The packaging sector is achieving good results

ASSOGRAFICI - CENTREXPO IAFC BOCCONI OBSERVATORY: THE PACKAGING SECTOR IS ACHIEVING GOOD RESULTS, PAPERMAKING IS IMPROVING, WHILE THE
GRAPHICS COMPARTMENT IS STILL SUFFERING

The 6th edition of the forecast issued by Assografici, Centrexpo and IAFC Bocconi for
the three-year period 2007-2009, highlights that the advertising, commercial and
publishing graphics sector is suffering, while the papermaking compartment is
undepressed (but it is supposed to suffer in future) and the papermaking segment continues to be in the best condition

As usual, on occasion of the introduction of the forecast issued by Prof. Alessandro Nova of Bocconi University and commissioned by Assografici (represented by Dr. Covini) and Centrexpo (re­presented by Dr. Corbella), some indications were provided concerning the trend of the graphics and papermaking sector in the three-year period 2007-2009.
The novelty of this survey consists in the investigation of the main segments of the papermaking/converting sector, which includes corrugated board, flexible packaging, folding cases and boxes, capacious paper bags and cardboard pipes. This investigation aims at providing detailed indications ensuring more specific and reliable results.
Flexible packaging and capacious paper bags are expected to achieve the highest production increase, thanks to the capability of the Italian companies of making themselves known in foreign markets.
Corrugated board, folding cases and boxes will play a more and more important role in the production chain, while the cardboard pipe sector, although it seems to be undepressed, will be mostly affected by the industrial production drop foreseen for 2008.

Folding cases and boxes
In 2007 the production growth should range between 2,2% and 2,8%, while in 2008 it should range between 2,15 and 2,7%.

Corrugate board
The production increase foreseen for 2007 ranges between 2% and 2,6%, while in 2008 we will witness a growth ranging between 1,8% and 2,4%.

Flexible packaging
The growth will be higher for this segment in 2007 (3,5%-4,1%) and just a little lower in 2008 (-3,3%/3,9%).

Capacious paper bags
The indications concerning this sector are positive. The production of this kind of bags will increase from 3% up to 3,6% in 2007, and in 2008 the growth will be ranging between 2,7% and 4,1%.
Cardboard pipes
In 2007 the production growth in this segment will range between 1,7% and 2,3%, and between 0,9% and 1,5% in 2008.

PROBLEMS ARE CAUSED BY THE RISING COST
OF OIL AND BY THE
SUPEREURO

“We should not neglect to analyse the negative elements affecting our economy which continues to show a curb on growth concerning the gross domestic product increase rate, whose yearly increase is less than a half of Spain’s, and more than one third lower than Germany’s. Also France and Great Britain are exceeding Italy. The forecast concerning the growth rate of the gross domestic product has been analysed several times and, therefore, we should be cautious in evaluating these figures. Unfortunately, the Italian ba­lance is affected by the energy problem due to the rising price of oil which is a primary source. Now it costs 80 Dollars a barrel, and it will hardly go down. In addition, the Euro superquotation is weighing heavy on Italian exports towards the Us-Dollar countries. On the other hand, this is favouring imports from the Far East, which are exchanged with the US-Dollars or the Chinese Yuan, linked to the Dollar. All this is further getting down our domestic industrial production”, says Prof. Nova.
There are also problems related to American loans, that had serious repercussions in Europe. In 2007, Europe will exceed the USA concerning the growth of the gross domestic products (2,7% against 2,2%), but the forecast highlights that it will decrease next year (2,7% against 2,5%).
Unfortunately, after the recovery registered in the three-year period 2003-2006, when the gross domestic product had reached +1,9%, the Italian economy has been reversing its growth and recovery trend.
In 2007, the gross domestic product should establish itself at 1,7%, in 2008 at 1,4% and in 2009 around 1,3%, as confirmed by Confindustria in September.
Then Prof. Nova highlighted the hoary problem of the tax burden which is actually the highest one in Europe, as well as the expensive labour cost, in spite of the low net remunerations. Of course, these factors interfere with the economic development and growth.
After outlining the general situation, Prof. Nova analysed in-depth each one of the four compartments in question.

PACKAGING

The paper and cardboard packaging segment has been growing in 2007 (2,9%-3,5%). Some trends, on which our expectations are based, are strongly related to the industrial production, whose recovery can already be seen in certain sectors, as well as in the increase of the packaging consumption, for example in the food compartment, and in the competition represented by alternative materials.
In 2007 paper and cardboard packaging had shown a growth rate of about 3,2%, thanks to a dynamic production and an accelerated development in some segments. The expectations for 2008 and 2009 show positive growth rates even though they are supposed to be a little lower compared to 2007.
They should range between 2,3% and 2,9% in 2008, and between 2,1% and 2,7% in 2009.

PAPERMAKING

This compartment has an irregular growing rhythm, also due to its structure: in fact, it is subdivided into 2 main areas, represented by productions related to stationery, and by the industrial processing.
In 2006 the production rate grew by 1% after 4 years of negative trends (2002-2005), also thanks to the recovery of some sectors. In 2007 there was an increase of 2% for school, office and mailing papermaking articles, also including the industrial paper segment.
According to the final balance of 2007, the papermaking production will highlight an increase ranging between 1,7% and 2,3%, while in 2008 the papermaking growth will range between 1,7% and 2,3%.
In 2008 and 2009, after the recovery of some sectors and the boost of the industrial manufacturing, the production increase will be lower (ranging in 2008 between -0,3% and +0,3% and in 2009 between -0,1% and +0,5%).

ADVERTISING AND
COMMERCIAL GRAPHICS

This compartment has been showing the strongest long-term growth rate, although the drop of 2002 had caused negative outcomes in 2005 and 2006.
In 2007 the production has been slightly decelerating (between -1% and -0,5%). Decisive factors for such a situation are the decrease of printed advertising and the competition of alternative advertising forms (internet). In addition, due to the reduction of the paper basis weight, it is more difficult to evaluate exactly the industrial trend of this sector and to compare ISTAT data (as a matter of fact, as the paper basis weight decreases, of course it is not so easy to calculate the industrial production rate in terms of weight because, in this case, less weight does not always mean less production).
The expectations for 2008 and 2009 will mostly depend on the general trend of advertising and commercial investments. According to the Ob­servatory, there might be a gradual recovery of the investment variables, and this should lead to a net production growth in 2008, ranging between 1,1% and 1,7%, and in 2009 between 1% and 1,6%.

PUBLISHING GRAPHICS

In the latest decade, the growing rhythm of the graphics sector had been decreasing, which had led to a negative outcome in 2006 (-1,7%).
The trends of 2007 are negative in almost all segments, particularly in the magazine sector, but also in the field of publishing products, like the supplements of newspapers and magazines.
Some ISTAT data, however, seem to exaggerate this negative trend, because they are focussed on medium and big enterprises.
During 2007, the trends of the publishing graphics sector are supposed to lead to a production decreasing ranging between -2,5% and -1,9%. For 2008/2009 further negative trends are expected, but they might end with a reduction in­crease ranging between -1% and -0,4% in 2008 and between -1,1% and -0,5% in 2009.

CONCLUSION

The papermaking/converting industry is fundamentally sound, and a growth is expected, especially in some compartments.
The graphics industry is being driven by the packaging positively, and the production performances of the three-year period 2007-2009 will register a yearly growth exceeding 2%.
In 2007 the papermaking sector was influenced by the effects of a favourable economic situation, thanks to which it will reach a growing level equal to 0 starting from 2008.
The advertising, commercial and publishing graphics sector has been suffering in 2007, but it is supposed to register positive changes in 2008.
We would like to point out that this forecast is capable of detecting long-terms trends, without considering either possible short-term anomalous factors, that may disturb the growing trend or the interstructural change, unless the latter is related to long periods.
The reliability of the forecast mostly depends on the quality of the data being analysed and subject to a strict control.
That’s what the labelling sector has not been analysed yet. As soon as we have important data also for this segment, we will include it into our survey.