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March 22, 2010 02:00 AM

Central, Eastern Europe still promise growth

Frank Esposito
Senior Staff Reporter
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    As economies around the world look to recover from a global recession, Eastern and central Europe could provide opportunities in plastics processing.

    Tamas Kovacs — founder of Eastern and Central Europe Business Development Ltd. in Budapest, Hungary — outlined the region's pros-pects at the 2010 Plastics News Executive Forum, held March 7-10 in Tampa.

    Typically, pro- cessors have looked to relocate to Eastern and central Europe — defined as a region north of Greece and south of the Scandinavian nations — for its lower costs or in order to follow customers from the U.S. or Western Europe, Kovacs said.

    Economic growth in the region varies from country to country, but has averaged just over 2 percent in recent years, more than double the 1 percent growth rate of countries in the eurozone.

    Russia is the region's largest economy and, with 140 million people, its largest population. But Poland's second-place economy actually has been the region's best performer recently.

    With the exception of Russia, the region's economies are driven by direct foreign investment, and as a result are subject to movements in investment cash flow and government incentives, Kovacs explained.

    And although the region may not return to the high growth rates it enjoyed before the economic crisis, it still has large potential growth in plastics consumption.

    Russia, Ukraine, Romania and Bosnia — with a combined population of more than 210 million — each consume less than 55 pounds of plastic per person each year. Poland is more developed, with per-capita plastics use of more than 120 pounds. Czech Republic, at 160 pounds, and Slovenia, at more than 175 pounds, also have high per-capita rates, but have relatively small populations.

    By comparison, per-capita plastics use in the U.S. is about 240 pounds. In China, that rate is about 65 pounds.

    Ukraine and other former Soviet republics are driven by internal markets, but many other countries in the region are driven by exports to other parts of Europe. Former Soviet republics often have large populations and ample natural resources. Economies in the Baltic nations — Lithuania, Latvia and Estonia — have been driven by investment from Scandinavian banks and now are struggling somewhat, Kovacs explained.

    Eastern/central Europe consumes about 5.5 billion pounds of plastic resin per year. Top plastics processing end markets — based on resin consumption — are food and packaging film, building and construction, and food packaging.

    Major international corporations such as Suzuki Motor Co. Ltd., Coca-Cola Co. and leading plastic closures molder Bericap GmbH & Co. KG already operate plastics processing facilities in the region. But the area remains home to a great number of small processors that use 10 million pounds or less of resin each year, according to Kovacs.

    Certain types of plastics processing also have concentrated in some locations. For example, Kovacs' native Hungary is home to a large number of film extrusion firms. He also singled out Romania and Bulgaria as countries that have “great undeveloped economic potential.”

    Copyright 2010 Crain Communications Inc. All Rights Reserved.

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