Plastics industry market reports paint gloomy picture
The battle against plastics that has been sweeping the globe appears to be having deleterious effects on the industry as a whole, according to reports from the Plastics Industry Association (PLASTICS) and K 2019 organizer Messe Düsseldorf. Both reports just might put a damper on the K 2019 show in October, as attendees feel less enthusiastic about where the industry is headed.
According to the report from Messe Düsseldorf, the European plastics industry is facing challenges on several fronts:
Strains in the overall economy;
wobbly traditional export markets; and
negative attitudes of consumers toward plastic packaging, which “are leading to hasty—some say ill-judged—moves among lawmakers” creating a path to the circular economy.
Germany, Europe’s traditional economic “powerhouse,” is in dire straits, according to the report, with the German manufacturing sector “clearly in deep recession.” Italy isn’t in much better shape, as its government collapses. The eurozone’s purchasing managers index (PMI) is now below 50 (an indication of a contraction in manufacturing). Only Spain is in positive territory, said the report.
General economic slowdowns have an impact on machinery sales. Sales for the plastics processing industry in Germany did “actually rise by just over 3%” in 2018. “This is remarkable, as the economy moves in an increasingly uncertain international environment,” said Oliver Möllenstädt, Executive Director of the German Association of Plastics Converters (GKV). However, he added, that should “not hide the fact that the plastics industry faces major challenges. The debate about plastics in the environment, which is sometimes very emotional in the media and the public, has a massive impact on plastics processing companies.”
Möllenstädt calls the strategies that the European Commission is attempting to implement to “address consumer concerns,” such as bans on single-use plastics and carrier bags, merely “symbolic gestures” that “may quiet the public debate in the short term and give the impression of high activity, but it is not effective in the interest of the environment and sustainability.”
The Single-Use Plastics Directive, approved by the European Parliament in March, is likely to be implemented across member states by 2021, said the report. The directive targets plastic cotton bud sticks, cutlery, plates, straws and stirrers, as well as cups, food and beverage containers made of EPS and all products made of oxo-degradable plastic. Also in the directive is a 90% separate collection target for plastic bottles by 2029 (77% by 2025), the introduction of design requirements to connect caps to bottles, and the incorporation of recycled PET starting in 2025 culminating with 30% in all plastic bottles beginning in 2030. All plastic packaging on the EU market will need to be recyclable by 2030.
The report noted the growing importance of chemical recycling, reflected this January in the creation of a new association, Chemical Recycling Europe (CRE). “The fast development of chemical recycling technologies that can provide a solution to hard-to-recycle plastic waste is outpacing the regulation and policy around it,” the CRE claims.
Major resin producers SABIC and BASF are both looking to boost chemical recycling.
Bioplastics is a big topic, but how much will bioplastics contribute to the circular economy? That’s a good question and one that the report rightly asks. While the European Bioplastics (EUBP) group says “it fully supports the transition from a linear to a ‘no-leakage’ circular and bio-based economy in Europe,” the specific regulations in the single-use directive fail to acknowledge the potential of biodegradable certified compostable plastics in those situations where EU legislation for hygiene and food contact need to be fulfilled, but where no multi-use options can be deployed.”
As for Brexit, “nobody knows what the consequences for the plastics industry will be,” the report noted. However, Philip Law, Director-General of the British Plastics Federation trade association, said in April that he was “very upbeat” about the long-term prospects for the plastics industry in the UK, said the report.
All of this doesn’t appear to bode well for the machinery makers who are seeing their market “moving sideways.” Among European machinery makers, injection molding specialist Engel says sales in its fiscal year 2018/19 grew by around 6%, which it calls moderate. The German-speaking machinery makers in Germany, Austria and Switzerland “remain at a good level,” but since the last quarter of 2018, they have seen a significant decline in production in the German automotive industry. Increasingly lower limits on emissions from vehicles will favor the use of plastics, which are the ideal materials for weight saving but “punitive tariffs and sanctions, as well as the debate about diesel limits and driving bans” are creating a cloudy picture, said the report.
“As the quality of the recycled material is usually more volatile than the quality of virgin material, recycled material has so far been out of the question for many [automotive] applications,” the report notes. “Intelligent assistant systems, which are an essential feature of Industry 4.0, are about to change this.”
As far as the North American plastics machinery market goes, the latest report from the Plastics Industry Association (PLASTICS; Washington, DC) shows that shipments have improved, increasing in the second quarter. Following a 27.6% decrease in Q1 2019, plastics machinery shipments increased 8.2% in Q2, representing a slight comeback. However, shipments remained sluggish from the second quarter of the previous year—12.7% lower.
“The second quarter numbers are encouraging, but machinery shipments remain comparatively lower than the previous quarters,” said Perc Pineda, PhD, Chief Economist of PLASTICS. “What’s happening is not surprising judging from the macroeconomic environment. Real business investment spending in the second quarter fell 5.5%. In particular, investment spending in industrial equipment flattened in the second quarter.”
A survey conducted by the Committee on Equipment Statistics (CES) showed that when asked about present market conditions and expectations for the future, 56% of respondents expect conditions to either improve or hold steady—much lower than the 70% that felt similarly in the previous quarter. As for the next 12 months, 53% expect market conditions to be steady-to-better, down from 60% in the previous quarter’s survey.
On the international trade front, plastics machinery exports in the second quarter totaled $378.8 million, a 4.3% increase from the previous quarter. Mexico, Canada and Germany remained the largest U.S. export markets. More than half (53%) of U.S. plastics machinery was exported to these three countries. While exports to China increased 11.4% in the second quarter, it was 37% lower than during the same period the previous year.
“In the short-term there are two outstanding issues that need to be resolved,” commented Pineda. “Mexico has ratified the U.S.-Mexico-Canada Agreement (USMCA), but the U.S. and Canada have yet to sign off on this critical North American trade pact. Both countries must ratify the USMC. Unless that is resolved, the uncertainty from the ongoing U.S.-China trade dispute will continue to run high and will negatively impact not only the plastics industry but the global economy.”