Demand for plastics down in Europe as price hikes kick in

By Ahmed ElAmin

- Last updated on GMT

Related tags: Cent, Plastic, Thermoplastic, Europe, Ami

Recent price hikes for petroleum-based plastics seem to have led to
a downturn in demand in Europe, according to a market analyst
report.

Industry analyst AMI says European thermoplastics producers are now hoping for a pickup in demand this year.

Their wish could be fulfilled if the oil price stabilises or falls. The run up in polymer prices in November for many of the plastic resins using in packaging has added to the input costs faced by many food processors.

However the prices have now eased. The price of polyethylene and polypropylene resins started falling at the end of December, according to a report by the Plastic Exchange.

In 2005 the European thermoplastics market recorded growth of less than two per cent, AMI estimates. After a downturn in 2001, the market in Europe had been growing fairly steadily at between two to three per cent for the past three years.

"However, the fluctuations in raw material pricing through 2004 and 2005 allied with weak consumer demand led to destocking and poor overall demand for most thermoplastic resins,"​ AMI stated.

Normally strong growth markets for resins such as polypropylene (PP) and polyethylene terephthalate (PET) had disappointing sales in 2005, the analyst reported. Both plastics are used extensively in the food and beverage industry, most notably for bottled water.

PP demand by volume was up less than one per cent to about 8.5 million tonnes. Demand for PET slowed to about five per cent.

Polyethylene markets were also weak. Polystyrene and PVC markets continued on a downward trend already noted in 2004.

The commodity polymer market continues to be largely driven by the packaging sectors. Packaging applications accounted for nearly 50 per cent of all thermoplastics consumed in 2005, AMI stated.

AMI's regular plastics industry report has been extended to included Central European countries for the first time.

The report shows that market demand there has been growing considerably more strongly than in Western Europe.

Boosted by their entry into the EU in 2004, their lower levels of plastics usage generally and increased consumer spending, Central European polymer demand grew by five per cent in 2005 compared with one per cent for Western Europe.

However, with a total market demand of around 3.4 million tonnes it accounts for less than 10 per cent of total European demand.

Plastic is made from hydrocarbons derived from petroleum or natural gas. With the rising prices for both inputs, plastic producers have slowly been passing on the costs to packers.

Graham Packaging increased its prices by three per cent from January 5, putting further pressure on food processors' margins.

In October Amcor, the world's largest producer of PET, said it was increasing prices for the third time this year. Some polyolefins prices rose by 20 per cent that month, with more hikes expected, according to European Plastics News.

Related topics: Processing & Packaging

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