Europe cautiously optimistic about long-term outlook for plastics industry

As the plastics industry around the world, and especially in Europe, gets ready for the 2016 edition of K, Europe’s largest international trade fair for plastics and rubber, the mood could best be described as one of cautious optimism. According to a recent report on the state of the European plastics industry plastics industry consultant Applied Market Information (AMI), the European plastics industry “finds itself in another period of upheaval and change as it struggles to pull out of the stagnation caused first by the Great Recession in 2008-2009 and the subsequent Eurozone crisis in 2012-2013.”  Nonetheless, while the volume of polymers consumed in 2014 was overall still some 10% below that used in 2007, AMI projects that polymer demand over the longer term is expected to average a rate of just over 1% per year up to 2019. Growth? Yes, but slowly and by degrees.

The situation in Central and Eastern Europe is more positive than in Western Europe. Most of the countries in the East now have a polymer demand well ahead of where they were in 2007, AMI noted. But growth was further hampered by last year’s rash of declarations of force majeure -  over 40 in one 4-month period in 2015 – leading to shortages of raw materials across the continent and putting significant strains on relationships between suppliers and processors. Global economic and trade framework conditions made it difficult for plastics processors to obtain materials on international markets. Among these were the relative weak euro against the US dollar, and continued strong demand for plastics in Asia and the US. In an effort to “fight this unjustified situation”, EuPC, the leading EU-level trade association for processors, launched the Alliance for Polymers for Europe. Among other things, the Alliance has since organized a Best Polymer Producers Awards for Europe.  “We decided to start the in order to re-establish a good communication between users of polymers and their suppliers, which has obviously suffered lately,” says Ron Marsh, chairman of the Polymers for Europe Alliance. “We simply want to award those producers who support their European customer base.”

Yet another sore point for the European plastics industry as a whole, and for Germany in particular, is that of the high costs of energy. Concerns mainly center on the difficulty of remaining competitive on the international stage, especially towards the North American companies with access to cheap shale oil and gas. While the low price of oil means that this advantage has lessened somewhat, it is generally felt that oil prices will creep back up again in the coming years. However, opinion is sharply divided on whether shale gas could solve Europe's energy supply security problems - with the U.K. government being among the most pro-fracking in the region. It is hardly surprising, therefore, that multinational chemicals company Ineos, which already imports ethane from shale gas from the Marcellus shale field in Western Pennsylvania (USA), has chosen the UK as the location to drill numerous test cores this year, although it does not plan any fracking in 2016.

On top of all other concerns, there is also growing awareness in Europe that plastics are a valuable material, and that more needs to be done about their use, re-use, and recycling. Late last year, the European Commission adopted what it says is an ambitious new “Circular Economy Package” (CEP) to boost competitiveness, create jobs and generate sustainable growth. Key actions adopted today or to be carried out under the current Commission's mandate include a strategy on plastics in the circular economy, addressing issues of recyclability, biodegradability, the presence of hazardous substances in plastics, and the Sustainable Development Goals target for significantly reducing marine litter. The latter issue, in particular, partly in response to the “The New Plastics Economy: Rethinking the future of plastics” report from the Ellen MacArthur Foundation launched at the World Economic Forum in Davos, Switzerland, has led PlasticsEurope to take the initiative in finding new ideas and solutions to preventing all plastics from entering the ocean.  PlasticsEurope president and Covestro CEO Patrick Thomas emphasized the association’s role in providing leadership in preventing marine litter and in sharing best practices.

A report on the European plastics industry would be incomplete without at least some reference to the state of the processing equipment sector, which remains a global powerhouse despite strong competition from China.  As far as exports are concerned, Euromap members continue to export around four times as much core equipment as Chinese companies, in value terms. Deliveries to Europe and the US have both been rising, while those to BRIC countries have been slowing down. Euromap members account for 40% of core machinery production and half of exports (of which almost half are from Germany, over 18% from Italy, and almost 15% from Austria). Around 43% of Euromap member exports are within Europe.

One of the topics that is expected to figure conspicuously at the upcoming K Show, is that of ‘Industry 4.0’, particularly among the European machinery companies who will be pushing their solutions for “smart” factories that operate within the Industrial Internet of Things (IIoT). The 4.0 refers to Industry 4.0, a term invented in Germany back in 2011 in reference to what was perceived as the fourth industrial revolution – and the German government’s plan to make sure German industry is at its forefront.

Proponents of Industry 4.0 say it represents a paradigm shift from centralized to decentralized production – made possible by technological advances which constitute a reversal of conventional production process logic. This means that industrial production machinery no longer simply “processes” the product, but that the product communicates with the machinery to tell it exactly what to do.

"Industry 4.0 is above all one thing: a tremendous opportunity that we want to take advantage of together with our customers," says Dr Stefan Engleder, CTO at machinery manufacturer Engel, which has adopted the term “inject 4.0” to describe its approach to meeting the challenges of productivity, quality and flexibility.

Yet a survey conducted by the German umbrella organization for the plastic processing industry GKV recently showed that only 8% of the responding plastics processors were putting significant effort into Industry 4.0, with the vast majority following the trend from the sidelines. This led GKV president Dirk Westerheide to conclude, perhaps somewhat optimistically, that “K 2016 will provide an excellent opportunity to explore the advantages offered by the digitization of our industry.”