Label Stock (Cont’d from Page 1)
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2020 and 2021, when peaking label demand was heavily influenced by excess demand for essential goods and services after the outbreak of the pandem- ic in 2020, and by rapid economic recovery in 2021. Secondly, since the summer of 2021, global man- ufacturing chains have been suffering from supply chain disruptions caused by Covid-related adjust- ments. This led to a growing gap between booming post-Covid demand and the shrinking availability of energy, raw materials, components, chemicals, pro- duction, labour and transport capacity. Strike Fallout In the first half of 2022, the European label indus- try was particularly hit by the long lasting strike at UPM, a leading paper manufacturer in Finland. Not only did this limit the availability of facestocks for paper labels, but more importantly, a significant share of raw materials supply for paper-based re- lease liners (the siliconized materials carrying the labels) was cut off from the market for more than 100 days. In the first quarter of the year, the effect was dampened by significant inventory surpluses that had been built up in the final quarter of 2021 in anticipation of further increases in lead times and raw materials prices. However, in the second quar- ter output was severely hit with lead times going up to 5-6 months and label converters being served on allocation. Part of the decline in paper label con- sumption may have been absorbed by increases in filmic label demand. In the latest FINAT RADAR, the association’s 6-monthly market survey, it was reported that 60 percent of participating converters, surveyed this spring, had been suffering revenue losses as a re- sult of supply chain issues. Although the strike fin- ished just before Easter, it is expected that backlogs will not be filled before this autumn. Thirdly, by that time, supply side related con- straints may have been overtaken by demand fac- tors, with exponential increases in energy prices, raw materials costs and, ultimately double digit consumer price inflation eating into disposable in- comes and consumer spending, and the dark clouds of the horrific war in Ukraine not expected to clear anytime soon. Demand for self-adhesive roll label materials is a significant indicator of European GDP. Although the correlation between the two has been distorted some- what by the volatile consumption patterns during the ‘Covid years’, part of the downturn points at an eco- nomic shift in Europe in the months to come.
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