If you believe the economic gurus, European economies are in for a rough ride these coming months. With no end in sight to the war in Ukraine, energy prices going through the roof, and inflation in double digits for six European countries (including Britain), recession looms.

To add insult to injury, central bankers here, as in America, are planning more interest rate hikes to damp down inflationary pressures. Say goodbye to growth prospects. Manufacturing industries will be badly hit, especially in countries like Germany and Italy. A recent report by JPMorgan Chase predicts annual GDP “growth” of minus 2.5% for Germany and minus 3% for Italy – other forecasts are more optimistic, though.

Let’s carry on looking at some of the nasty consequences of all this gloom: what are the main raw materials for the label and packaging industries? Well, paper and carton board, of course. And what do you need to make them? Lots and lots of energy. And where do we get that energy? In too many cases it’s from Russian natural gas, and whatever the energy source, mill costs and prices will continue to move upwards.

Sweden’s Lessebo Paper saw its annual energy costs go from three million to 19 million euros (roughly the same in US dollars at today’s rate). This mill doesn’t make packaging or label grades. In fact since the end of August 2022, it doesn’t make anything. Commenting on the shutdown, CEO Jens Olsen said:

“Since autumn 2021, the price of electricity has gradually increased. Historically, the winter period typically brings high electricity prices and the fact that we already have record high electricity prices in August is disconcerting.” In France, Papeterie Saint Michel is still producing cartonboard, but has cut its output. Commenting, general manager Jacky Quiesse blames – you guessed it – a jump in energy prices over the past two years, with the kWh price going up tenfold. He reckons other producers will also soon be forced to cut back or halt production.

Just over the Rhine in Germany, label paper producer Feldmuehle has announced a 2.6 million euro investment to convert its Uetersen mill from natural gas to light heating oil. Feldmuehle said the switch will be completed by the end of this year and will ensure the continued operation and competitiveness of the mill in the event of a worsening natural gas shortage and sharply rising prices.

It’s not just the paper industry that is suffering from the rise in Europe’s energy prices: the plastics sector is also bearing the full brunt of the increase in electricity and gas costs. Elipso (the French association of plastic packaging professionals), warns that the sector vitally needs visibility on the evolution of energy costs in the medium term and is obliged, however reluctantly, to pass on to its customers the cost increases incurred. “After the Covid crisis, the supply logjams, and having survived a first wave of price increases, we are facing another dizzying increase in our electricity and gas costs,” says Christian Théry, president of Elipso. “If we cannot pass on these increases, we will be forced to shut up shop.” The dynamics of all this uncertainty is that label converters who have for years practiced lean production and purchasing are now looking to build up their inventories in the almost certain knowledge that prices and delivery dates can only move one way.

The art of getting smart

Smart labels and packaging are no longer a new idea, but it’s increasingly difficult for converters to keep up with this burgeoning field of development. A new study by Vandagraf, a UK-based consultancy, aims to cover all the developments that will make headlines over the coming years. These include the Internet of Packaging (IoP), the vast range of smart-phone related applications, smart medical uses, and many opportunities arising from the falling costs of printed electronics. Other topics covered in this study include taggants, time-temperature indicators, and sensors for measuring food freshness.

Some label converters are still investing

The Storebælt Bridge cuts the time it takes to get from one Danish island to another, and may have helped Scanvaegt Labels of Odense to choose another Nilpeter for its latest investment. The FB-350 Line, which is scheduled for installation at Scanvaegt in early 2023, is based on modular flexo technology for easy configuration and includes screen and hot foil drop-in features. Part of the Scanvaegt Systems group, which makes labeling equipment, Scanvaegt makes a wide range of labels mainly for the food and pharmaceutical sectors.

The bridge reduces the gaps between Danish islands. Gaps of another kind were worrying Germany’s Koehler Etiketten. Ever decreasing lead times and the need to eliminate gaps in production capacity were the driving factors for Koehler’s decision to invest in a Xeikon CX300 digital press. The system was installed in June 2022 to complement a Xeikon CX3, which has been giving excellent results for the last six years, according to CEO Michael Markus.

“During the pandemic, when the supply chains in the packaging industry were broken, there was increased demand for labels as an alternative medium,” he explains.

Similar problems were facing another label converter, Sita 3000 in Italy. With just 10 employees and sales of €2 million, Sita could not be called a market leader, but it has seen the digital light and installed its first digital press, a 7-color Screen Truepress Jet L350 SAI.

“One of Sita 3000’s strengths is that we have always been able to invest in new technologies, as is the case of this latest investment, our company’s first digital label press,” says technical manager Gianluigi De Blasio.

A gleam of good news from central Europe

The Hungarian economy is holding up well, and Poland saw GDP growth only a tad short of 5% in the latest quarter. The Polish currency has dropped by 20% against the dollar and 5% against the euro, which should do some good to the country’s label converters who export massively to Germany. In 2017, Arti-Bau in Western Poland was the first in Europe to invest in both a Xeikon PX3000 and a Mark Andy Digital Series press, and it has just installed a Digital HD press from the same manufacturer.

According to Arti-Bau CEO Monika Stefanska, hybrid technology has opened up markets with new customers, some of which had no concept of what digital print could offer.  A medium-sized company, Arti-bau has several dozen human employees…and two very large dogs!