Raw material costs impacting sector profits, warns BCF
help the packaging sector face up to the rising cost of plastics
and printing inks. Anthony Fletcher reports.
Prices for plastic packaging materials rose by more than 16 per cent in 2004, and in some cases by as much as 70 per cent, according to the BCF. The organisation's president Peter Rieck has now written to Patricia Hewitt at the department of trade and industry asking for official recognition of the critical state of UK manufacturing and calling for appropriate and urgent action to be taken.
The BCF wants the UK government to reduction of the legislative load on packaging firms, and put in place a 12-month delay in implementing costly EU labelling laws. In addition, it wants the state to extend eligibility to Part B processes for entry into Climate Change Levy Agreements.
The organisation, which represents the 25 leading manufacturers of printing inks and coating in the UK, a sector worth £2.5 billion, believes that these measures are vital to bolster the current fragile state of the packaging industry.
Print suppliers such as Flint claim to have been forced into making price increases for packaging ink products because of the rising costs of transportation, energy, and raw materials. Limited raw material supply, an escalating issue worldwide, has exacerbated the problem.
Since the beginning of 2003, raw material feed stock costs have increased from 9 per cent for ethylene to 190 per cent for benzene. Crude oil costs are up 65 per cent and natural gas is up 67 per cent.
Chemical giant Dow is another firm that has been affected by the current climate.
"Our price increases in 2004 have not compensated for the tremendous rise in raw material costs during the first half of this year," said Markus Wildi, commercial vice president for Dow's plastics portfolio in Europe, the Middle East and Africa.
The federation claims that this situation has had a severe knock-on effect in the industrial coatings sector, where sales have been falling at an annual rate of 10 per cent. Profits have continually fallen, with 40 per cent of firms in the industrial coatings sector now trading unprofitably.
Some 80 per cent of participants in a recent survey reporting lower gross margins than a year ago. Employee numbers fell 5 per cent in the last year, the largest decrease since 1996, while new investment is down 20 per cent.
In addition to declining sales, the BCF cites increasing labour costs, energy and other environmental taxes and the disproportionate burden of EU legislation as enacted and enforced in the UK, as serious threats to UK competitiveness.
"Further rises for gravure and flexographic printing inks for both the corrugated and flexible packaging sectors are inevitable," said BCF chief executive Moira McMillan.
