Corrugated cardboard success story continues despite dramatic cost situation

The corrugated cardboard industry in 2017 benefited from the generally good economic development in Germany. In 2017, the members of the Association of the Corrugated Cardboard Industry (VDW) were able to achieve an increase in sales of 4.3 percent. This is well above the general economic growth of 2.5 percent (adjusted for calendar effects). In absolute terms, the VDW members sold well over 7.8 billion square meters of corrugated board in 2017. This represents an increase of 230 million square meters over the previous year, which corresponds to an increase of 3.0 percent.

"The prerequisites for this success story for corrugated board are, above all, the solid development with our customers and the continuing demand of consumers", said dr. Steffen P. Würth, Chairman of the VDW, at the annual press conference of the association. "At this economic upturn, corrugated packaging was again able to prove that, because of its efficiency, it is an indispensable partner for industry, trade and logistics.”

"But the sustained positive economic development and the associated sales growth can not hide the fact that there is also a downside," said Würth. Accordingly, the high demand for corrugated board products caused a significant shortage of raw materials, whereupon the paper suppliers reacted with immense price increases. This led to a dramatic economic imbalance, which poses major challenges for the corrugated board industry.

Expenditure on raw materials accounts for more than half of the total costs in the corrugated board industry. For the most important raw material, corrugated base paper, by 2017 VDW members had to accept surcharges of up to 27 percent. And in the first weeks of 2018, companies were already confronted with further significant cost increases.

In contrast, revenues in 2017 fell far short of the price of raw materials. As a result, average costs per square meter of corrugated board rose in 2017 from 52.6 cents in January to 53.8 cents in December. As a result, prices for corrugated board products averaged 53.1 cents per square meter in 2017, an increase of just 1.1 percent over the previous year. From a purely mathematical point of view, 13.5 percent would have had to be achieved in order to achieve an adequate revenue situation. "Looking at the margins, for our industry the year 2017 can actually be described as catastrophic," says Würth. In 2017, many corrugated board manufacturers and processors were bound to some longer-term supply contracts with their customers, which were concluded on the basis of a significantly lower price level for raw materials, and market observers and industry experts now expect significant price adjustments for corrugated cardboard products.

Based on current indicators, Würth expects the positive economic trend to continue in the current year. He forecasts an increase in corrugated board sales of 3.9 percent. Würth: "Corrugated board is and will remain a central value driver for our customers and the entire supply chain. Despite the difficult framework conditions, we want to continue our efforts in this success story in 2018 with all our strength."

For more information:
Verband der Wellpappen-Industrie
www.wellpappen-industrie.de