The British Plastics Federation (BPF) said packaging manufacturers were suffering most as result of a raft of conditions that had led to a severe shortening of supply of some key polymers – particularly polyethylene and polypropylene.
Users of blow moulding grades of high density polyethylene (HDPE) have seen their raw material costs increase by over 30 per cent in Euros in the year May 2009 to May 2010 and buyers of polypropylene saw increases by as much as 50 per cent in the same period, said a statement from the body.
Alexandre Dangis, managing director of the European Plastic Converters (EuPC) backed the view from the BPF, and said he hoped the situation would ease by September but that he “was not 100 per cent confident about this”.
Chinese demand surge
The BPF listed a series of events that had coincided to put the sector under increasing pressure as it sought to explain the plight of its members.
The stronger than expected recovery from the world recession had taken the industry unawares – with the subsequent surge in demand from China having the greatest impact. Annual Chinese demand had risen to 50m tonnes per annum as the burgeoning economy “absorbed huge quantities of plastics raw materials”, said the BPF.
The situation has been intensified by what it called a “succession of ‘force majeure’ announcements by some raw material suppliers.
The trade group added the movement of raw material production from Europe to the Middle and Far East was also significant - saying “ongoing access to secure sources of key plastics raw materials raises strategic issues for both EU and UK governmental institutions”. It quoted a KPMG study, The Future of the European Chemicals Industry, as forecasting a 26 per cent reduction in cracker capacity in the EU by 2015.
BPF director-general Peter Davis said the situation was damaging plastic processors as the “faltering material supply” was undermining their confidence to “engage in business development projects”.
Davis called on the sector’s customers to “realise the very real pressures that our processing members are under and reflect this sympathetically in their negotiations with their suppliers.”
EuPC chief Dangis backed the view from the BPF.
“I agree with this analysis and we have seen something very similar in European sectors, such as France, with a lack of materials,” he told FoodProductionDaily.com.
He said announcements of ‘force majeure’ over the past month that had pushed prices up by between 15 and 30 per cent – particularly in the polyethylene sector.
“Plastic converters are sandwiched in the supply chain between strong suppliers and strong customers, and margins are becoming tighter and tighter,” he added.