2004 is expected to be a good year for the packaging industry. While packaging innovation is flourishing, the economy is expected to recover rapidly through the first half of the year and then to settle into a steady pattern of growth. The positive outlook extends to packaging machinery and to the corrugated and paperboard box segments.

Sales of packaging machinery will register three years of growth, from 2003 through 2005, predicts the Packaging Machinery Manufacturers Institute (PMMI). U.S. shipments of packaging machinery will expand at a cumulative annual rate of 3.9% to about $5.4 billion by 2005, according to the organization's ninth annual shipments and outlook study. This rate will mark a big improvement over the miniscule 0.06% growth rate of 2002. The main reasons for this healthy projected growth include expected improvements in the gross domestic product, capacity utilization and exports. "We are hopeful that the positive economic forecasts for 2003, which indicate gross domestic product growth in the area of 3 to 3.5% will boost capital investment," says Charles Yuska, PMMI's president. "The industry's future does look more promising."

The expectation that the U.S. economy will fully rebound is largely behind the upbeat outlook for packaging machinery shipments. While higher interest rates and the slow recovery of employment will moderate any spending advances, consumer spending should stay relatively robust. Improved productivity, diminished inventories, and healthier corporate profits should stimulate significant investment in new commercial equipment.

In more good news for the packaging industry, non-durable manufacturing in particular is expected to increase from 76.9% utilization to 81-82% by mid-year. According to a recent Paperboard Packaging article by Norma Pace, "2004 will be the year of non-durable goods where output has lagged in this recovery." Early this year, for example, food manufacturing should start to register improvements.

Also bouncing back from the low it reached in 2002, demand for corrugated and paperboard boxes will likely rise 2.8% per year to over $35 billion in 2007, according to a new study by The Freedonia Group, Inc., an Ohio-based industrial market research firm. Since non-durables represent more than 75% of total box demand, a projected increase in this kind of shipment will be a big boost, spurring advances. Moreover, the base food and beverages market will remain robust and stimulate gains. The durable goods markets, which commonly use bigger, more expensive boxes, are also expected to see improvements and thus drive gains. Further contributing to surging demand is the current trend toward printed and other higher-value box categories.

According to the Freedonia study, corrugated and solid fiber boxes—which represented 71% of box demand in 2002—will post the most substantial gain, growing by 2.9% per year and reaching $25.2 billion in 2007. They are poised for the most significant growth through 2007 because of the expected resurgence in the manufacturing sector and the increasing importance of box appearance, which calls for higher-grade materials and graphics. Meanwhile, folding cartons will expand by 2.6% per year and hit $9.8 billion. Tempering its growth are competition from other packaging media, source reduction initiatives that have phased out some cartons, and the rise of offshore manufacturing in key markets such as toys, sporting goods and hardware. Over the same period, set-up paperboard box production will stay level at $490 million because of its high cost.

Increases in food and beverage shipments will spur gains and the spread of processed, prepared foods that rely on eye-catching packaging to propel sales. Representing the largest single end use for boxes, food and beverages were responsible for over 40% of aggregate demand in 2002. Strong projections for machinery and equipment shipments and better prospects for durables will bolster durable goods markets for boxes in general. The most rapid increases are projected for the comparatively small retail and carry-out market, which will benefit from the fast growing popularity of Internet shopping.

Indeed, the outlook for the packaging industry is the most promising it's been in years. With the economy on the rebound and the manufacturing sector on the path to recovery, packaging demand seems set for several years of growth.

Sources:

PMMI Forecasts Three Years of Growth
Packaging World, December 2003
www.packworld.com/articles/Departments/17062.html?ppr_key=12.2003&sky_key=12.2003&term=12.2003

Corrugated Demand Will Grow
Official Board Markets, December 20, 2003
www.packaging-online.com/paperboardpackaging/article/articleDetail.jsp?id=79654

The Stage is Set for Improved Packaging Demand in '04
Norma Pace
Paperboard Packaging, November 1, 2003
www.packaging-online.com/paperboardpackaging/

Machinery Sales in 2002 Barely Edged Ahead of 2001's Results
Packaging Digest, November 2003
www.packagingdigest.com

Primer Links

Associations

Corrugated Packaging Council www.corrugated.org

Institute of Packaging Professionals (IoPP) www.iopp.org

National Wooden Pallet & Container Association www.nwpca.com

Packaging Machinery Manufacturers Institute www.pmmi.org

Publications

Packaging World www.packworld.com

Packaging Digest www.packagingdigest.com

Packaging-Online www.packaging-online.com

Paper, Film & Foil Converter pffc-online.com

Pharmaceutical & Medical Packaging News www.devicelink.com/pmpn/