European plastics processors are confident the year 2000 will bring healthy growth, estimated at 4-5 percent across the region. There is widespread optimism that, in spite of several major long-term challenges, a new era of regional economic growth and prosperity is dawning, creating huge opportunities for European processors.
Even so, a flurry of raw-material price hikes in the closing months of 1999 and an expected lull in some markets after a pre-holiday business rush will see many molders easing their way through a difficult initial six months of 2000.
For Europe, 1999 was truly a transitional year, with the successful launch of a single currency, the euro, by 11 of the European Union's 15 member states.
Economic growth in the euro zone is forecast to improve 2.6-3.1 percent during 2000. The quickening pace is being helped by relatively low inflation, rising exports, and an upturn in the powerful German economy, according to economists.
Processors welcomed the arrival of the common currency, although its full effects will take some years to be felt. Processors are sure that, apart from simplifying cross-border trade, the era of the euro is leveling the international playing field and providing new market opportunities.
One area the European currency has not influenced is the violent fluctuation of resin prices. In commodity plastics generally, processors faced a steep, relentless rise in prices in 1999.
Victor Dierinckx, president of the European Plastics Converters trade group, anticipates it will take processors three to six months to pass on the latest price hikes to their customers. As a result, he said the first half of 2000 will be tough for processors.
EUPC is hopeful that resin prices gradually will stabilize in early 2000, Dierinckx said. Brussels, Belgium-based EUPC has 30,000 processor member firms.
"Generally speaking, for converters in Europe last year was a good year, with the notable exception of Germany, where this big market was flat because of the economic situation there," Dierinckx said. "Overall, the industry had growth of 3 percent. We believe 2000 will be a good year for us. Prices, of PVC particularly, should stabilize in the first three months with lower demand in construction, for example. The big German market will improve, and overall we see annual growth of 4-5 percent over 2000."
Many of Europe's processors have been squeezed by heavyweight customers determined to screw down their costs.
This was especially noticeable in the automotive components sector; but, that market has remained strong despite gloomy predictions of market decline at the start of 1999.
"In Europe, the year was very good — it has broken all records, and we anticipate 2000 will also be a good year," said Michel Costes, chief executive of Mavel SA, a European automotive consulting firm specializing in materials for vehicles.
"All lights are green in Europe where the economies are doing well. People are changing their cars and there's new confidence," he said.
Other European forecasters' expectations vary, according to London-based Automotive News Europe. Its poll of six automotive analysts showed an average 0.7 percent decline in passenger car sales for 2000.
Costes predicts continued consolidation among Europe's component suppliers. He said Tier 2 suppliers in the next two years will need to adjust to the new power wielded by Tier 1 suppliers.
"There will be mergers in Tier 2 and these suppliers must restructure themselves to be able to get better quality and be better organized and maybe support Tier 1 in design of parts," Costes said.
Even so, the automotive plastics market is set to grow in 2000 by a healthy 5-6 percent, said EUPC Vice President Joachim Eckstein.
One materials war where plastics is winning is in packaging. Despite increasing pressure for downgauging, plastics should grow in 2000 by more than 2 percent, albeit less than the nearly 3 percent achieved in 1999, Eckstein predicted.
He pointed to the growing success of PET, set to expand by a hefty 14-15 percent this year. Among its latest conquests is the refillable bottle markets in countries like the Netherlands and Germany.
Eckstein said the construction market should grow 2-3 percent, with the window profiles and pipe sectors making steady progress.
Meanwhile, plastics has found huge growth potential in electronics and electrical manufacturing, where the mobile phone revolution continues unabated.
Challenges still face the European plastics industry, not least among these is the pressures of environmental regulation.
By mid-2000 the EU is due to complete the final stages of new regulations covering automotive recycling. The original proposal was for carmakers to finance the recovery of materials, but this also may involve Tier 1 and Tier 2 suppliers, said Dierinckx.
Plastics packaging producers are anxious as they await the revision of the EU's packaging and packaging-waste directive, which originally set a minimum waste-recovery level at 15 percent. Some proposals call for a new goal of 40-45 percent, which EUPC considers unrealistic, because some countries still have not reached the 15 percent mark.
However, recent discussions between EU and plastics industry representatives have come up with a 20 percent compromise target, said Eckstein, who was a party to the talks.
Even that level will stretch the industry, said Ron Marsh, chief executive of top European rigid container molder RPC Group plc.
Regulations come thick and fast in Europe and another fear of processors is the latest proposal, just beginning its EU legislative process, that 70-90 percent of electrical/electronic waste should be recovered and recycled.
Finally, the industry has sustained serious damage from an assault by environmental pressure groups on the use of PVC. Although the market for infants' soft PVC toys and teethers is small, soft PVC, a major part of Europe's PVC business, has seen its image badly tarnished by the EU's plan to ban phthalates in some PVC toys, Dierinckx said.
Dierinckx sees this damage as the tip of an iceberg that may threaten the PVC processing industry and its hundreds of thousands of employees across Europe.