Viewpoint - AWA Global Release Liner

Today's release liner industry may be a global market, but the profile and characteristics of the business are changing. As conference keynote speaker Michael Apperson of Loparex, put it: "Global isn't global any more". Around the world, things are changing. The old 'global' definition featured multinational sales offices and manufacturing, and a consistent global product offering, with technologies and products developed in the established markets - usually the USA, Europe, or Japan. Today's definition is a complex combination of these basic requirements with a much more regional focus, where products are also developed, manufactured, and serviced to meet local customer needs.

Regional differences "We must understand regional differences," said Apperson. He compared the profile of industry standard US premium graphics liner
with that of graphics liner in China, where local quality, performance, and price requirements make the product "ten times harder to make". Loparex, he said, is creatively pursuing this new business route, which it believes will promote product innovation as well as growth. He suggested that such a strategic synergistic approach makes a drive for 6-10% growth "not an unrealistic number" in the release liner business.

Market data
AWA Alexander Watson Associates' president and CEO Corey Reardon provided his annual overview of current market characteristics. "Consolidation," he said, "and backward and forward integration continue across the supply chain. What were, in Europe, eight companies are now - in a short period of time - reduced to just two." Capacity investment continues in the emerging markets; and while growth in the Asia Pacific region - the world's largest market for release liner - is slowing, it is still "a significant driver of global growth", at two to three times the rate of the markets in North America and Europe.

Worldwide, Reardon showed, growth in 2013 increased at around 4.7% over the previous year, with 48% of release liner demand focused on pressure sensitive labelstock, of which approximately 80% is in-house siliconised.

The voice of the industry
Jackie Marolda, AWA vice president and senior consultant, presented the results of the 2014 AWA Industry Survey. Respondents, she showed, "very much echo Michael Apperson's insights into globalisation". Costs have increased in the last 12 months in every
aspect - transportation, energy, labour, and materials - and "there is very little expectation of any decreases in the next 12 months".

Asked to comment on whether the release liner industry is "in real need of some true innovation", more than 60% of survey
respondents agreed, and identified arenas where innovation has recently occurred, and where more activity can be expected - for
example, linerless labels, sustainability, and recycling programmes.

Executive leadership discussion
On the topic of globalisation, Ritrama's Tomas Rink observed: "Globalisation also means spreading the risk! But we must indeed be
global on a regional basis, because it's a different story everywhere. There isn't a common denominator." In Asia, local suppliers "play a different game", and it is difficult to compete. In South America, he added, "it is difficult to follow local rules".

On the subject of innovation, Michael Apperson said "the challenge is to get people to think differently". Rink said "nowadays,
innovations in the speciality arena become commodities in weeks, not years". However, Roland Hill of Contra Vision Supplies, "would
rather see a world where we could co-operate as an industry on innovation".

Defining leadership, Thomas Blaige of Blaige & Co said it is a matter of "leading by example, participation, and communication skills'; while Dr Bernhard Klofat from Felix Schoeller preferred the term "managing, and achieving results". On industry growth for the
next five to 10 years, Blaige highlighted niche products and markets, while Apperson pinpointed inkjet, India, and electronics as areas that will see positive development.

Market and industry discussion
'When we talk about innovation today', said Reardon, 'the conversation always seems to get around to 'cost out'. What are we doing in
terms of innovation that is not focused on taking cost out?" Dow Corning's Christian Velasquez said he is actively pursuing new
end-use markets such as electronics. Sjaak Elmendorp of Avery Dennison's Materials Group added customer sustainability
scorecards and reduced dispensing line downtime to the list, commenting that, in the latter context, "film liners offer a huge benefit". Velasquez said: "Film liners are growing at a faster rate than paper," and Sean Duffy of Bluestar Silicones added: "When they
are cheaper - much cheaper - they will replace paper".

Lead, follow, or get out of the way!' was the subject addressed by Thomas Blaige. In an industry context, for a company to 'lead', it
should 'acquire'. To 'follow', it should merge; and to 'get out of the way', a company should sell, divest, or recapitalise where needed.

Blaige said there are now 40 such transactions a year in the label industry supply chain - for example the recent creation of Coveris, bringing together five leading packaging companies to make a single manufacturing entity with revenues exceeding $2.5 billion. There has also been considerable strategic activity in the coatings sector - in Mondi, Loparex, UPM, and Avery Dennison, for example. "The big are getting bigger - widening the gap," he commented.

Looking at polyolefins
Current trends in the global polyolefins market were presented by Remko Koster of IHS Chemical. As global economic growth
gradually picks up, he showed, "the commodities supercycle has ended". With oil prices currently moving down, it is critical to note that "hydrocarbon feedstock costs are the key drivers in chemical manufacturing". China represents 50% of global polymer demand, and continues to lead overall market expansion.

North America's active source of hydrocarbon feedstock, shale gas, is creating capacity growth in that region, making it once again a competitive supplier of PE.

Europe's major chemical companies are rationalising capacity, with PE (mainly HDPE) production plants closing in 2013-1015,
resulting in a 7% capacity reduction. Koster expects to see growth in demand in the short term for PE - levelling off thereafter - and
forecasts 2018 demand worldwide for HDPE, LDPE, and LLDPE at 102 million tonnes. The overall price of PE resins will be dictated by Europe's higher cost base - so users may not see the price reductions in PE polymer the use of sources like shale gas might suggest.

Being green
Calvin Frost of the US based Channeled Resources Group underlined the fact that the release liner industry does not have "a very
good track record on recovery". Less than 10% of all spent liner generated in pressure sensitive roll labeling is currently recovered.
Reuse, for example as pelleted fuel, and recycling are both practical for release liner; and recycling PET film liner is a 'no brainer'.
Paper liner recycling is more complicated, and there is no monetary incentive, he observed. However, industry initiatives are in progress, and FINAT recently launched a liner recycling competition. Nonetheless, he concluded, it is legislation that will drive recycling.

EUROPEN's Virginia Janssens looked at how the 2014 EU Waste Legislation Review is moving the packaging industry towards
resource efficiency. Most European countries already meet the Packaging and Packaging Waste Directive's 55% overall recycling target. Targets are likely to rise significantly, however, across most material categories - including paper and board, currently at 60%, and plastics, currently at just 22.5%. While release liner was removed from the pan-European list of materials considered 'packaging waste', individual EU member states can decide for themselves how to categorise liner waste, which continues the uncertainty that is a real concern for the industry.

A label maker's perspective
Skanem's Alan Hazlewood profiled release liner from a label maker's perspective. Taking costs out has become a standard tactic for
brand-owners, he said, but, "the cost reduction initiative 'barrel' is nearly empty now. What we are looking for from the manufacturers is absolute performance - and that is what the industry is delivering. Label release liners are fit for purpose."

He also discussed global availability shortfalls in oil-price-dependent PE liner. Purchasing savings delivered by a switch to PP liners, he said, are balanced by the question as to whether they have yet proved themselves: they are heat sensitive, stretch on press, and suffer some problems in label positioning. He examined the option of switching to film liners from glassine, but the attendant disruption, would require a significant price reduction which "would have to be a minimum of 7.5% before we would consider it". Linerless labels are, he observed, are a long term choice here, and are already being explored with Skanem Linerless labelstocks and dedicated dispensing lines.

Hazlewood forecasts continued disturbance in the label release liner market in the short term, but, in the long term, a "coalition
market" for all the currently available options, with the possibile emergence of other types.

Next on the release liner industry's schedule is the AWA Label Release Liner Seminar, in Chicago, USA, on 8 September 2014, just before Labelexpo Americas.

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