Poland is the third-largest exporter of packaging within the European Union, and it's possible that this year it will overtake France for the second-place position. Since the beginning of the last decade, there hasn't been a year where our share in the total EU export of these products hasn't increased; it currently stands at over 10 percent and is one of the highest in the entire manufacturing sector. However, due to the economic slowdown across Europe, primarily driven by weaker private consumption, recent quarters have not been easy. How the domestic packaging industry has navigated these turbulent times and what awaits it next year are discussed by Bank Pekao analysts in their latest sector report, "The Packaging Industry in an Era of Weaker Demand. Current Situation and Prospects for the Coming Quarters."

For the third consecutive year, Bank Pekao has been examining the packaging industry. It is a growing and significant part of Poland's manufacturing sector, responsible for approximately 4 percent of its total production and encompassing manufacturers of 5 types of packaging (paper, plastic, glass, wood, and metal).

According to Smithers Pira estimates, global packaging sales will reach around $1.2 trillion this year, with paper and plastic packaging accounting for 70 percent of this value. Within the European Union, approximately three-quarters of packaging production is concentrated in the five largest member states. Poland ranks fifth in this classification but is consistently closing the gap with fourth-placed Spain.

"The above-average growth rate of the Polish packaging industry, as well as its significant size relative to the national economy, is partly due to the ongoing foreign expansion not only of packaging producers but also of many Polish manufacturing branches that utilize them."– states Krzysztof Mrówczyński, manager of the sector analysis team at Bank Pekao and co-author of the report.

This expansion is best reflected by the fact that between 2010 and 2022, the share of Polish producers in EU packaging exports increased by over 4 percentage points.

However, the demand environment for the domestic industry has deteriorated in recent quarters, both domestically and in the key EU market. After a stable 2022, the first 9 months of this year saw significant quantitative declines in packaging production in the EU, observed across all segments of the sector. Their year-on-year dynamics ranged from 4 percent (plastic and glass packaging) to as much as 11 percent year-on-year (wood packaging). The reason for the downturn was the economic slowdown and the weakening condition of key industries that are packaging consumers.

In the case of the domestic industry, the years 2021-2022 were marked by dynamic growth in the value of packaging production (as much as 26 percent annually), not only due to increasing volumes but primarily due to higher product prices. However, the current year has seen a slowdown influenced by weaker domestic and foreign (EU) demand.

"Consequently, the volume of intra-EU trade in packaging decreased by 14 percent year-on-year in the first half of this year, with a value growth of only 3 percent. This naturally translated into poorer export results for Polish producers, who direct over 80 percent of their foreign sales to the EU market," – emphasizes Magdalena Płaczek, co-author of the report.

Year-on-year declines in domestic production volumes for most types of packaging ranged from a few to a dozen percent. Weaker sales translated into a deterioration of the industry's financial results. However, the overall situation of the industry remains stable and favorable compared to the manufacturing sector (higher profitability, lower percentage of companies with net losses, optimal liquidity, and debt levels). Furthermore, for next year, the report's authors predict a recovery in the sector's performance, based on the assumption of faster economic growth in Poland and the European Union. On the cost side, one of the main challenges (apart from regulatory issues) is again the pressure on wages, although this is compensated by significant relief in material costs.

More information can be found directly in the report "The Packaging Industry in an Era of Weaker Demand. Current Situation and Prospects for the Coming Quarters.".