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March 24, 2022.
Persistent self-adhesive materials shortages could severely disrupt the supply of functional and regulatory labels and packaging, warns Finat, the Association for the self-adhesive label industry.
According to Finat, in 2021, European self-adhesive label stock demand increased by another 7% to almost 8.5 billion sqm, after an increase of 4.3% in 2020. Underlying these numbers were opposite fundamentals.
Whereas in 2020, excessive demand for self-adhesive labels was driven by the need for labels in essential sectors, demand peaked again in the second and third quarters of 2021 due to the unexpected strong economic recovery around Europe and North America.
However, after emerging general supply chain disruptions since last summer, the fortunes of the label industry have turned dramatically since the beginning of 2022 by long-lasting union strikes in a specialty label paper mill in Finland and recently, another supplier in Spain and the war between Russia and Ukrain both suppliers of pulp to the specialty paper mill in Finland have caused serious problems in the industry As Avery Dennison a major supplier in North America is under investigation for price fixing and deciding who gets label stock and who gets cut off.
The mills on strike are responsible for more than 35% of the paper grades used to manufacture materials used to print, embellish and cut self-adhesive labels in Europe and North America.
Although the supply chain of raw materials for labels has been underpinned relatively successfully in early 2022 by label converters, this trend is unlikely to continue into the second quarter of 2022. Persistent self-adhesive materials shortages could severely disrupt the supply of functional and regulatory labels and packaging in food, pharmaceutical, healthcare and logistics sectors around Europe and North America, warns Finat.
Assuming an average size of 10 cm2 per label, 17 billion square meters consumed in Europe and North America per annum corresponds with nearly 33 billion labels each week. As part of the total product value, the cost of a single label may be low.
Still, the damage of its lack of availability to goods manufacturers, logistics companies, consumers, and ultimately European and North American economies and societies is considerable.
Since the end of January, Finat, national label associations, and individual label printers have appealed to the parties concerned in the strike to take into consideration the broader impact of the dispute to their downstream customers: label stock producers, label manufacturers, brand owners, retailers and, finally, the consumers in the shops or online.
So far, these appeals have not been reflected in an acceleration of the negotiation process.
‘As we have seen during the pandemic, labels are an indispensable component of the essential infrastructure that is difficult to replace,’ commented Philippe Voet, president of Finat. ‘Our members have always been agile and innovative in finding new and alternative solutions for their customers.
Even today, there is limitless creativity within the label value chain and community to secure both critical label supplies and keep our employees working.
‘Both are very close to our hearts, and we don't like to see the relationship we have with them mortgaged by this ongoing dispute. Without an adequate pipeline of raw materials, label converters will be forced the extend lead times, prioritize customers, put part of the capacity on hold and send workers on leave because there are simply not enough materials to convert to labels.
We once again appeal to the partners engaged in the dispute to do everything possible to resume production without further delay. Against the already tight supply chain conditions since last summer and now the hideous invasion of Ukraine by Russia, a further extension of the strike even beyond the current date of April 2 would be socially and economically unsustainable.
Jules Lejeune, managing director of Finat, added: ‘We’re in it together with the commercial printing sector that is represented through Intergraf. But this is not just about our two sectors. There are many supply chains, also nearby, that have the same “defect” of global dependency on an ever-smaller number of leaner players.
Going forward beyond the current crisis, Finat and the members of the European Label Community would like to use the lessons learned from the current case to engage in a cross-sector dialogue to better spread the risk to societies, in terms of supply chain management education, in terms of industry collaboration and in terms of public policy.
At our European Label Forum in June, we will plant the seeds for such a dialogue.
We greatly appreciates your continued business and support through this time. If you have any further questions or concerns regarding future label deliveries and price increases, please do not hesitate to reach out to me.
We are more than happy to discuss this situation with you.
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