It reported that the decrease came after an increase of 7% in 2021 overall – which brought the annual demand to a record 8.5 billion sqm, and an increase of 4.3% in 2020, when the Covid-19 pandemic struck Europe.
FINAT said the downturn in H1 was driven by the collapse of paper roll label materials, especially in the second quarter when consumption fell by 8.3% compared to the same period last year. During that same period, filmic roll label materials still increased by 2.2%.
Several factors were behind this reversal of the trend, FINAT explained: “Firstly, the numbers for 2022 follow the two disruptive and volatile years 2020 and 2021, when peaking label demand was heavily influenced by excess demand for essential goods and services after the outbreak of the pandemic in 2020, and by rapid economic recovery in 2021.
“Secondly, since the summer of 2021, global manufacturing chains have been suffering from supply chain disruptions caused by Covid-related adjustments. This led to a growing gap between booming post-Covid demand and the shrinking availability of energy, raw materials, components, chemicals, production, labour, and transport capacity.”
The European label industry was particularly hit in the first half of this year by the long-running strike action at UPM’s Finnish mills, which limited the availability of facestocks for paper labels and saw “a significant share” of raw materials supply for paper-based release liners cut off from the market for over 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,” FINAT said.
“However, in the second quarter 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 consumption may have been absorbed by increases in filmic label demand.”
In the latest FINAT Radar, the association’s six-monthly market survey, it was reported that 60% of participating converters who were surveyed this spring had been suffering revenue losses as a result of supply chain issues. Although the UPM strike finished just before Easter, it is expected that backlogs will not be filled before this autumn.
“By that time, supply side related constraints may have been overtaken by demand factors, with exponential increases in energy prices, raw materials costs and, ultimately double digit consumer price inflation eating into disposable incomes and consumer spending, and the dark clouds of the horrific war in Ukraine not expected to clear anytime soon,” FINAT added.
“As reported previously, statistically, demand for self-adhesive roll label materials is a significant indicator of European GDP. Although the correlation between the two has been distorted somewhat by the volatile consumption patterns during the ‘Covid years’, part of the downturn points at an economic shift in Europe in the months to come.”
