One industry insider told FoodProductionDaily.com that Chinese shipments into Europe had almost doubled last year and that the threat from the country’s producers was “significant”.
Weaker European output
Alufoil output in the region dropped year-on-year by over 5% to 801,900 tonnes in 2011 - with thin gauge material used extensively in flexible packaging declining by just under 8%, said industry group the European Aluminium Foil Association (EAFA).
Continued downgauging had also been responsible for the fall in volumes, said the body.
Demand for thicker gauges, utilised more in industrial application, but also in semi-rigid containers – held up better as the segment registered a 2.4% fall compared to 2010, while European exports dipped by just 0.7%.
Trends in 2011
As well as dampening demand, the threat of a global recession also saw alufoil customers keeping inventory to a minimum by ordering on a “just-in-time” basis.
“The general economic uncertainty affects the whole supply chain,” said EAFA’s Roller Group chairman Manfred Mertens. “Most retailers and fillers are placing orders on a ‘just in time’ basis and in lower volumes.”
The economic slowdown was triggering a ripple effect that was reverberating throughout the value chain, added the industry expert, who preferred not to be named.
“Greater just-in-time ordering means that retailer do not want too much stock. This effect is passed along to food manufacturers and packaging producers,” he said.
Just-in-time ordering - with shorter lead in times for smaller volumes - was also likely to push production costs up, he estimated.
“This certainly makes it more difficult for producers and is likely to put upward pressure on costs, as it is unclear whether manufacturers can absorb these without passing them along to customers.”
The trade insider said he believed volumes were broadly similar to 2010 but that there were a larger number of orders for smaller amounts as clients kept a much tighter hold on cash flow.
The Chinese factor
Another major issue in 2011 had been the leap in Chinese exports coming into Europe – believed to have jumped by almost 100% to reach between 70 – 80,000 tonnes last year.
"This poses a significant threat to European players – and exports from China are likely to go up again in 2012 as capacity continues to grow”, said the industry insider. “It is difficult for European producers to compete on costs both because there are lower overheads in China and there is a suspicion that the Chinese producers are receiving subsidies from their government.”
He added that Europe’s players would likely have to compete on food contact quality and safety issues and crucially – shorter times in bring material to market.
“Because European producers don’t have to factor in the four to eight weeks shipping time for moving aluminium from China, they have a shorter to market time of up to six weeks,” he said.
Outlook
Both the industry insider and EAFA said the outlook in 2012 was uncertain.
"Forecasting future demand remains difficult. As the longer-term outlook for aluminium is positive, we are cautiously optimistic for the next few months,” said Mertens.