As host to the world’s largest plastics show, Germany and Europe’s economic conditions, and specifically plastics demand, come under greater scrutiny in K years.
That demand is down, according to an article from show organizer Messe Düsseldorf, citing data from industry consultant Applied Market Information (AMI), which noted that polymer consumption in 2014 is 10% below 2007 levels. AMI expects nominal growth to return, forecasting that polymer demand is expected rise an average just over 1% per year until 2019.
From 2002 to 2014, plastics production in Europe grew every year except 2009, rising 52% over that time period from 204 million tonnes in 2003 to 311 million tonnes in 2014, according to Plastics Europe. In its most recent report for 2015, which looks back at 2014 data, the trade association reported that the European plastic industry employed 1.45 million people at 62,000 companies generating more than Euro 350 billion in revenue.
That same report found that in 2014, 24.9% of total plastics demand in Europe—47.8 million tonnes—came from Germany, followed by Italy (14.3%), France (9.6%), the U.K. (7.7%) and Spain (7.4%).
Resin Suppliers Are Upbeat
Across the Atlantic, much has been made of the burgeoning production advantages enjoyed by North American resin makers thanks to the natural gas boom, which has lowered key feedstock costs. But more recently, the drop in oil prices has given a boost to Europe’s resin manufacturers who are more reliant on petroleum-derived naphtha.
The article noted that Borealis enjoyed record profits in 2015, quoting CEO Mark Garrett as saying that integrated polyolefin industry margins reached historic highs for the year.
“Despite lower feedstock costs, polyolefin prices did not retreat to the same extent, driven by a tight market as a result of solid demand combined with a supply shortfall, in particular resulting from unplanned production stops. In addition, imports of polyolefins into Europe have been uncompetitive following the weakening of the Euro. We expect this situation to ease in 2016, but we believe the integrated polyolefin industry margin will be solid.”
Messe Düsseldorf also sought the opinion of Melanie Maas-Brunner, Senior Vice President for Performance Materials Europe at BASF, who was also bullish.
“Overall, we look positively at the current state of the European plastics industry. We have seen good business growth in all our segments in 2015 and we are optimistic that those who have the right technologies, people and facilities globally will stay successful. We expect more demand from industries such as medical, transportation as well as from consumer industries such as footwear, sports and leisure. The main trends driving those needs are resource efficiency, light weighting, comfort and energy efficiency.”
Processors, Machinery Makers Optimistic
On the processing side, the report noted that Germany’s converting sector posted moderate growth in 2015, after a record 2014, while in Italy, where consumption has been flat, equipment association Assocomaplast reported a strong upward trend in orders.
Further on the machinery front, Euromap members most recent reports covering 2014 noted that the continent accounted for 40% of the global total of plastics and rubber core machinery sold—euro 13 billion out of euro 32.5 billion. Down slightly from 2013’s share of 41.5%, while China’s grew over the same time period from 30% to 33.5%.
Euromap members continue to export around four times as much core equipment as Chinese companies, in terms of value, with deliveries to Europe and the US on the rise, while shipments to BRIC countries slip. Around 43% of Euromap member exports are within Europe.
Force Majeure’s Take a Toll
A significant challenge to European plastics processors in 2015 was difficulties obtaining raw materials, with more than 40 declarations of force majeure during a period of just four months at one stage in 2015, as major polyolefin plants in Europe stood still for extended periods, “putting significant strains on relationships between suppliers and processors,” per the report, which noted that some processors “had to shut down production lines.”
Could there be relief on the way from the U.S.? The Messe Düsseldorf report noted that Ineos chartered eight ships to bring ethane from Pennsylvania’s Marcellus shale field across the Atlantic, with the first delivery arriving in Norway in late March. Shipments to the company’s refinery at Grangemouth, Scotland, were scheduled to start later this year, with Europe’s first shale-based polyethylene expected tocome onto the market soon after.
Ineos Chairman Jim Ratcliffe noted that U.S. shale could complement the declining supplies of gas from the North Sea, according to the report, with imports of shale-derived ethane acting as a stop-gap measure while his company investigates shale-gas deposites in the U.K. The company is set to drill numerous test cores in 2016, although it does not plan any fracking this year.
Pictured: Ineos' new ethane storage tank, completed in July 2015 and said to be the largest in Europe.