PCI: ‘Why are companies investing in BOPP film in an already over-supplied European market?’

By Jenny Eagle contact

- Last updated on GMT

Poligal
Poligal

Related tags: Bopp film, Flexible packaging, Investment, Bopp

PCI Films Consulting (PCI) claims too many companies are investing in BOPP film in an already over-supplied European market, as it releases a report analysing 15 flexible packaging markets.

‘Opportunities in Emerging Flexible Packaging Markets to 2019’, looks at flexible packaging markets in Poland, Russia, Turkey, Argentina, Brazil, Chile, Colombia, India, Indonesia, Kazakhstan, Myanmar, Pakistan, Thailand, Vietnam, and Nigeria, with details on substrate suppliers, converters, investors and purchasers.

BOPP film producer, Poligal

SK
Simon King

Simon King, managing director, PCI, said on his blog that Spanish BOPP film producer, Poligal, recently announced it will invest in a 8.7m wide, 5-layer, 40,000 tpa film extrusion line from Brückner at a factory south of Wroclaw in Poland.

This investment is being made in an already over-supplied West European market, where film producers idle capacity when volumes and margins are poor, and in an East European market where Biaxplen has been consolidating the Russian industry after years of under-achievement​,” he said.  

According to King, the Polish BOPP film market is around 58,000 tonnes per year, primarily flexible packaging grades and growing in excess of 5% per annum.

It currently has one domestic BOPP film producer, Flexpol-Gasior with 33,000 tonnes of installed film extrusion capacity, exporting around 20% of its output and significant imports (up to 50% of the market) including Egywrap, PlastchimT, Jindal, Taghleef Industries, Treofan, Vibac and Biaxplen.

BOPP film demand is likely to continue to grow as Poland has benefited from the growing presence of several multinational converters and from export growth (of converted flexible packaging using BOPP films, as well as BOPP film packaged foods) due to the domestic food processing industry’s proximity to northern Europe​,” he added.

Emerging economic woes in Polish export markets such as Russia and the Ukraine are likely to impact short-term growth, but in the long term prospects still look positive​.”

Russia & Brazil affected by falling commodity prices

One of the key findings in the report is despite a number of emerging markets, such as Russia and Brazil which have been affected by falling commodity prices and a slowing global economy, overall flexible packaging demand has grown nearly 10% per annum over the past five years, double the rate of the global flexible packaging market as a whole.

Major drivers in this sector include inward direct investment by multinational brand owners and converters, improving living standards, high population growth, liberalisation in a number of markets, changing consumer lifestyles and the development of mass retailing.

Author Paul Gaster said over 60% of the demand is concentrated in seven South East Asian countries and this is where nearly 90% of forecast growth will be generated over the next five years. 

These markets in particular will present investment and penetration opportunities for all those involved across the flexible packaging supply chain," ​he said.

However, average growth over the period in the South American and European countries reviewed is expected to be 5% or less. Demand in Russia is forecast to fall to less than 2% per annum, where a faltering economy, collapsing oil revenues and western sanctions are heavily impacting demand​.”

King believes on the surface Poland is a sensible bet because it has a large and growing domestic demand for BOPP films with gaps in the supply chain and opportunities to export excess volume to Northern and Eastern Europe.

However, the downsides are a very competitive Polish flexible packaging market, which will put downward pressure on BOPP film pricing, and the growing economic difficulties being experienced in some of the plant’s potential export markets.

Related topics: Processing & Packaging

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