While some plastics end markets seem unstoppable, European processors see the beginnings of a slowdown in 2001.
European processors expect growth of barely 2-3 percent in the coming year, according to Victor Dierinckx, president of Brussels, Belgium-based European Plastics Converters.
"For 2001, I would say there are two question marks hanging over the industry. One — whether or not the trend of polymer price rises, mainly in PVC and polyolefins, may be coming to an end," he said.
"The other question is whether signs of the U.S. economy going down a little mark a new trend and, as usually happens, it follows on in Europe within six months," Dierinckx said in a telephone interview.
The past year proved one of continued strong demand, but margins were squeezed, and 3-4 percent growth fell short of the 5 percent industry forecast.
Last year, some processors in Germany and France enjoyed export opportunities resulting from the weak euro, which languished near record lows against the U.S. dollar for much of the year.
Still, Europe's 30,000 plastics converters, 80 percent of them small and medium-sized enterprises, felt the force of a big squeeze in 2000. On one hand, polymer prices rose, while on the other, large customers resisted accepting price hikes, Dierinckx said.
"In many cases there is a delay of three months before we can increase the price to our customers. But, in more difficult markets, it can take nine months to pass on the extra costs," he said. Dierinckx was re-elected in 2000 to lead EuPC for two more years.
Processors were cautious about forecasting resin price movements in 2001. Some agree that increases will not be so steep, but they do not expect a general fall.
"Raw material prices will be slightly lower but not that much lower," said Hans Van den Doel, business development director of Pactiv Protective Packaging Europe in Amstelveen, the Netherlands. "From the suppliers' side, they need the margin to improve their position. They have doubled their level over the past year and a half, and they will fight like hell to stay on that level."
Consolidation among resin producers in Europe is creating more powerful international companies that have more control over pricing, Van den Doel said.
Packaging remains the biggest plastics market in Europe, accounting for 34 percent of the total resin volume. The sector will continue growing 4-5 percent annually during the next few years, according to EuPC.
But much of the packaging sector is suffering from overcapacity, prompting some leading companies to call for more effective consolidation. Van den Doel, for example, is spearheading the European growth strategy for Pactiv Corp., his company's Lake Forest, Ill.-based parent company.
Looking to 2001, Van den Doel, who is also chairman of EuPC's packaging strategic committee, said some processors are realizing the benefits of cooperation with suppliers and customers in integrated business-to-business logistical systems. Smaller processors need to move quickly or run the risk of being sidelined, he said.
"The message to ... converters is: `Join us or you'll be out of the business.' It is pretty tough," he said. "But, it is a very shark-infested business. If you don't do it, you can forget it in three years' time."
Another major challenge is meeting the revised European regulations on packaging waste and recycling, which Van den Doel said are somewhat flexible and attainable.
Electronics, including mobile telephones, are a major growth sector. The electrical/electronics market, which represents 9 percent of resin volume, is set to grow 4-5 percent annually to 2005. The telecommunications subgroup will grow 20 percent annually, according to EuPC.
Processors in Finland, home to Nokia Oyj, enjoyed volume gains of 17-20 percent in 2000, according to Kari Teppola, managing director of the Finnish Plastics Industries Federation.
"Investments by plastics molders serving E&E in Finland will not be so huge as in 2000. Those plastics companies are investing heavily abroad as well," he said.
In the automotive segment, processors expect a slowdown in 2001. Tier 1 companies will continue to consolidate, and processors will have a difficult time balancing customers' increasing demands with shareholders' expectations, said Claude Thibaut de Maisieres, chairman of EuPC's automotive sector strategic committee.
"In addition, they will have to accompany their customers in their international expansion, and that in a context where volumes will significantly decrease in the U.S.A. and pressure on prices will be harder than ever," said Thibaut, who is director and chief intelligence officer at Solvay Processing in Brussels.
The year 2000 was a good year for Europe's plastics machinery suppliers, said Bernd Knorr, secretary general of Euromap, the Frankfurt, Germany-based group that represents the national associations of plastics and rubber machinery manufacturers in Western Europe.
Until the third quarter of 2000, at least, sales and incoming orders for machinery were at a record level, he said. Knorr is optimistic that, judging by the forward-order book, suppliers will enjoy another good year in 2001.
Hot markets for machinery include Southeast Asia and the global electronics market. Other growth areas for machinery in Europe include medical and PET packaging, while construction will grow in some parts of the globe.
One other area worth watching during 2001, according to processors in Europe, is PVC. The European Commission has prepared a Green Paper on PVC, which is due to go before the European Parliament at the end of January. The EC is set to publish proposed regulations by September.
As a result, the PVC industry expects 2001 to be a crucial year in redrawing its public image and deciding its future, Dierinckx said.