France: Difficult times for the pallets and packaging market

April 09, 2024
Source:
RW/Fordaq
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Tough times for packaging  

 

 

The packaging market in France is sluggish. The prospects are not very encouraging.It's not surprising because this sector depends directly on the economy in general and particularly on multi-industrial activities and the state of health of construction. Indeed, industrial production in France decreased again in January 2024 (-1.1% over 1 month according to the Ministry of Economy and Finance). In construction, it's even worse. By the end of February 2024, authorized housing recorded a decrease of -21.8% over 1 year (with -4% in January 2024), while authorized housing decreased by 25.2% over 12 months.

The post-Covid euphoria lasted only a brief year. Today, manufacturers of pallets, crates, and other containers have abruptly come back down to earth. In practically all product categories, demand sharply declined in mid-2023, worsening in the 4th quarter. "The pallet market is sluggish. We experienced a sudden halt in orders at the end of the first half of 2023 and since then, no recovery is in sight," reported Anne Piques-Rouxelin, who heads Gers SCI Pal, a southwestern company producing 800,000 pallets per year.

In fact, some pallet users, especially in the manufacturing industry sectors, are having difficulty selling their stocks as they operate at a slow pace. Without significant improvements in the coming months, some professionals anticipate predictable annual revenue declines of 30% to 35% and even mention a crisis whose magnitude could be comparable to that of 2008.

While the construction sector is struggling, some government measures do not favor construction. As for the decline in industrial production in France, it also affects other countries in Europe, particularly Germany, which entered a recession in 2023 with a GDP decline of 0.3%. And that of France, which stood at +2.5% in 2022, is not very bright (+0.9% for all of 2023).

Under these conditions, prices of finished or semi-finished products are seriously contracting. Thus, in pallet sawmills (green wood) and according to the CEEB survey, prices plummeted by almost 20% over 1 year and by 3.4% in the 4th quarter of 2023.

Spruce-fir (choice 4) is heavily affected with an annual price decrease of 25%. Poplar sawn timber destined for packaging (choice 3) is also affected: -6% in the last 3 months of the past year.

The same downward trends are observed among sawmills in the Massif Central specialized in cutting for packaging. "As far as I'm concerned, and depending on the products, I do indeed see that my prices have dropped by 20% to 25% compared to those practiced during the exceptional year of 2022 and up to the first half of 2023," says Fabien Salles, manager of a namesake sawmill in Lozère.

However, even if the prospects remain unlikely, this young forty-something doesn't necessarily see the future as very bleak. While he admits that the end of the year was very difficult and he feared the recovery in January, he believes that the worst has been avoided. "The market is indeed very volatile, it brings us back to the pre-Covid years, but I notice a slight stirring at the end of March-early April with a return of more numerous orders." The coming months will tell if this observation was just a springtime illusion.

 

Table 1:

      DECLINE IN SECONDARY SAWN TIMBER PRICES IN FRANCE

           Excl. VAT price in euros/m3 free of sawmill

  Index for pallet wood base 100 in 2005

           According to CEEB survey      

 

Q4 2019

Q4 2020

4Q 2021

4Q 2022

4Q 2023

     Evolution

    2022/2023

Fir-spruce

 

 

 

 

 

 

Choice 3

157

158

251

254

184

-27,6%

Choice 4

134

149

259

211

158

-25,1%

Scots pine

 

 

 

 

 

 

Choice 3

133

137

185

215

209

-2,8%

Choice 4

132

-

170

180

160

-11,1%

Pin maritime

 

 

 

 

 

 

Choice 3

157

158

212

256

228

-10,9%

Choice 4

128

140

195

228

240

+5,3%

pallet wood

index 100 in 2005

124,4

127,5

186,6

225,9

182,7

-19,1%

Source : Robert Wood

Table 2:

            AVERAGE PRICES FOR SAWN PINE TIMBER IN THE MASSIF CENTRAL

           In euros excluding VAT/m3 free of sawmill

Products

2T 2022

2T 2023

1T 2024

Average evolution

            over 2 years

Average evolution

          at 9 months

Wedging

230

210

180

-22%

-14%

Packaging

250

230

200

-20%

-13%

Palette

270

250

210

-22%

-16%

Source : Robert Wood