production down by 28.4% in March and 20% in April. The same fate for exports, which fell by 16.3% in March and 67.9% in April. As can be seen from the numbers, pre-Covid levels did not recover either.

According to Prometheia

According to the latest analysis provided by Prometeia (July 2020), the maximum point of the contraction in Italian manufacturing was reached in April, reaching -40% (compared to April 2019 data). The decline in the first five months of 2020 compared to the same period of the previous year was -21.6% for production and -19.3% for turnover. The same situation at the European level where France, again relative to the first five months of the year, registered -19.9% in production and Spain -17.6%, referring to the same period of 2019. Germany registered smaller drops (-15.9%) thanks perhaps to the limitations imposed during the pandemic, which were lower than in Italy, France and Spain.

closed with an increase of 2.2%. SMI also carried out a survey of the effects of Covid-19 on the performance of the sector in the first quarter of 2020. In the quarter JanuaryMarch 2020 there was an average decline in orders of -29.2%.

Furniture and furnishings Another sector strongly affected by the health crisis was the furniture sector which, in the period January-May, registered a drop of over 30% influenced by the production stoppage of the months of lockdown. Another fundamental element is the heavy drop in exports. turnover over 33.8 billion euros. tor registered a positive trend in turnover (+5%), however, decreasing in terms of weight (-5.6%). Steel packaging registered a +1.3% in turnover, while production expressed in tons was practically stable (+0.3%). Cosmetic sector Forecasts for the cosmetics sector for 2020 are more rosy than a few months ago. According to the latest elaborations of the study center of Cosmetica Italia, the 2020 should close with a final value of the -15%, since although negative it is better than the world forecast. Estimates for exports are -12%. The consumption that “kept” even during the quarantine period were those of face and hand hygiene products, shampoos and conditioners. The consumption of perfumes and cosmetics, on the other hand, is definitely decreasing. The sector has however not only been affected by production stoppage, but also the closure of beauty salons and hairdressers.

Pharmaceutical sector One of the very few sectors with a positive trend is that of pharmaceuticals, an area of manufacturing that played a key role during the pandemic and which surpassed production levels in 2019 thanks also to the good performance of exports. Based on the analysis of the first five months of the year, the sector recorded +3.1% in 2020.

Other manufacturing sectors The performance of the other manufacturing sectors closely linked to the world of packaging is definitely negative: household appliances at -22.9%, metal products and construction mate-

The final data for 2019 show us a sector still in good health: turnover up 2%, production expressed in tons less brilliant but still positive (16,800 t/000, +1.1% compared to 2018), The packaging sector

Let’s see in detail the evolution of the various supply chains. The aluminium packaging secrials at -20%. Positive trends in glass packaging, where turnover grew by about 8% compared to 2018 and production was +3.6%. Bottles, which represent 89% of the production of glass packaging, alone grew by 4.3%. As far as plastic packaging is concerned, turnover grew by about 1% while production rose by 2.6%, undoubtedly influenced by the trend of rigid packaging - bottles and flacons - the

most representative in terms of weight, which alone registered an increase of 2.8%. Both the turnover and the production of flexible converter packaging grew by 3%, with paper-based packaging also stable for 2019. Paper and cardboard packaging grew by 1.9% in relation to turnover and 1.5% in terms of production in tons, influenced by corrugated cardboard packaging which alone grew by 1.2%. Wood packaging is basically stable, with production at +0.1%.

Hypothesis 2020

In a year as complicated as the one we are experiencing it is difficult to try to quantify precisely the trends in the sector. However, we can say with certainty that the packaging sector is reacting well to the difficult economic situation. The sector has benefited from the food consumption and online sales trends, but we have of 2020; container and capsule tape falls by 6% in the same period. A similar trend for

to consider the repercussions caused by the

Raw materials quotations

Analyzing the price quotations of raw materials used to produce packaging at the Milan Chamber of Commerce, there were generalized decreases in the first half of the year. The only exception, in which we find increasing prices, concerns the raw materials used to produce paper and cardboard packaging. Prices for corrugated cardboard grew by an average of 1% between January and June 2020, while prices for paper for chess production remained stable and sheetboard grew by 1.3%. For paper from recycling, growth rates range from 3% to 7%. Metal prices are falling: thin aluminum laminate has fallen by about 5% in the first half very heavy declines in the Horeca sector.

aluminium from recycling. As far as quotations for steel for packaging production are concerned, for a year now, only scrap prices have been quoted at CCM and in the first half of 2020 the drops are around 20%. Plastics used to produce packaging are also decreasing, with the only exception of raw materials coming from recycling for LDPE granule for film, which is up 11.8% between January and June 2020. This item is however down compared to the same period of the previous year.

Table 1. Turnover of the Italian packaging market. Values expressed in t/000.

Material Prod. 2018 Export Import Use Prod. 2019 Export Import

Steel Aluminium Cellulosic pack Polylam. Rigid containers Plastics Flexible packaging Glass Wood Other Total

679 124,7 5.273 139 3.003 391 4.167 2.731 28 16.536

310 62,1 630 0 1.046 185 482 179

2.894

46 17,6 157 0 579 3 793 427

2.023

415 80,2 4.800 139 2.536 209 4.478 2.979 28 15.664

681 117,7 5.352 139 3.080 403 4.316 2.734 28 16.851

301 61,7 627 0 1.018 222 512 170

2.912

47 27,7 160 0 566 3 811 437

2.052

Use

427 83,7 4.885 139 2.628 184 4.615 3.001 28 15.991

Prod

0,3% -5,6% 1,5% 0,0% 2,6% 3,1% 3,6% 0,1% 0,0% 1,9%

Var % Export Import

-2,9% -0,6% -0,5%

-2,7% 20,0% 6,2% -5,0%

0,6%

2,2% 57,4% 1,9%

-2,2% 0,0% 2,3% 2,3%

1,4%

Use

2,9% 4,4% 1,8% 0,0% 3,6% -12,0% 3,1% 0,7% 0,0% 2,1%

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