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Part 2 of 3

By Brendan O'Neill, Editor-in-Chief, CMM Online

Converting an Opportunity
One benefit, or at least, opportunity for U.S. converters is that the rising cost of fuel is having an impact on transportation, causing converters and manufacturers to reconsider the financial implications of maintaining facilities abroad.
      "Regional collaborations are more important than ever. As reported in the June 13 issue of The Wall Street Journal, 'Soaring Transportation Costs' are 'forcing some manufacturers to bring production back to North America.' Transport and fuel usage are important aspects of responsible ink, printing, and packaging production. . . ." writes Dennis Curtin of The Print Suppliers Group, in an upcoming article that will appear in the September 2008 issue of Paper, Film and Foil Converter magazine.
      Conversely, some U.S. converters are looking to areas of Europe for expansion, capitalizing on the apprehension of competitors caused by the U.S. economy. It seems that the key region being targeted by U.S. converters is Russia and Central/Eastern Europe, thanks to lower costs and a perceived lack of capacity in the region.
      According to Stan Sachrow in the May 2008 issue of PFFC, the reasons for targeting Central/Eastern Europe include:

• Accelerated plant closures by big converters in Western Europe;


• Trends toward healthy foods with short shelf life and modified atmosphere packaging (MAP); and


• Changing lifestyles in less-developed nations causing an increased use of convertered materials.

      Also in that issue of PFFC, Sergey Minko, a commercial specialist with the Foreign Commercial Service at the U.S. Embassy in Moscow, says companies that sell printed materials and packaging films are most successful in this market, selling $290 million worth of materials to Russia each year. Foreign suppliers provide 25 percent of the corrugated market ($75 million annually), 40 percent of paperboard boxes ($82 million annually), 45-55 percent of labels, and 70 percent of label paper.
      Examples of this move include Amcor Flexibles, which plans to increase the percentage of manufacturing in the lower-cost regions of Southern Europe; and Alcan Packaging, a division of Rio Tinto Alcan, which has targeted Russia by building two new plants in St. Petersburg. Although Russian producers meet as much as two-thirds of demand in the overall packaging material market, more than $1 billion worth is still imported. (PFFC, May 2008)
      Mark Spaulding, Editor-in-Chief of Converting magazine, agrees that despite the squeeze felt by many U.S. converters, a select few are seeing an opportunity for growth in the form of joint ventures and partnerships to develop facilities in other areas of the world.
      "As much as possible, U.S. converters are opening overseas plants or forming joint ventures with foreign converters to be able to make products based on other currencies than the U.S. dollar," says Spaulding. "In dealing with rising energy costs, fully half of converters responding to our online poll said, 'We are adding fuel surcharges to our outgoing shipments.'
      "Nearly 40 percent said they are paying fuel surcharges for incoming shipments, and the rest are biting the bullet--for now--by not adding fuel surcharges to shipments and consequently cutting their margins. A handful of larger U.S. converters are building new plants, mainly in Central Europe, to serve these specific growing markets. They can make product closer to their customers, save shipping expenses and cut delivery times," he adds.

Folding Carton
The folding carton market is also facing many of the same challenges as flexible packaging. Fred Shapiro, a converting industry consultant, member of the Flexographic Technical Association Hall of Fame and Coordinator of the Folding Carton Technology Center for the CMM International 2009 tradeshow, says that the economic conditions in the United States are driving converters to find and develop new technologies.

Written for our media partner, Converter magazine in the United Kingdom

Continued in Part 3

Fri Jul 25 13:54:00 CDT 2008

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