K 2022 – Trend Report: European plastics industry braces for increased instability, higher prices, and lower growth

The European plastics industry is tackling challenges on multiple fronts. In packaging, by far its biggest market, it has become a victim of its own success, particularly as the ideal material for single-use applications and people on the move. In building and construction, some infrastructure projects may go on hold as governments divert some funds away from infrastructure projects to defence, although business is being boosted as consumers get help to improve energy efficiency in their houses. In automotive, component suppliers are suffering because car makers have been cutting production – not as a reaction to reduced demand, but because they cannot obtain the chips they need for their electronics.

Since early 2019, COVID-19 has had major effects on production, occasionally positive but mostly negative. And now, just as Europe and the rest of the world was recovering from the devastating two years of the pandemic, we have the tragedy of the Ukraine conflict.

Discussing the situation in late March, Martin Wiesweg, Executive Director Polymers EMEA at consultant IHS Markit, said that, quite apart from causing a humanitarian disaster, the crisis is weighing heavy on the plastics business, in terms of cost inflation, the worsening of supply chain bottlenecks, including energy supply, while also raising the spectre of demand shock amid the fear of global stagflation.

Inflation across the EU hit an all-time high of 7.5% in March. S&P Global Economics said on March 30 that it expects eurozone growth to be 3.3% this year, compared to 4.4% in a previous forecast, and inflation to reach 5% this year and stay above 2% in 2023.

European machinery makers in good shape

The picture is bright with European plastics equipment suppliers. Thorsten Kühmann, Secretary General of EUROMAP, Europe’s Association for plastics and rubber machinery manufacturers, said in March that member companies’ order books were “filled to the brim. The current year will therefore be another very good year. We expect sales to increase by 5 to 10%.” However, here too, rising prices and now the war in Ukraine are increasing uncertainty.

Dario Previero is president of Amaplast, the association of Italian producers of plastics and rubber machinery and moulds. At the end of last year, he said: “According to our estimates, at the close of 2021 production should be a hair’s breadth from pre-pandemic levels, up 11.5% with respect to 2020. The clear recovery recorded in 2021 gives us good reason to expect performance beyond pre-crisis levels in 2022.”

Ulrich Reifenhäuser, CSO of Reifenhäuser Group and also chair of the K exhibitor advisory board, says the company has “an extraordinarily positive” order backlog for the current year.

Looking back at the financial year that has just closed for injection moulding technology major Engel, CEO Stefan Engleder said in mid-March: “We are closing a year with great challenges, but also great opportunities. We will close the 2021/2022 business year with a significant increase over the previous year. Material bottlenecks are currently one of the major challenges. So far, we have managed to avoid delivery delays as far as possible.”

Gerd Liebig, CEO of another injection technology major, Sumitomo (SHI) Demag, says that overall, consumption figures are good. “Nevertheless, the coronavirus situation clearly had an impact on demand. But we are anticipating a fast recovery due to our strength in business strategy.” Sales of machines are on track to surpass pre-pandemic levels at this company too.

“Demand continues to increase for all-electric models, and we anticipate this ratio will continue to increase,” says Liebig. “We’re forecasting further increases in 2022 in the automotive and consumer sectors. A decade ago, 20% of our machines were fully electric; now it is more than 80%.”

Packaging challenges

High and escalating resin prices globally means the packaging market is under continuing pressure, says Liebig. “Given that recyclable granular is now at the same price as virgin polymer was 12 months ago, the impetus to lightweight now stretches across all packaging material substrates, not just virgin polymers. We continue to focus on reducing material usage by improving the process and enabling our customers to produce ever thinner-walled parts.”

The move towards tethered caps (mandatory from 2024 under Single-Use Plastics Directive, or SUPD) and extensions of Extended Producer Responsibility (effective 2023) will inevitably have a strong influence, as does the new EU Packaging Levy on non-recycled packaging waste, Liebig says. (Since Jan 1, 2021, the EU charges member states €0.80/kg of plastics packaging waste that is not recycled. States are free to choose how to finance the levy.)

The European plastics industry is in fact having to contend with various pieces of legislation relating to plastics waste. For example, there is now a mandate that 55% of all plastic packaging in the EU be recyclable by 2030, as well as the levy on non-recycled plastic packaging waste. Some countries are also introducing local legislation (Spain and France for example), making the playing field not as level as it should be.

Industry is already having to face up to some consequences of the SUPD, some elements of which came into force on 3 July 2021 in most EU countries – although the roll-out of the legislation has not been entirely smooth. In Italy, for example, it only became law in January, with a delay on final implementation; it is also more flexible in its definitions of plastics products than Brussels originally intended, and whereas the SUP Directive does not exempt certain biodegradable plastics, the Italian legislation does.

On the subject of bioplastics, the European Bioplastics trade association says: “Unfortunately, in Europe, bioplastics still don’t obtain the same degree of support that other innovative industries receive from EU political decision makers. The EU Commission has sometimes contradictory positions on bioplastics. Member State positions on bioplastics also vary a lot, the regulatory environment is anything but harmonized.” This discourages investment in R&D and in production capacities, it says.

Despite these challenges, development in European bioplastics is “very positive. Global production capacities still represent less than 1% of the more than 367 million tonnes of all plastics, but by 2026, bioplastics production will pass the 2% mark for the first time.” Production capacities for bioplastics in Europe were close to 600,000 tonnes in 2021 and can be expected to increase to around 1,000,000 tonnes within the next five years.

In the UK, now outside the EU, a new tax on plastic packaging came into force on April 1 of this year. The tax will apply to plastic packaging components that do not contain at least 30% recycled plastic and that are either manufactured in the UK or imported into the UK (again, there are exemptions). The tax will be levied at a rate of £200/tonne (approx. €235/tonne).

At the British Plastics Federation, Director-General Philip Law is determined to see the positive side. “The Plastics Packaging Tax could ultimately be a platform for innovation and help reduce the heat of public debate,” he says.

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