2022 has been an eventful year for the paper, printing, and packaging industries. The beginning of the year was still marked by the pandemic. Shortages of raw materials, disruptions in supply chains, and high energy prices have put pressure on industries worldwide.
Pandemic is a Present Reality
Thanks to increase in vaccination rates, herd immunity, and declining infection figures in most parts of the world, a calming of the markets was in sight by the end of 2021. With this, the only consolation was that we have been able to contain the threat of the new Omicron variant quickly, but the sword of uncertainty still hangs above in the form of the pandemic re-emerging in several parts of the world including China, Japan, South Korea, Pacific Island countries, and the US. Keeping this in mind, the industry will be making a cautious entry into the New Year with nothing but hope.
Impact of Russia’s invasion of Ukraine on Print, Paper, and Packaging
24 February, 2022, was a date that changed the global scenario abruptly. Russia’s invasion of neighbouring Ukraine, initially coined as a “special military operation” and with a goal to “demilitarize and de-Nazify Ukraine” has dragged on for over 10 months as a full-scale war with Western powers providing Ukraine with financial and military assistance.
In the wake of Russia’s military operation in Ukraine, many of the world’s leading paper, printing, and packaging companies have been deeply impacted by a sudden refusal to deal with Russian firms, drawing the ire of the industrial community.
On the whole, the military incursion is severing key supply chains – already in disarray from the outstretched impact of the COVID-19 pandemic – and setting global companies on a scramble to comply with an ever-growing set of sanctions.
Several high-profile 3D printing companies have ruled out sales to Russian businesses as part of the global economic sanctions imposed against Moscow. World leaders in additive manufacturing including American 3D Systems and HP, German EOS, and Polish Zortrax have broken off negotiations with Russian buyers, condemning Kremlin’s unprecedented military aggression against Ukraine.
With Russian invasion of Ukraine – the “bread basket of Europe”, state-level deterrents have targeted high-ranking Russian officials and state-owned broadcasters, besides industries including aerospace, banking, energy, and sports amongst others. Many major companies such as Apple, Ford, and Nike have already pulled their products from the Russian market.
The West has also excluded seven Russian banks from SWIFT (The Society for Worldwide Interbank Financial Telecommunication), a Belgium-based messaging service that connects financial institutions globally, as part of a barrage of sanctions designed to limit Moscow’s ability to fund its war in Ukraine.
The 3D printing industry echoed a similar response by announcing a total withdrawal of business with Russian companies from 25 February, 2022, to stand up for democratic beliefs and a unified fight for peace.
Though complying with the sanctions imposed by the United States, HP CEO Enrique Lores joined his competitors, stopping short of criticizing Russia’s acts as the “latest in a series of global challenges.” Lores also admitted that the US sanctions against Russia would impact its top line and bottom line business prospects across FY 2022.
Looking at the future, refusal to deal with 3D printing companies in Russia can at least limit their technologies’ impact on the conflict, but the same cannot be said of in the printing and packaging sector, the second largest after the cinema industry.
Mondi, the UK-headquartered multinational packaging and paper group sold off all its operations in Russia including its Syktyvkar mill, its biggest Russian operation. Austria-based global producers of paperboard and folding boxes, Mayr-Melnhof Group (MM), recently sold its two Russian packaging sites in St. Petersburg and Pskov to local investor Granelle following approval from the authorities.
The move made by these companies is an interesting one for a variety of reasons, perhaps the most significant being that it breaks the illusory fourth wall that separates business from politics, which in reality are so intrinsically linked, and for business decision makers to do what is right, summarizing the issue.
Paper-Print-Packaging industries join hands globally to tide the crisis
As the whole world is watching the painful events unfold in Ukraine, over a hundred major companies have closed shop in Russia as a mark of protest against the prolonged invasion.
Printing in Ukraine was developed quite well, especially in the sectors of flexographic printing, and corrugated and carton packaging, while commercial printing, book production, and especially production of self-adhesive labels have developed quite dynamically in the last two years.
But things seem to have changed dramatically for the printing fraternity in Ukraine as most printing houses were forced to suspend their traditional operations, changing their profile to volunteer activities, producing materials that are more conducive to the war environment.
Despite the tough scenario, many Ukrainian printing houses work and even carry out commercial orders whenever possible. The Ukrainian government has also come up with initiatives for private entrepreneurs, including many in the printing industry, who were exempted from some of the taxes in addition to small targeted payments to printing houses. Many in the packaging sector are also doing voluntary service for the Ukrainian armed forces.
But despite the positive spirit, restoring Ukraine’s once flourishing printing and packaging industry, post invasion, seems to be an uphill task. The problems related to personnel and consumables are the most pressing issues, despite a sliver of hope raised by the European Union (EU).
Russia’s invasion of Ukraine has also severely impacted the packaging industry throughout Europe, given the status of Russia and Ukraine as key suppliers of timber as raw material. With exports alone worth over €12 billion, the paper and packaging industry has been be drastically affected by the crisis.
The war has created instability and unpredictability in trade and business relations between EU and the warring nations, Russia and Ukraine, and to some extent Belarus, with its economic impact still very difficult to assess in the foreseeable future.
The exclusion of Russian banks from SWIFT and the dramatic plunge in the rouble’s exchange rates have lead to far-reaching restrictions on trade between EU and Russia.
As paper and pulp trade flows between EU and Russia are quite large, bilateral trade restrictions have impacted the EU paper and pulp industry significantly. While most countries in Europe are affected by the ongoing crisis, those that are severely hit along with their industries include Germany and Sweden, which account for 55% of the EU pulp exports to Ukraine, and Finland representing 54% of all EU exports of paper and board to Russia. Ukraine is a major importer of paper and board from the EU with limited exports, while the EU-Russia trade is quite balanced. Restrictions on the trade of wood and wood-based products which could be included in the sanctions by either EU or Russia could substantially harm the paper industry.
The photo industry is another one that has raised hands together against the invasion. As photojournalists are risking lives to keep the world updated with their pictures from the Russian invasion of Ukraine, other photographers have joined hands to raise funds for humanitarian aid by selling prints of their work, while companies in the photo industry continue to make donations and suspend shipments to Russia.
In the US, several renowned National Geographic photographers have contributed their prints to the non-profit Vital Impacts with the entire profit donated to Direct Relief, a top-rated international humanitarian charity that provides medical aid to affected people.
Many companies have come out and done their bit as a sign of protest against the invasion by making donations to humanitarian causes, including Sony Group Corporation, Canon EMEA (Europe, the Middle East and Africa), Fujifilm, Nikon Group, Panasonic Corporation, Skylum, Pixellu, Adobe, Peak Design, and Shutterfly Foundation.
Europe facing a harsh winter with energy crisis
Many regions in the EU are heavily dependent on natural gas supplied by Russia. But with the current scenario, availability and pricing might be impacted. As the paper industry is an energy-intensive industry, this could be a matter of concern. With roadmaps set by Net Zero by 2050 and European Green Deal, there will be a further escalation in energy prices and carbon costs.
Literally adding fuel to fire, the war has sent global prices skyrocketing, leading to even higher costs for all modes of transport. Oil and gas prices have soared with the Independent Commodity Intelligence Services (ICIS) reporting that crude oil prices have reached a high not seen for years.
Many companies including German trade fair ground and organizer Messe Dusseldorf, Norwegian carton company Elopak, and Finnish pulp and paper manufacturer Stora Enso have suspended business in Russia as a direct consequence of the Ukrainian invasion. The Director of Forest Stewardship Council (FSC) encouraged stakeholders to act against what he called “the violation of the integrity of the whole region and FSC values.” The organization is currently focused on the protection of forests in Ukraine and Russia.
Paper prices continue to rise with no roof
Publishers worldwide have been drawing up emergency strategies amid the soaring price of paper along with its scarcity, threatening the very future of printed newspapers and magazines. The price of paper has nearly doubled putting the publishing industry in jeopardy.
With digital revolution changing the very face of the industry, the demand for paper gradually declined over the last 30 years globally, forcing many paper mills to shut up shop. The subsequent COVID-19 pandemic with its incessant lockdowns brought in a huge shortage of labour and severely impacted the supply chain routes. The already tight market was further challenged by a growing demand for cardboard packaging with the boom of e-commerce. With rising inflation and energy prices going through the ceiling, the situation has already taken a turn from bad to worse for paper supply this year.
From an industry perspective, this was a recipe for disaster as publishers were forced to cut down on pages and print runs even while having to increase the cover price of their publications.
Many major paper manufacturers announced increases across their portfolios. According to industry sources this price increase was essential in order to offset the exceptional rise in raw material costs driven by soaring energy tariffs.
Mitsubishi HiTec Paper Europe GmbH, the German subsidiary of Japan-based specialty paper manufacturer Mitsubushi Paper Mills Ltd., increased its paper prices by 15% for worldwide deliveries, beginning 1 September, 2022. This is in addition to the 10% global price hike across all its specialty papers that came into force on 1 March, 2022, and a 12% rise for its entire range of coated specialty papers on 1 July, 2022.
Following in the Japanese company’s footsteps, Belgium-based Sappi Europe increased the price of its wood-free coated and uncoated papers and paperboards by 8-10% from 12 September, 2022. This follows an increase of 10-25% effected from February, 2022.
Saving gas for a cold, harsh winter
The ‘Save gas for a safe winter’, the EU’s fast-tracked proposal for protecting its member states against disconnection from Russian gas was welcomed by the German-based Flexible Packaging Europe (FPE), an industry association for all types of flexible packaging manufacturers.
With more than half of all food products sold in the European retail markets packed with flexible packaging, FPE considers packaging as an integral part of the “societally critical” agrifood supply chain, a concept outlined by farmer organisation Copa Cogeca; FoodDrinkEurope, a food industry confederation; and Primary Food Processors, the European primary food processing industry. Besides agrifood, the pharmaceutical sector, also considered within this value chain, relies largely on flexible packaging.
The packaging sector is dependent on a stable and continuous access to gas to maintain operations even while the total gas consumption by flexible packaging manufacturers is rather limited as compared to other industries, such as paper.
FPE’s Executive Director Guido Aufdemkamp says, “A stable supply of gas over a defined time frame would avoid disrupting production of these materials which are made using continuous processes.” Aufdemkamp feels that this will ensure agrifood and pharma supply chains to maintain a secure supply of products which are necessary and vital for Europe.
“Flexible packaging can be considered as a one-time solution to help reduce dependence on gas and energy consumption, from a macro-economic perspective,” he adds.
German households have been severely affected by the energy crisis, being forced to shell out hundreds of pounds more a year for gas in order to help cover the cost of replacing supply from Russia. Federal Minister for Economic Affairs and Climate Action Robert Habeck raised the nation’s gas risk level to the second highest “alarm” phase stating that “the situation is serious and winter will come.”
Trade shows and exhibitions proliferate
With a dip in the severity of the pandemic in most parts of the world, trade shows and exhibitions have made a comeback. Paper, printing, label, packaging, books, and award functions held on a periodical basis, have seen an increased footfall in 2022, boosting confidence in the industry. International book fairs in Abu Dhabi, Beirut, Cairo, Damascus, Doha, Istanbul, Riyadh, and Sharjah were major successes. Trade shows in Asia, Europe, the Middle East, and the US, featuring the printing and packaging industries that showcased the latest technology and solutions, were major crowd-pullers.
Printing and packaging industry is going green
The global print industry has come to terms with environmental concerns. Earlier, sustainable practices in printing were optional, but with a rise in awareness amongst the general public, they have become necessary.
According to a recent survey by Nielsen, 73% of consumers around the world would like to change their consumption habits in order to reduce environmental impact.
While major companies like HP has already initiated low-carbon printing, many others have started leveraging sustainable printing methods like LED UV printing, digital printing, and using recycled paper, among others. Renowned brands have also started selling products that promote sustainability such as apparel made from recycled materials and other alternatives to packaging.
Packaging seems to have become more sophisticated and integral to consumer experience in recent times, not merely as a layer for preserving and storing products, buts as a medium for engaging and delighting customers, giving brands a chance to tell their story, communicate who they are, and add value to their products.
Brands have recognized the need to stand out visually, reflected on their cartons of premium products through specialty coatings and foil stamping to enhance graphic quality, texture, and colour contrasts and combinations.
With an emphasis on investing in sustainable packaging, another trend is the shift from plastic to paperboard. The shift is more prevalent in mass beverages where single-use plastic rings and shrink wraps are being replaced by fiber-based can collars. When it comes to folding cartons, the emphasis has shifted to right-size packaging with no wasteful air pockets, using only enough material to secure and protect the product during shipping, storage, and after use.
UAE joins to put a cap plastic use for a greener future
Heads of State, environment ministers and other representatives from 175 nations endorsed a historic resolution at the UN Environment Assembly in Nairobi, Kenya, to end plastic pollution and forge an international legally binding agreement by the end of 2024.
With this, the UAE continues efforts at the federal and local levels to address the menace of excessive consumption of plastic bags in the daily lives of community members and reduce their harmful effects on the environment and other living creatures.
The initiatives and measures implemented by the UAE in order to reduce the consumption of plastic bags has focused on raising public awareness in all segments of the society about the importance of sustainable consumption of this type of product, and the application of circular economy systems in dealing with this waste through its treatment and recycling.
The Ministry of Climate Change and Environment has continued to lead in its efforts to reduce consumption of plastic bags at the federal level and since 2013, the UAE has banned the circulation and import of non-biodegradable plastic bags.
In March 2020, the Environment Agency – Abu Dhabi (EAD) launched a policy for returning plastic bottles to retail outlets to ensure a change in behaviour towards relying on multi-use materials instead of shifting consumption from plastic materials to non-plastic single-use materials. The policy was based on international best practices with measures that address challenges in the emirate of Abu Dhabi.
In Dubai, the move was initiated in line with the global trend in adopting sustainable alternatives to reduce the consumption of single-use bags, reflecting international efforts to reduce the use of plastic bags which have already become an environmental hazard.
In Ras Al Khaimah, the Environment Protection and Development Authority (RAK EPDA) has taken major steps to take a 180 in plastic use by implementing the ‘Ras Al Khaimah Plastic Free’ initiative, chiefly targeting supermarkets and bakeries.