The reason why forest products and paper companies are investing wholesale in packaging grades is clear from the figures. Board production has not increased radically in Europe in recent years and yet demand for corrugated, boxboard and folding carton boards is increasing. The main corrugated groups talk about an increase of around 8% for their services with little sign of a reset. Their problem is sourcing raw material.
While demand for printing and writing papers is slipping across the board and for some grades (SC in particular) is falling sharply, there are supply shortages in corrugated and carton boards as demand for fibre based packaging continues to increase. Shortages in label materials are due in part to the lengthy strike in Finland earlier this year and to a switch away from film towards the more easily recyclable paper stocks.
This is the force driving demand for corrugated, coupled with growth in home shopping and ecommerce. Producers have noted difficulties in production because of problems in collecting recyclable materials from households as this change kicks in. It was much easier to collect huge amounts of board from retail shopping centres and supermarkets.
The data, from Cepi, shows how little production of packaging materials was affected by lockdowns and pandemic. It would be difficult to single out from the data any impact from Covid-19, compared to the steep decline for catalogues and advertising material noted in the commercial side of paper production. Indeed total production of boards increased in 2020. And this feeds through to paper mills deciding that production of packaging papers is a much safer bet than continuing to produce papers for which there is a declining demand, most clearly demonstrated by Stora’s decision to turn off 1 million tonnes of coated woodfree paper and instead produce packaging material at the Oulu mill instead.
The figures for paper production are symptomatic of trends affecting the printing industry. Newsprint is not quite the biggest loser. That accolade goes to SC papers used for mass market advertising flyers and for gravure printing. As capacity and demand has dropped for this type of printing, it is unsurprising that paper production also drops.
The 2020 figures also show the effects of pandemic with falls in production across both coated and uncoated woodfree papers as demand dropped off. This has come back in 2021. While the full figures are not yet available from Cepi, initial findings suggest a 5.0% increase in production as economies have stirred back into life. But this has not been enough to bring production and demand for woodfree and other printing papers back to pre pandemic levels.
The same cannot be said for packaging grades which have shown an estimated 7.0% increase in 2021, based on figures from the first nine months, to what has been the highest level in Europe. This means that packaging grades now account for 58.7% of total European paper production with graphic papers unchanged at 27.8% of the total. Tissue and hygiene papers account for much of the remainder along with specialist papers for industrial applications.
Production of graphic grades in 2021 is estimated to have risen by 5.4% led by printing and writings to overcome a 7.4% decline in production of newsprint. Within this production of woodfree coated papers has grown 8.8% and of uncoated by 7.5%. This is still not enough to cope with a surge in demand, hence shortages in some grades stoking the rise in price.
The same swing towards packaging is reflected in ink consumption figures compiled by Eupia, the organisation representing European ink makers. Five years ago its members across 27 countries produced 440,000 tonnes of publication inks and 520,000 tonnes of packaging inks. Last year this had become 300,000 tonnes of publishing inks and 550,000 tonnes of packaging inks.
Eupia only records inks its members make covering litho, letterpress, gravure, flexo and inkjet – but not toners for digital presses. While there may have been some substitution of litho for digital, the drops in volumes for publication inks correspond more to the loss of substrates. Digital printing is not yet eating into volume markets for printing.
Looking at overall ink consumption in Europe’s largest markets. Germany and the UK vie for the biggest decline in the period, while Italy has remained stable overall and France has dipped less. The German market remains the largest in Europe followed by Italy in clear second position. The UK was comfortably ahead of France in 2016. It is now nip and tuck between the two countries.
The figures also show the rise in demand from growing markets. Thus Turkey has grown substantially in five years and is now among the biggest ink markets in Europe, while Poland too is a fast rising market.
The decline in demand in the UK can be attributed to shifts in volume print production of the sort that has led to the demise of YM Group and Polestar before it and may yet account for further consolidations.
Tracking the ABC circulation of five significant magazines from different sectors shows only one is increasing sales substantially. Even Private Eye, often held up as an example of a successful magazine in the news sector, is showing a fall in sales over the period. Its 5% drop on the index is however dwarfed by the once dominant Cosmopolitan. Over the five years it is down to sales that are 35% of the level in 2016. Country Living and Radio Times, the others being tracked, have seen also seen falls. And this is purely around circulations. It says nothing about the number of sections the titles carry. Publishers must hope that the 2021 figures have been influenced by difficulties in casual sales due to less travel as lockdown restrictions were to some extent still in place and that sales will rebound as the great return to work takes effect.
Books on the other had have performed well in the five-year period according to the Publishers’ Association. Book publishing is an industry where the UK remains very strong with exports in 2021 accounting for £3.7 billion of a total turnover in book publishing of £6.4 billion.
The figures also show the extent to which ereaders have failed to disrupt most parts of book publishing. Only in educational and academic publishing have book sales declined. In consumer publishing, book sales rose in 2021, possibly a lockdown effect, while the sector as a whole declined.
The lockdown impact is seen in fiction sales. These trundled along at around the same rate from 2016-2019, then as lockdown hit in 2020 demand shot up and the growth has continued into 2021. The rising popularity of audio books has not stopped sales in the sector.
Like fiction, non fiction sales in consumer publishing were showing incremental growth until the Covid year when sales leapt ahead and have grown again in 2021. Children’s books have been less affected, perhaps because alternative sources of entertainment, perhaps because the closure of book shops and other retailers capped growth rates. Nevertheless there has been growth too in this sector.
In educational a drop in the overall market and a steep drop in sales occurred last year.
Academic publishing, one of the largest sectors in book publishing, shows a move away from print to digital publishing. Printed journals in particular have given way to digital versions while there is still a market for hefty academic tomes, no doubt to line a bookshelf as evidence of erudition on a Zoom call. This means that the value of scholarly and academic book sales is falling, but the sector itself is growing, possibly because of introduction of different revenue models and published products.
Overall the value of printed books to UK publishers (and the caveat is that not all the revenue is generated in the UK, nor books sold in the UK) has increased in the index years with the numbers sold reaching 653 million books last year. This is higher than the 642 million sold in 2016 and a return to normal after the lockdown dip in 2020 when unit sales dropped to 608 million books.
That is attributed to closure of bookshops which carried on into 2021, making a 5% rise in sales of consumer books, something that the PA says is an indication of the enduring appeal of printed books: “In times of uncertainty they offer comfort and escapism as well as great value for money” according to Perminder Mann, chair of the PA’s consumer publishers council and CEO of Bonnier Books UK.
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