Underlying the growth was the 9.5 percent recovery of the demand for rolls of paper based label materials, representing some 70 percent of total demand for self-adhesive label materials. Exceeding this growth, however, was the increase in demand for film roll label materials (PE, PP, others), which amounted to 15.3 percent over the previous year. Film materials thus resumed their rise in the share of European self-adhesive materials demand, and this from just over 15 percent at the beginning of the decade to more than 22.5 percent in 2010.
Geographically, growth in demand was driven by Eastern and Southern Europe (including Turkey). Both regions recorded healthy double digit growth figures of 20.6 percent and 13 percent respectively. Within these regions, Turkey, Russia, Bulgaria and Romania stood out with annualized growth in excess of 20 percent, a sign of strong economic development in this emerging region. In the more matured regions, growth of self-adhesive label demand was more modest at around 4.5 to 8.5 percent, although double digit growth figures recorded for Germany, the Netherlands, Italy and Spain ranked above the top end of this range.
The recovery comes with concerns. In late summer 2010, FINAT members expressed worry about disturbances in the supply chain that were building up pressure on raw material market conditions. According to FINATs quarterly member survey, this prospect tempered the optimism of executives at the beginning of 2011, although the balance of respondents continued to be positive about business prospects for the industry.
Over the past three to four months, the pressure on raw materials has aggravated. Between January 2010 and January 2011, benchmark pulp prices increased 20-25 percent, while resins for LDPE, PP and PET, crucial to film label materials, increased 25-35 percent. Polymers necessary for the production of adhesives rose 65-75 percent. Ink suppliers are being faced with the impact of tight raw materials markets and have announced price increases ranging up to 30 percent. The rise of crude oil, driven by uncertainties in the Arab world, is further intensifying the pressure, not in the least because of the increase of related transportation costs.
According to FINAT Managing Director Jules Lejeune, “Capacity limitations cause a gap in supply versus double digit growth in demand, gap that is closing only slowly. Our members are confronted with quarterly price adjustments or even ‘spot’ prices on materials not yet delivered. Under such market conditions and because of the time lapse, contractual raw materials clauses offer only limited shelter. Ultimately this could affect the financial stability of label businesses.”