Many European plastics processors are breathing a sigh of relief after weathering a tough 2006 with continuing raw material price hikes, and yet they are achieving better-than-expected growth.
Compared with the sector's dire performance in the dark days of 2005, when European converting grew by barely 0.3 of a percentage point, 2006 was positively a boom year, with an estimated leap forward of 3.9 percent.
As for 2007, processors seem set to maintain the momentum, albeit with slower growth in some areas, notably industrial and consumer goods and semi-finished products.
Processing overall should expand in Europe by around 3.2 percent this year, according to French economist Frank Wittendal, who monitors the European plastics industry.
The sector's continued progress can be attributed to an economic recovery in Europe, thanks largely to growth in Germany and Eastern Europe. Export strength also is a key factor, especially in Germany and the Nordic countries, he said.
Europe also is seeing new business optimism following the sharp fall in oil prices after their summer 2006 peak.
In 2006 the plastics sector was stimulated by expansion of the construction industry in Western Europe after several years of stagnation, most notably in Germany. Taken together with a more vibrant Eastern Europe, growth in France and Germany lifted the plastics construction sector by an estimated 2.8 percent during the year, according to Wittendal.
Other dynamic contributors to the turnaround in processing were semi-finished products, including molded industrial components; large extruded building materials like pipe and siding; and masterbatches. Those markets grew an estimated 5.1 percent last year; that contrasts with the 2.2 percent rise forecast a year ago.
Packaging, which traditionally is the processing sector's most resilient area, grew an estimated 2.9 percent, slightly better than Wittendal's forecast of 2.7 percent.
The past year saw some ups and downs for retail bag producers. One triumph was the decision of the European Union to clamp down on polyethylene bag dumping from Chinese and Thai imports. Producers in Europe welcomed punitive duties on the importers, which should apply for the next five years.
There was gratitude among retail bag converters after Scottish legislators threw out a plan for a bag tax similar to that imposed in Ireland.
However, there have been further moves, both within and outside the industry, to switch to biodegradable plastics for bags in several European states.
Wittendal remains cautious in forecasting the likely movement of packaging in 2007, not least because of the trend toward more environmental regulation in the region. He now predicts the sector will grow 4.1 percent this year.
Figures for the industrial and consumer plastics area grew an estimated 3.8 percent in 2006, a distinct improvement from the 1 percent shrinkage in 2005.
However, in the automotive sector of that market, with its long lead times and unrelenting pressure on pricing, life was harder. For that sector, passing on escalating raw material prices proved tougher during the year and automotive growth was lower than expected, Wittendal said.
Also in the industry/consumer segment, processors are experiencing a cyclical slowdown in the electrical/electronic goods business, he added.
One trend that has continued through 2006 was the gradual shift of plastics product manufacturing from Western Europe to points east. The search for low-cost production has led to Eastern Europe and increasingly to Asia.
However, there are signs that, while the offshore trend toward the Far East will continue, the flow is slowing down particularly for Eastern Europe, according to David Williams, the long-serving president of the European Plastics Converters in Brussels, Belgium.
``We are going to see much the same during 2007, with less of a slide in terms of offshore production moves,'' said Williams, formerly managing director of Linpac Group and now a consultant.
Williams stressed that there is often ``a quick turnaround'' in the plastics business with the cost of manufacturing changing around the world.
``Looking back, Spain 10-15 years ago was the low-cost target. Now, it is one of the highest-cost countries,'' he said.
As Eastern European states join the European Union, those countries are experiencing change.
Despite the continuing attraction of the Far East, he pointed out that problems can arise in dealing with Asia and there is less control ``if things go wrong'' out there.
He predicts that, with expansion of polymer production already apparent in the Middle East, processing of commodity products, including film, is likely to migrate to that region.
Europe's plastics processors are uncertain about the impact of Europe's tough new REACH (Registration, Evaluation, Authorization and Restriction of Chemicals) laws, which will regulate the use of many chemicals.
Many processors are seeking ways to cut costs and boost productivity while focusing their attention firmly on product innovation to get them through another challenging year.
