Narrow Web Europe

Narrow Web Europe

January 15, 2008

Label materials take a hit as UPM cuts back production

Narrow Web Europe

Label materials take a hit as UPM cuts back production

By Barry Hunt

In what could be a sign of tougher times ahead for certain sectors of our industry, UPM, the Finnish papermaking giant, is reducing capacity. It is closing three of UPM Raflatac’s older pressure-sensitive coating lines in Tampere, Finland, plus a specialty coating line in Melbourne, Australia. The company has transferred products produced on this coater to other production lines. The factory continues to serve the Australian market with a combination of locally produced products and imports from other Asian factories. Early last year UPM Raflatac opened a $40 million labels material factory in Changshu, China.

The closures form part of the group's efforts to bring its papermaking capacity into line with reduced demand and profitability in key parts of its global operations. UPM is also reducing speciality label paper capacity with the temporary shutdowns in Finland of one papermaking machine in Jamsankoski and one in Tervasaari, both up to three months. Overcapacity in Europe and the strong euro are said to make the current exports unattractive.

In other markets, UPM is permanently closing the Miramichi pulp and paper mill in Canada to remove around 500,000 US tons of magazine paper capacity from the market. It also reducing newsprint capacity through the temporary shutdown of two papermaking machines: one in a Finnish mill and another in Austria.

In a corporate statement, UPM said the decisions were based on its view of the markets and cost competitiveness of its assets. It estimates that demand for its paper products will be slower than in 2007. Also, meaningful price increases will take hold only in the magazine papers sector. At the same time, the entire papermaking industry faces higher costs for wood pulp, recycled paper and energy. UPM forecasts the full year 2007 operating profit, excluding special items, will exceed that of 2006, but it expects increased costs for the current quarter will make it the weakest quarter of the year.

Spotlight on end use of waste plastics

What happens to waste plastics in the recycling chain might not be of immediate interest to narrow web converters, but there is an obvious connection given a greater accent on packaging. In many European countries the issue has moved center stage. Diverting packaging waste from scarce landfill sites is a top priority. Incinerating waste for energy recovery is one answer, although it has some vocal critics. For example, Friends of the Earth says governments should instead aim for higher recycling rates, while calls to reduce all types of packaging waste have become stronger among pressure groups. A more favorable approach is to convert waste plastics into useful products, such as containers made from post consumer recycled (PCR) polyolefin resin. However, it is not always cost effective, which explains why so much recovered waste plastics is shipped to China and a few other Asian countries for reprocessing.

In the UK — as in other countries — reprocessing is not keeping pace with the huge volumes of waste being produced every year. This situation prompted the independent Waste and Resources Action Programme (Wrap) organization to examine ways of expanding end-use markets for recovered plastics. In a new report, Realising the Value of Recovered Plastics, Wrap states that United Kingdom exports of recovered plastics have tripled over the past three years, with a corresponding 20 percent fall in the quantity reprocessed.

To place this in context, UK consumers and manufacturers account for around five million metric tonnes (5.5 million US tons) every year. This grows at about 1.5 percent annually in an industry worth some £18 billion ($36.7 billion). Around one third of consumption is for plastic packaging (typically LDPE, PET, HDPE and polypropylene), while construction products account for a further quarter.

The UK collects and recycles about 22 percent of plastics packaging consumed. Between 2001 and 2006 the exports of recovered plastics increased nine-fold to 450,000 metric tons (496,000 US tons) per year, with up to 90 percent shipped to China. Although this represents an increase in the recycling rate of only 3 percentage points since 2003, the growth in the waste stream during this period means that the volume of material recovered has increased by over 40 percent. To meet the current target of a 24 percent recycling rate by 2010 will require recovering the equivalent to 77,000 US tons of material every year.

Wrap says any improvement in the UK’s plastics recycling rates will depend on post-recovery prices, which directly relate to the price and demand for virgin polymers. Any fall will reduce the commercial incentives to invest in new reprocessing capacity. Also, lower prices for virgin materials would mean that recycled plastics would have to be cheaper, but retain high quality.

As ever, the entire recycling issue is made more complex by the conflicting interests of government and trade bodies. For example, the Industry Council for Packaging and the Environment (Incpen) recently questioned the validity of British government proposals to increase packaging recycling rates in 2008. Incpen said that raising targets was “not really exploring the whole issue”. It suggested that more work was needed to improve the quality of recycled materials and find end markets for them. It also questioned the data used to establish future targets, given that forecast declines in economic growth could have an impact on spending and therefore the amount of packaging used.

Wide-width inkjet seen as alternative to printing labels

So far it has been largely impractical to print quality images directly onto a packaging medium using inkjet technology. Tonejet thinks it has cracked the problem. As part off The Technology Partnership, a development and licensing company based in Cambridge, England, it has developed a 7" wide printhead, the widest available for an industrial digital printer. The company claims that by allowing single-pass printing of certain food and drinks packaging, its system will bring “substantial logistics and cost savings” to the packaging industry. Commercial printing applications are also a possibility.

Each packaging type had its own requirements, but trials with printers and packaging technicians showed that print quality, throughput and cost were the key issues. “The Tonejet system ejects a very concentrated ink to produce a high quality image on every kind of packaging material,” says Guy Newcombe, director. “It removes the need for labels on curved and uneven surfaces and enables greater customization of products. It opens up new design possibilities for branding and marketing professionals who can now have free rein over how their products are marketed,” he adds.

The process uses a variation on electrostatic drop-on-demand technology, allowing the printing of high quality designs on various absorbing or non-absorbing substrates at high speed. The size of the droplets of the pigmented inks are varied within a continuously flowing ink system. The inks resemble conventional offset printing inks and are said to give excellent results in terms of abrasion and water resistance, color gamut and film thickness. They require no special surface preparation, coatings or curing processes.

Stork Prints sold to equity firm

The takeover of Stork Prints Group by fellow Dutch company Bencis Capital Partners means that most of the major international prepress suppliers have given up their independence to become part of largely anonymous investment companies (EskoArtwork is an obvious example). In effect it is an evolutionary development, following the large number of mergers and acquisitions of the 1990s that saw many smaller prepress companies become part of larger international groups.

The degree to which the current international banking crisis will cramp the style of the new masters is another matter entirely.

In respect of Stork Prints, approximately 1,350 employees are involved in the takeover. Bencis says there will be “no negative consequences for current employment levels”. Stork Prints had a total turnover of €186 million ($273 million) in 2006. It was part of Stork NV, a global technology group comprising 60 companies.

Dick Joustra, president, says the day-to-day running of the company will continue as usual. That means Stork will continue to manufacture rotary screen technology, direct laser engraving systems and consumable products under its current name and with the existing management. The deal includes Stork’s affiliated company, AKL Flexotechnik GmbH. It makes flexo consumable products, including conventional sleeves for plate mounting, seamless-endless photopolymer printing formes and Optiflex thin sleeve and adapter technology.

Huge pharma order places the accent on the tactile
Ditone Labels, part of Clondalkin’s specialist packaging division, has won an order to produce 20 million Braille labels over the next two years for Aspar, a manufacturer of analgesic products. The contract includes the production of three million of Ditone’s Extensia leaflet/labels each year.
Based in Cambridgeshire, England, Ditone was required to undergo an audit to meet the requirements of the pharmacies and supermarkets served by Aspar. Ditone Sales Manager John Haworth said that the company’s work on pharmaceutical and Braille packaging meant it had all the processes in place to help Aspar meet its labeling objectives.

• Ditone’s parent has continued its international expansion by acquiring Cartonplex, a pharmaceutical packaging manufacturer based in Barcelona, Spain. Cartonplex produces folding cartons for the pharmaceutical and healthcare sectors. It represents Clondalkin’s fourth acquisition for 2007. In April, it bought pharmaceutical labelling specialist Kenilworth Products. This was followed in the summer wth the purchase of pharmaceutical packaging firm Keller Crescent and flexible packaging manufacturer Direct Plastics.

Tough year ahead for UK converters, says analyst

According to business analyst Plimsoll Publishing, UK label converters face tough trading conditions. “Almost every sector of British business stands at a crossroads as it prepares for the coming 12 months,” says Senior Analyst David Pattison. “With uncertainty in the economy, some will want to sit tight and do nothing radical. Others will need to cut costs quickly to weather the possible storm. But some who have built up large cash reserves will be looking at this period of difficulty to make acquisitions at a bargain price.”

He adds that, as predicted, label growth was minimal in 2007 due mainly to increased competition in the market: “In fact, 47 percent of companies actually saw their sales decline. It’s important, however, not to confuse sales with profit. Some smaller firms, with a turnover of £3 million ($6.1 million) or less, lost out on sales but still enjoyed healthy margins. They did so by keeping their costs under control and by carving out a specialist area in the market. These firms have managed to do very nicely for themselves by trading in niche products. This trend has been an important factor since 2006, and I see no reason why it shouldn’t continue.”

Pattison says companies should aim for a growth target of at least 2.1 percent, but the more imaginative ones should expect to beat this. Pressure on sales will force many companies to cut costs, which usually means job losses. He advises that cost reduction programs should form part of a planned long term strategy, rather than a panic decision. “But don’t be too hasty; 2007 was not a bad year overall, with margins averaging 3.4 percent. Indeed, for some exceptional companies, that percentage was in the mid teens — in some cases for the second year in a row.”

Specialized applications for new film rewinder

SA Labels Ltd in Keighley, West Yorkshire, is the first company to install the Omega FSR film rewinder developed by AB Graphic International. The line undertakes video inspection, slitting and rewinding of labels produced with a wide range of film and paper substrates. A crucial element in the evaluation process was that the FSR also converts substrates produced with SA’s unique Ultraflex process. This offers end users a choice of screen, flexo and gravure printing, coupled with decorative effects based on foils, tactile finishes and varnishes.
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