Europe’s plastics industry has hit a speed bump. So, why are some people smiling?

As you can imagine, the business outlook for Europe’s plastics industry is a hot topic at K 2019 in Düsseldorf, Germany. The conversation is a bit schizo, however. The plastics industry, in general, and makers of plastics processing equipment, in particular, have a dour assessment of 2019 and are scratching their heads about business prospects in 2020—overall unpredictability and a downturn in the automotive sector are foremost on their minds. And yet, despite sales declines in the current year, most of them are not wringing their hands.

Happy and sad smiley faces

Wittmann Battenfeld General Manager Michael Wittmann set the tone at a press conference on the opening day of the show: The slowdown has finally come, and if anyone tells you any different, I would be skeptical, he said, and he wasn’t wrong. No one that I spoke with was peddling an alternate narrative. “From 2010 on, there was only one direction for industry, and that was up,” said Wittmann. We knew there would eventually be a downturn, he added, it just took a longer time coming than has been the historical norm.

For Wittmann Battenfeld, 2019 sales will be down approximately 12% versus the previous year, Wittmann announced. The downturn has been particularly pronounced in Germany and in the automotive sector, said Wittmann. “A lot of Tier 1 suppliers have stopped all investments,” he noted. However, some markets are still seeing an increase, and the United States is showing a slight uptick, so this is nothing like what we experienced in 2008 and 2009, added Wittmann.

Engel also projects a sales deficit in 2019, down 19% year on year, said Christoph Steger. “Usually, we have a six to seven year economic cycle, and this has been a 10-year cycle,” he reminded attendees. Like Wittmann, he blamed the slowdown on the automotive sector and overall economic headwinds. Tariffs and sanctions implemented by the Trump administration and China, the unpredictable outcome of Brexit and even consumer uncertainty about the type of automobile they should buy—electric, hybrid or the good ol’ internal combustion engine—are feeding this slowdown, he said.

Plastics production also has declined in Europe. While global production of plastics continued to grow in 2018, said industry association PlasticsEurope during a presentation at the K, plastics production in Europe decreased in 2018, and “2019 forecasts show that the downward trend will continue,” said the the association. “Plastics manufacturers are suffering from weak economic development not only in Europe but also worldwide. Economic development has lost considerable momentum, and important customer industries are showing weak to clearly negative growth rates,” said PlasticsEurope. 

And yet, the tone at the K is anything but downbeat. What gives?

There is, of course, the exuberant optimism that flows from an industry trade show of this scope and size. But I think the very unpredictability of the current global economic situation plays a role, because that can cut both ways. Circumstances, also, can take a turn for the better.

The automotive industry is at a crossroads, and that is not likely to change for some time. But the economy as a whole could swing back into positive territory, if the scattershot trade policies of the United States were to take a more deliberative tone, for example.

Perhaps the United States and China strike a deal that settles some, if not all, of their differences. Or, if a Trump administration sunsets, the stock market and the global economy could experience a resurgence. One respected Wall Street analyst has predicted that a return to normalcy, under, say, a President Pence, would juice stock prices.

“The erratic US-China trade war is slowing global growth, disrupting global supply chains, raising costs for businesses and consumers,and crushing the manufacturing industry,” reported CNN recently. The Raymond James investment firm wrote in a report published last week that, in the event of Trump resigning, an admittedly low-probability event, the market will rally “as Pence is a traditional, conservative choice.”

And what could be more unpredictable than that?

Image: Trahko/Adobe Stock

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