EuPC expects further price increases in plastics products

EuPC (www.plasticsconverters.eu), the Brussels based trade body for plastics converters, is warning that high oil prices are threatening the recovery of the industry.

‘The price of plastic products will have to increase in the coming months’, according to Alexandre Dangis, EuPC’s Managing Director. In EuPC’s analysis the two main reasons for this are the increasing raw material prices following on from the high oil prices and a shortage of raw materials in Europe.

Raw material price escalation
EuPC states that since December 2006 the prices of polymers and additives have reached record levels or are close to doing so. It believes that he increase in price is structural and is confirmed by such models as that developed by NRK in the Netherlands in collaboration with EIM . It says that prices, on average, have increased from 50 % (for PP) up to 100% (for PS) since the beginning of 2004 and that the trend for the coming six months is clear and that users of plastics products should expect a further 15% to 20% increase in prices.

Impact on profitability
Dangis fears a reaction from customers, especially from multinationals and large enterprises. He said ‘Their dominant position in the market means that converters will not be able to recover their own raw material cost increases. This will put further pressure on profitability. Recovering raw material price increases is absolutely necessary to guarantee the appropriate levels of investment and innovation by plastics converters’.

EuPC points to impressive responses so far by plastics converters. It says that the plastics industry is innovative and has absorbed recent price increases by gains in productivity efficiencies, energy savings, product innovation and new market developments. ‘However these efforts don’t make up the increase in raw material prices and wages’ said Dangis. He is fearful that despite overall economic growth, the profit recovery has failed to appear and that now the future health of the sector depends on the passing on of costs.

Polymer supply
EuPC is also concerned about the uncertainty of supplies. ‘For the past two years our manufacturers can’t rely on their orders of raw materials being executed’, complained Dangis. ‘No delivery due to declarations of ‘force majeure’ by the raw material supplier occurs on a regular basis, whilst the partial delivery of 80 to 90% of the purchase orders for certain raw materials is a widely accepted fact of life. The problems this causes are obvious: a failure to live up to commitments, the creation of a negative image and losses for the company. This leads to decreases in output and a restriction of growth’.

The impact of world demand
In a sector where raw materials account for 30 to 70 % of the selling price, the influence of oil prices is high. This is particularly so at a time of escalating demand for oil and polymers in the growing world economy. The fast growing plastics industries in China and India are leading to even higher polymer prices.

European Plastics Converters, Brussels, Belgium

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