Plastics converting companies have come under renewed pressure through increasing raw materials prices, says EuPC, the industry's Brussels based body.
'There has been a sharp upswing in prices across the board for most polymers, commodity and engineering, and this is both seriously compromising processors with their customers as well as threatening profitability', said Managing Director Alexandre Dangis.
EuPC's member national associations are reporting increases of up to 20% since December and Dangis is particularly concerned by the increasing incidence of firms who are reporting difficulties. As much as 70% of their selling price is accounted for by raw material costs and their international competitiveness is extremely vulnerable when , as at the moment, we don't appear to have a level playing field with Asian converters.
Dangis cites oil as the key factor. 'Whilst we are some way off the peak prices of early 2008 when oil reached $150 dollars a barrel over most of last year they rose again, hovering above and below $100 dollars per barrel and now we are about $125 dollars (Brent Crude at mid-day on 13th March)'.
Much of this is driven by political uncertainty he says. 'Iran's diplomatic dispute with the west over its nuclear programme, international sanctions against Syria reducing output and lower production in South Sudan and Yemen, are all having their impact'.
'On top of this', added Dangis, 'we have also had the additional factor of refinery and steam cracker failures which have significantly affected the availability of naphtha and its derivatives especially ethylene and propylene and the recent bad weather has caused some plants to freeze over. We have also seen several 'force majeure' declarations in Europe and a danger for us is that the investments required to keep these older plants running in order to supply plastics converters in Europe could be questioned. We need to ensure also the flow of raw material supplies from outside the EU (free of import duties) if we want to develop further our promising plastics markets with innovative products.
Dangis said 'It is crucial for plastics processors to pass on these sudden increases in order to recover their costs; otherwise the viability of a large swathe of firms will be in doubt. All partners in the supply chain down to the consumer will have to absorb their fair share of these increases if they want to benefit from the advantages which plastics bring, particularly in helping to reduce energy usage, transport costs and household fuel bills.'