The Russian war of aggression in Ukraine left its mark on the year 2022. Not only in humanitarian and political terms, but also in economic terms. This also applies to the global packaging industry. But in addition to this, the industry faces other challenges and has to adapt to changing legal requirements. Nevertheless, there is reason for confidence.
The beginning of the year was still marked by the pandemic. Shortages of raw materials, supply bottlenecks and high energy prices put pressure not only on the packaging industry. Nevertheless, after two years of the pandemic, thanks to rising vaccination rates and declining infection figures, an end to the global state of emergency seemed in sight and with it a calming of the markets.
But 24th of February changed this situation abruptly. The Russian invasion of Ukraine was accompanied by a rise in energy prices - especially in those countries that imported a lot of natural gas from Russia. In Germany, for example, the price per kilowatt hour on the electricity exchange rose from 10 to 30 euro cents within two weeks, 600 percent above the previous year's level.
The war didn’t just impact the energy sector. Numerous companies suspended their production in Russia soon after the start of the war or terminated their business in the Federation altogether, such as Stora Enso, Huhtamaki or Smurfit Kappa.
Stability – for now
Likewise, government sanctions and institutional restrictions led to relevant changes in the global economy and also in the packaging industry. Already in March, just few days after the beginning of the invasion, the Geneva-based PEFC certification system classified wood from Belarus and Russia as so-called conflict wood and withdrew the product's PEFC certificate. Pallet producers, in turn, were not only confronted with a shortage of wood, but at times also without the necessary nails, which were often made of Russian iron. In one way or another, almost all branches of the industry were affected by the escalating events.
Pallets were temporarily in short supply in 2022 due to sanctions. (Image: Lucas van Oort/unsplash)
By now, the situation has partially stabilised. In October, the Flexible Packaging Europe association recorded slightly lower prices for HDPE, LDPE and PET film compared to the second quarter of 2022. It is also expected that the supply bottlenecks for raw materials will ease in view of falling oil demand and the falling barrel price. However, they are not out of the woods yet. "Of course, we welcome this price stability for raw materials in Q3, but that is only part of the picture. Converters are facing not only higher energy costs but also strong inflation in a number of categories, so it is with mixed feelings that we look to the future," says Guido Aufdemkamp, Executive Director of Flexible Packaging Europe.
New legislation in Europe
In terms of legislation, the packaging industry has also seen some changes in 2022. In France, for example, a law came into force at the beginning of the year that largely prohibits the use of plastic in the packaging of fruit and vegetables. In addition, the government introduced a gradual ban on printing inks containing mineral oil in packaging applications in the spring to enable a more efficient recycling process. The country has set itself ambitious goals: From 2040 onwards, no single-use plastics are to be allowed to be put into circulation.
In Germany, since July 2022, such companies that circulate packaging for to-go operations or online retail must register in a specially established register and thus pay a corresponding fee. In this way, the federal government wants to hold mail-order companies accountable for their contribution to the recycling process within the Federal Republic. Furthermore, from 1st of January 2023, restaurateurs and caterers in Germany will be obliged to offer their customers reusable packaging for their products in addition to disposable packaging.
In Brüssel wurden im November die Weichen für weitere Verpackungsgesetze gestellt. (Bild: Guillaume Périgois/unsplash)
So Europe is taking action against single-use packaging and virgin plastics. Only on 30th of November, the EU Commission made public a proposal to reduce the packaging waste generated in Europe and to promote efficient recycling. The proposed revision of EU law has three main objectives:
The amount of unnecessary packaging put into circulation should be reduced overall and reusable solutions should be promoted.
By 2030, all packaging on the EU market should become economically recyclable.
The demand for primary raw materials is to be reduced and a well-functioning market for secondary raw materials created. This is to be achieved through binding targets for the use of recycled plastics.
"After tackling single use plastics, we now take the next step on our way to a future without pollution. Our proposals today reduce packaging waste, promote reuse and refill, increase the use of recycled plastics, and make it easier to recycle packaging," said Frank Timmermanns, Executive Vice President for the European Green Deal. Although it will still take a while before the Commission's proposal is cast into binding law, the push from Europe certainly has a signal effect.
In fact, according to a report by Plastics Europe, around 20 per cent more recycled plastic was used in new products this year compared to 2020. So the industry is already on the right track. There is also hope in an expansion of chemical recycling. "If we want to make our industry fit for the future, the acceptance of chemical recycling including the mass balance approach is essential to accelerate the dual transformation of our industry. More intensive and coordinated cooperation across the value chains and with policymakers is key to making this happen," said Virginia Janssens, Managing Director of Plastics Europe in October.
All in all, the industry has had an eventful year. It was able to hold its own against many adversities and overcome the first shocks after the beginning of the year. Challenges such as high energy prices still exist and will certainly cause problems in the coming winter. But the pandemic also appeared to be an almost impregnable challenge at the beginning and the industry still made it through. After all, one thing is certain: Where there’s goods, there’ll be packaging.