China aims to become world’s largest packaging producer

China is aiming to become the world’s largest packaging producer by the end of 2012, according to new research by financial advisory firm Catalyst Corporate Finance.

The report, seen exclusively by Packaging News, is entitled Paper and Packaging Sector M&A Update. The new research suggests that Chinese ambitions will alter the global market. It states that Chinese producers have made plans to increase their capacity aggressively in the next three years. “Their stated aim is to become the world’s largest packaging producers by the end of 2012, which will further intensify competition and will alter the global market dynamic,” says the report. Speaking to PN, Catalyst Corporate Finance chief operating partner Mark Wilson said: “China has created great demand for raw material supply and has intensified competition at the end product level. Whilst there will be more competition and this will be tougher for EU companies, this should create new opportunities for the FMCG and industrial packaging sectors.”

The report also suggests that large trade players in the packaging and paper industry have made recent acquisitions in Turkey, India and other BRIC (Brazil, Russia, India and China) nations and it states “we expect this trend to gather pace”. Wilson said: “The change in demographics means that you have got a huge growth in populations entering into consumerism, not just in China, but in Brazil, India, Turkey and Russia. Demand for consumer products in these countries is driving demand for the packaging around it. “This will continue to have an impact on UK business in terms of competition for the raw materials, namely recovered paper, and the supply of UK product packaging. It is also influencing M&A strategies. “We are beginning to see European companies making acquisitions in these higher growth nations. If you look across the gamut of commodities, whether aluminium or recovered paper, global demand has been buoyed by demand from developing nations. “Whilst the outlook for the world economy is a little uncertain today, developing nations will continue to drive commodity prices upwards for the foreseeable future. “In India in particular, the number of children shifting into adulthood (18-25 group) and thereby with earning capacity and into consumerism over the next five years is staggering.”

Elsewhere, the research claims that packaging firms will continue to focus on restructuring their operations and decreasing debt levels, through disposals of non-core businesses. The researchers say that unlike the US market, which has been consolidating for over a decade, the industry in Europe remains relatively fragmented – the top five US firms account for 75% of the market compared to only 40% in Europe. The report claims that increased consolidation will happen in Europe as European firms seek both growth and higher returns.


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