Polymer Industry Keep on Track, Despite Market Turmoils: The Future of Polymers
K2016, the leading fair and expo for plastics and polymers wants to set the industry’s new course between shale gas, feedstock fluctuations and the internet of things — New raw materials. Energy prices. Demand fluctuation: Business as usual is no option for the global plastics industry. The branche is nevertheless cautiously optimistic at the sector fair K — Industry 4.0, light-weight construction and recycling management still promise new perspectives.
From light-weight building blocks through new materials right up to revolutionary recycling management concepts — the plastics industry is looking for new ways. In this context, alternative resources and feedstock are regarded with the same exited anticipation as the concept of the networked industry. And the market dynamic speaks for itself: 59 million tons of plastics were produced in Europe in 2014 — an increase by nearly 3.5 percent compared to 2012.
The prices for basic materials like polyolefins are slowly becoming attractive, especially since several major producers failed due force majeur related short-term production standstills in 2015. No one however wants to speak about a genuine upsurge — in general, cautious optimism seems to be in vogue.
Moderate Growth in Europe
The good figures could become a light at the end of the tunnel for the trouble-ridden and buffeted industry. Even the tiniest signs of hope are also absolutely essential, as polymer producers are still suffering under the solid decline in sales following the recession of 2008–2009 and the subsequent crisis in the Euro zone in 2012–13.
Marker researchers like Applied Market Information now predict an average 1 % growth per year up to the end of the decade. But how stable is this development given the background of the turmoil in the worldwide petro- and polymer industry?
Integrated Poylolefins Witness 'Historic' Margins
More and more players continue to throng the market: Asian and Mid-Eastern mega plant projects announced in the mid-2000s are going on-stream with time, while cheap shale gas is ensuring a boom in the US downstream sector. European polymer producers nevertheless continue to be optimistic. Mark Garrett, CEO of Borealis even speaks of “historical” margins in the integrated polyolefin industry.
A solid demand and delivery bottlenecks due to unplanned production interruptions would have converted the raw material into goods in demand, explains the manager. The reports of several European industry associations take the same line, which predicts a clear growth in the plastics processing industry in Europe. Even in the weakening Italian market, the plastics machine manufacturers’ association Assocomaplast is happy about a “clear upward trend”.
In Germany too, the sector experienced further moderate growth after the record year 2014. Dirk Westerheide, President of the German Total Association of Plastics Processing Industry (GKV) however complains about major delivery bottlenecks and the extremely volatile price fluctuations for raw materials, especially for polyethylene and polypropylene.
The “New Normality”
Internationally, this new “normality”, characterized by economic growth and trends like the low oil price, fluctuations in supply and demand as well as weakening of most Asian currencies against the US dollar, is opening up new perspectives for regional economies.
The South Asian countries of the ASEAN (Association of South East Asian Nations) Group in particular are profiting from the favourable conditions: The production rates of the sector have increased continuously on an average in the last few years, especially in the ASEAN-6, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, which according to McKinsey, account for more than 95 % of the regional gross domestic product (GDP).
Plastics and plastics products belong regularly to the top export sectors of these countries, boasting an export turnover of $ 39.3 billion per annum.
Things are totally different in China: The People’s Republic had to revise its growth target downwards to 6.5–7 % due to the weak export demand. Now the initial companies are threatened with migration. The OECD too fears that the situation in China can impair the growth outlooks of the region. And yet: There is still no way around the “Goliath of global production” (McKinsey) for investors.
India, the second largest Asiatic market, still has considerable accumulated demand: Forecasts presume a doubling of plastics consumption to 20 million tons by 2020. According to the estimates of the Plastindia Foundation, the per-head consumption will be approx. 16 kg in 2016 (in comparison: a Central European consumes 130 kg per year on an average).
Is Europe Lagging Behind?
While the chemicals industry is happy about the impressive market development for polymers in the Far-East, the plastics processors are groaning: The weak Euro, large demand in Asia and the US, and the short-term failure of several large polyolefin plants have forced the subject of raw materials safety back on the agenda: EuPC (European Plastics Converters, the umbrella association of European plastics processing companies) thus formed the “Alliance for Polymer Supply in Europa”, an information network which is expected to provide support on raw materials or customs duty problems.
But not only raw materials but also energy costs are of considerable importance for the entire plastics industry. Especially in Germany, where the power tariffs are among the highest in Europe, criticism from all branches is very vocal. In particular the notorious energy-hungry chemicals industry fears that it could be overtaken by competitors in the US, who are benefiting from cheap shale oil.
Looking for New Feedstock
Many eyes are thus focused on the petrochemicals giant Ineos, which of late is importing ethane from US shale gas to Norway. The first shale-based polyethylene from Europe will presumably see market introduction within a few months. Ineos is also on the starting blocks for the promotion of shale gas in the UK, although no actual fracking is planned in 2016. The company wants to use shale gas as an energy resource as well as a basic feedstock for polymers.
Concern for adequate raw materials and energy supply is also the essential drive behind the recycling management concepts and intiatives of the European Commission. Its ambitious Circular Economy Package (CEP) introduced in 2015 shall help to promote recycling and reuse, including a revision of the garbage legislation that sets a uniform EU target for the recycling of 75 % of packaging waste by 2030, and a ban on dumping of separately collected waste matter. At present, less than 25 % of plastics waste is recycled and approx. 50 % is disposed in garbage dumps.
Too little, too late in the eyes of the European Plastics Manufacturers’ Association: “For a long time now, the European plastics industry has been promoting a legally binding dumping restriction on all recyclable and other reusable post-consumer waste materials”, explains the association. “Although a 10 % target is a step in the right direction, it remains a half-hearted attempt.”
European Bioplastics (EUBP), the association of suppliers of bio-based plastics, responded positively to the report and says that “Future-oriented sectors with pronounced environment protection advantages and growth potentials like bio-plastics should be promoted.” The association projects that the production capacities for bio-plastics in the EU will increase 20 times to 5.7 million tons by 2025.
Setting the Course
Despite all these concerns, the European plastics industry has set its sights on new opportunities: Chemicals companies and plant manufacturers want to position themselves in the battle for market share with the new light-weight building materials or intelligent systems. Thus for instance, Covestro presents itself as a solution provider for future challenges like energy efficient building or light-weight construction, for which the company wants to make its mark with new polyurethane foams.
Further, special polymers for the additive production or 3D-printing supplements the portfolio of the former Bayer Material Science — just like the firm’s new Cardyol Technology for the utilisation of the greenhouse gas CO2 in the manufacturing of high-quality polyols.
Lanxess presents a wide range of heavy duty plastics and rubbers along its new rubber joint venture Arlanxeo, in which the Cologne-based special chemicals group has bundled its rubber activities with Saudi oil giant Aramco. BASF in contrast ramps up an innovative materials portfolio consisting of insulators, poly-amides, coatings and pigments.
The chemical behemoth is especially proud of its wonder polyamide Ultramid Advanced N, which is expected to exceed conventional PPA plastics in matters of endurance and wear and tear, as well as of its simulation software Ultrasim, with which can calculate the behaviour of PU systems in foaming processes e.g. in the automotive industry reliably.
A New Industrial Revolution?
The machine builders are banking on networking: Many companies present the number 4.0 highly visible on their stands at K 2016, as they push 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 in reference to what is perceived as the fourth industrial revolution.
This paradigm shift away from centralized and towards decentralized production is a challenge, especially for the polymer chemicals companies with their huge production volumes and comparatively low margins.
Nevertheless: “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 of injection technology specialist Engel. He says he does not consider the word ‘revolution’ to be very appropriate, however.
“The changes that we are currently experiencing are more like an evolution,” Engleder says. “For us, Industry 4.0 is not a new idea, but is already long-established daily practice in many areas.” Other players in the sector will most likely see things in a similar vein.
Thus, GKV President Westerheide is convinced that new digital technologies will open up new vistas for plastics processors too, and says: “K 2016 will offer us an excellent opportunity to explore the advantages of digitization for our industry.”