EUROPEAN PLASTICS OUTLOOK MAINLY HOPEFUL

Comments Email Print

The European scene in 1997 will be dominated by the big issues of a single currency and greater political unity among the 15 nations of the European Union.

Economically, 1996 was a time of gradual recovery from lingering recession, with some nations slower than others to return to the path of strong and sustained growth.

Britain's gross domestic product grew by an estimated 2.3 percent and is set to expand by as much as 3.8 percent in 1997. Germany and France managed only a little over 1.3 percent for 1996. Their 1997 growth is predicted at less than 2 percent, and 2 percent plus, respectively.

Italy's GDP is forecast to grow by just 1.2 percent this year.

Beneath the macropolitical and macroeconomic pictures lies an optimism in many industries that 1997 will be a better year.

However, major challenges remain for the plastics industry in the new year. Not least of these are the conflicting pressures from end-users for innovative, complex packaging, and Europe's ecological demand for waste control and recycling.

``The signs we get are that consumers will be more optimistic this year. We expect higher consumption, so we hope for a higher growth rate than last year,'' said Joachim Eckstein, president of the European Plastics Converters organization EuPC.

Eckstein, who predicts industry growth of 2-3 percent for 1997, said processors serving almost every market are optimistic since they have reduced costs in 1996. They expect to enjoy a competitive edge globally in 1997 and will take advantage of rising home demand.

Europe's plastics processing industry grew 1-2 percent last year, said Eckstein, who is director of the plastics and film division of German chemicals giant Hoechst AG.

Markets expanded most in France, Italy and the United Kingdom, while the mature German plastics market was ``more or less stagnating'' during 1996. Much of the driving force for growth was provided by a buoyant automotive end-use sector, he said. The sector ranked Europe's fourth-largest plastics user by volume.

Meanwhile, the construction sector (20 percent share) saw some growth outside, but in Germany activity was weak. The top-ranked European plastics market, packaging (42 percent), and the third-ranked electrical/electronic sector (11 percent) were static during 1996, Eckstein said.

The EuPC president admitted that European processors did not enjoy a good year in 1996. Profit was squeezed, leaving firms to cut costs where possible.

Raw material costs, which stabilized after the big hikes of 1995 in the first half-year, began moving up again later in 1996 — among them prices for polypropylene, polyethylene and PVC.

Eckstein forecasts that prices for polymers, including the polyolefins and PVC, are likely to push up again this year. Suppliers had not achieved profitable enough levels.

``If demand is good enough, they will be able to put up prices again,'' he said.

The British marketplace promises to be ``reasonably good'' on the back of consumer confidence, at least in the first half, said Stephen Nobbs, finance director of expanding bottle maker Plysu plc of Milton Keynes, England. But the picture across the English Channel remains less promising, he said.

Nobbs is more pessimistic about the growth of consumption on the continent, where life will remain tough for the next two to three years. Some nations still are grappling with lingering recession, while leading European governments are tightening control of their economies to qualify for entry to the European Monetary Union.

On the recycling front, EU states are taking hesitant steps to follow the bold lead of Germany in responding to the first EU directive for packaging waste, which targets a minimum 15 percent of each material for recycling.

While Germany has its own ambitious scheme in place for recovery and recycling of packaging, and France has made some progress, governments in Italy, Spain and the United Kingdom still are debating which path to take, Eckstein said.

He is convinced that the plastics industries in other member states will escape the drawn-out battle and negative image experienced in Germany as it pioneered its environmental legislation.