While growth in the global biaxially oriented polypropylene film market through 2013 is expected to be slow compared with the last five years, Asia's producers will see the most opportunities and the Middle East will emerge as a manufacturing center, according to a new report.
The report from Guilsborough, England-based PCI Films Consulting Ltd. predicts BOPP markets worldwide will grow 5.7 percent a year through 2013, which it believes to be healthy, but a slowdown from the 7.6 percent annual growth rate seen from 2003-08.
The report, World BOPP Film Market Trends 2008, said prospects could improve if China's economy picks up later this year and India continues to develop its retail and packaged-food industries.
PCI cautions, however, that the near term will still be difficult: Everyone will continue to be in a weak position for the next two years, but things should start to improve from 2011, for all except producers in the Middle Eastern region.
Overall, the global BOPP industry is expected to expand by one-third by 2013, with the expansion of emerging markets likely to mean a significant change in the who's who rankings of top producers.
The sharpest cutback seems to have come in Europe's 781,000-metric-ton market. Demand volume dropped 3.1 percent in Western Europe in 2008, driven by recessionary pressures and changes in purchasing patterns.
Asia, by contrast, showed 7 percent growth last year, with China's 1.8 million-tonne market becoming more balanced and suppliers starting to plan expansions.
One film extrusion equipment maker has already sold 10 lines in 2009, with 375,000 tonnes of new capacity, the report said. Chinese BOPP film producers will be largely focused on their domestic market.
New capacity in Saudi Arabia and India, however, is expected to be more export-oriented, as capacity will exceed local demand, the report said.
The Middle East will emerge as a significant regional BOPP film production center in the next three years, with capacity expected to double as governments there hope to take advantage of lower production costs and target downstream industries, including film extrusion, flexible packaging and food processing, the report said.
PCI said there will be a strategic shift away from traditional suppliers toward companies like Dubai, United Arab Emirates-based Taghleef Industries LLC and emerging competitors in developing economies.
Producers in these mature markets, previously the market leaders, have had to react to the strategic movements of other players in a way they have never had to do, the report said. Larger producers, such as Exxonmobil, Treofan and Vifan, have found that having major assets in markets with slowing growth is not a good strategy, but have been very slow to invest in regions with growth.
Companies need to either focus on being low-cost commodity producers in a large market like China or India, or target specialty niche products with higher margins, PCI said.
Copyright 2009 Crain Communications Inc. All Rights Reserved.