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Price of plastic expected to increase
In Europe the prices for the raw material used to make plastics has recently increased quite quickly; a development that will be reflected in the price of plastics and plastic packaging. For example, the price for LDPE was 1,152 Euro per ton in week 9, in week 23 it hit a record 1,752 Euro per ton. According to packaging suppliers and the European trade organization the rising prices are the result of deliberate price inflation by oil companies. What is going on with plastics?
Prices for raw materials are usually stable, although the price does move with the price of oil. Last year when a barrel of oil became much cheaper, the price of the raw materials for plastic also fell. During the first week of 2015 the price was at 1,325 Euro, before falling to it's lowest point, 1,150 Euro.
The upward trend started during week 10, which was the first week in March. In the weeks that followed, European companies closed many production locations declaring 'Force Majeure' due to technical reasons. The first was Versalis, better known as Eni, who announced the scaling back of production in Dunkirk on March 12th. On March 18th Borealis, for reasons beyond their control, stopped production in Schwechat, Austria. Later production locations of Sabic, Shell, LyondellBasell, BASF and various other Total subsidiaries followed.
There are several factors contributing to the higher prices for the raw materials for almost all plastics. These factors include: the changes in the global oil market, the EU rules for import, falling oil prices and a weaker Euro. These causes, which, incidentally, are closely linked to each other, all point to Plastics Information Europe (PIE). PIE is an organization that collects market data about the plastics market.
European producers
To begin with the first cause: the changing world market for oil. In the Middle East there are major areas where the cheap production of oil is possible, and this increases the pressure on European companies. Analysts expects that Europe will eventually become a net importer.
The turning point came in 2010 when the margins of European companies came under pressure. From 2010 onward the import of various commodities, such as LLDPE, HDPE and PE, rose. European producers started a lobby in Brussels, reports PIE, with the goal of getting higher import tariffs. In 2014 the EU agreed to this wish and import tariffs for PE from the Middle East were raised from 3% to 6.5%. PE imports fell that same year.
More expensive packaging
The declining exchange rate of the Euro against the dollar made it less attractive for the world to export to the Euro zone. That was reflected in import statistics that show a downward trend during the final months of last year.
Meanwhile, the packaging industry has begun worrying. PIE regularly publishes on this trend, but Dutch companies are voicing concerns as well, "We have our work cut out for us, explaining to our customers that the price increases are due to this development," says Marcus Gillioen from Flex Film. Within months a change in this trend is expected, but how far the price will continue to rise before this change happens, is anyone's guess.
More information:
Flex Film Marcus Gillioen Achterwetering 35 2871 RK Schoonhoven 0182-388700 marcus@flexfilm.nl