Last year emerged as a period of weak recovery for Europe's hard-pressed plastics processing sector in the wake of the global economic slowdown of recent years.
But any chance of sustained revival was dealt a blow by soaring polymer prices and escalating energy costs in the second half, leaving uncertainty over the prospects for 2005.
Optimists point to an apparent slowdown in Asia, particularly in overheated China, which could begin to rein in polymer prices in Europe by the middle of the new year. That change, together with signs of steadying oil prices, could help put the sector's recovery back on track.
After disappointing progress in 2003, most market sectors showed stronger growth earlier last year, resulting in an expected full-year volume increase of 2.5 percent.
But record-high oil prices and limited resin availability since the summer forced up raw material costs.
``We have had the most rapid escalation of costs in the industry since the 1970s, and it is certainly testing our skills to handle this,'' David Williams, president of processors organization European Plastics Converters (EuPC), said in a recent news release. ``This is causing major problems for the industry, which is also suffering higher energy and distribution costs.''
Europe's processors are striving to make more efficient use of materials, looking to processing technologies that use less energy, and striving to manage cash flows more tightly, Williams said.
European packaging in general made progress earlier in the year and seemed set to finish 2004 firmly on the plus side. Annual business volume grew 2.9 percent, compared with about 2.7 percent in 2003, according to estimates compiled by Paris-based economist Frank Wittendal.
Other plastics market segments looking up during last year were building components and semi-finished products, the former seeing estimated annual growth of 3 percent, up from just 1 percent in 2003; and the latter more than doubling to 4 percent volume growth in 2004, according to Wittendal.
Construction growth was driven largely by strong demand for plastic pipe, profiles, flooring and PVC-based wall coverings in Eastern Europe. The growth reflected heavy investment in new member states of the European Union, said Joachim Eckstein, an EuPC vice president and a former chairman of its building and construction committee.
Prospects for European packaging in 2005 are mixed, according to Ron Marsh, chief executive officer of RPC Group plc, a major blow molder in Higham Ferrers, England. While demand for cosmetics packaging is depressed, new products are creating fresh opportunities.
``It is not a widely publicized theme these days, but plastics is going to continue to grow. So, packaging is a good area to be in,'' he said.
Among Europe's hardest-pressed plastics processors are those supplying the automotive sector. Constantly urged by big vehicle manufacturers or Tier 1 suppliers to cut their costs, component molders have been forced to pass on the latest polymer price increases to their customers.
``We had a period of [resin price] stability over the past 18 months. But from midyear , suppliers have forced through increases. We've seen second and third rounds of price rises since then,'' said John Pearson, chief executive of car parts molder Stadium Plastics Ltd. of Hartlepool, England.
Stadium is one of a rare breed among parts suppliers, still successfully molding all its components in Britain. It has not joined the rush to set up plants in low-cost areas of Eastern Europe or Asia.
European processors seeking some respite from soaring resin prices may find new stability, at least for some grades, with the promised arrival of polymer futures trading. The London Metal Exchange plans to start trading May 27 in polypropylene and linear low density polyethylene.
A constant concern of the region's processors is the expansion of European Union regulations to more aspects of industry.
``We are overlegislated in Europe against the rest of the world,'' said Williams, who is concerned that red tape will stifle the region's economic growth. The sector is disturbed particularly by recent EU proposals to govern chemicals and food contact with plastics packaging.
Converting-industry leaders are confident that in 2005, Europe's plastics industry will begin to speak with a single voice. This month marks the formal launch of PlasticsEurope, an association representing raw materials producers that has replaced the Association of Plastics Manufacturers in Europe. A key aim of the new body is to collaborate more closely with the European processors and EuPC.