Just a few days left until 2016 draws to a close. A year that was shaped by a number of events and emotions in industry, too, from the automotive sector to recycling, from "Brexit" to "K" and the election of Donald Trump as the new US president. Throughout the year, PIE was on hand to offer reliable market information and background on the global plastics industry, alongside editorials and comments.
PIE supplied you with a total of 2,023 stories in the past 50 weeks, divided into 1,066 company news, 299 price reports, as well as 195 market stories. These were accompanied by 340 different charts and innumerable pictures.
In line with established practice, we have once again compiled for you the key events of 2016. Take a moment to read about everything that shaped the year and prepare for 2017 along with us.
K 2016 - the world's largest plastics factory at work
This year's "K" fair, held in Düsseldorf / Germany in October, was a resounding success, with 232,000 visitors attending the eight-day flagship industry event, held every three years. The share of international visitors rose once again, and now stands at 70%. Taking stock of the show, the 3,285 exhibitors expressed their deep satisfaction, some quite enthusiastically so. "This was the most exciting K I have ever experienced," fair president Ulrich Reifenhäuser said.
The success underlines the unique role K plays for the industry, as a mirror of its global status quo and a source of inspiration for new technological and economic innovations and impulses. The main theme at the fair was flexibility - whether with regard to feedstocks, machinery ("Industry 4.0") or processing. There is no shortage in the number of reasons why K 2016 could become an important milestone in industrial history.
It was already evident on Day One that "K 2016" would see a record number of visitors.
The best of the industry was on full display, including at Arburg's booth in hall 13.
KI Group's "Polymer Summit" took place on Day Two.
The high-ranking speakers included Stanley Chu (second from left, head of "Chinaplas" fair organiser Adsale) and Michelle Jou (third from left, Covestro's president of Polycarbonates) (Photos: KI).
Hunters and gatherers were out in full force.
The press event at KI Group's booth in hall 6 attracted a lot of visitors.
Exhibitors gathered on Saturday evening for the traditional bash at the CCD Süd.
With some 232,000 visitors, "K 2016" set a new record.
KI Group also published the official German-language fair daily, with more than 30 staffers on site in Düsseldorf.
If 2015 was the year that China turned inward, as the country started to come to terms with its "new-normal" lower economic growth rates, then 2016 will go down as the year in which companies from the People's Republic embarked on an almost aggressive buying spree abroad. With salaries that no longer allow it to operate as the world's workbench, Chinese buyers set out to acquire the latest - and best - in technology, and struck gold across the world - whether the brand involved was German (KraussMaffei and Kuka come to mind) or American (GE Appliances being a case in point). Gaining market access was a key motivator, as was the desire to acquire established and renowned brand names. Other players chose a different form of attack, setting up their first satellites abroad. Kingfa, one of the world's leading compounders, is a case in point, opening its first foreign production site in Germany.
At the end of 2015, it was clear that China would never be the same. At the end of 2016, it is dawning on many that Chinese M&A activity means the world - and the plastics industry along with it - will never be the same either. The writing was on the wall - quite literally so - in spring, when Beijing published its 13th "Five-Year Plan". Its tenets underline the "Belt and Road Initiative", issued in 2013, and one of whose underlying premises is that China needs to take a bigger role in global affairs. All under the watchful eye of the government, of course, as the video announcing the new plan by state-owned Radio China International shows.
This new reality is seen with fear and suspicion by some, and welcomed by others. Taking a closer look at the new relationship between Europe and China - dubbed "China-Europe 2.0" - was KI Group's Polymer Summit K 2016. The conclusion: All differences and difficulties notwithstanding, there is no escaping the rise in Chinese M&A activity abroad. That is the new normal Europe and the rest of the world will have to get used to.
Video published by Radio China International, formerly Radio Beijing, the state-owned foreign broadcasting service of the People's Republic of China.
Marine litter: A sea change?
"The ocean is expected to contain 1 t of plastic for every 3 t of fish by 2025, and by 2050, more plastics than fish." That statement hit the world like a thunderbolt when a new study on the plastics economy was presented at the Davos Conference in Switzerland in early 2016. The problem of marine litter is not news, but in 2016 industry for the first time set out to openly address it, showcasing its efforts to prevent plastics from seeping into the ocean and joining hands to give life to new initiatives aimed at reversing the status quo.
In March, industry leaders gathered in Brussels for their annual "PolyTalk" conference readily made the forum available to showcasing solutions to the problem posed by plastics in the marine environment and sharing best practices on how to prevent pellet loss, support innovative clean-up campaigns and achieve the shift to a "new plastics economy."
KI Group was able in 2016 to hold a number of exclusive interviews with high-ranking members of the World Plastics Council, the industry body tasked with combating marine litter and whose members account for about 75% of total global plastics production. From Saudi Arabia to China, from Germany to India, the heads of leading plastics manufacturers and industry associations in 2016 intensified their efforts to address the issue and for the first time held a public press conference at "K 2016" to outline their action plan.
With the pollution visible to all, the decision to actively and openly engage both their peers and the public on this matter means those who joined WPC can no longer jump ship. That fact alone indicates that 2016 will go down in history as the year in which industry openly and irreversibly committed itself to helping solve one of the most pressing environmental issues of our time.
Bag the plastic bag?
2016 saw another push by plastic bag opponents towards alternative materials, often marketed as "more environmentally friendly" and branded as more fashionable, too. EU member states were called upon to implement measures that will result in a marked reduction in plastic bag usage. A number of countries picked up this gauntlet in 2016, including by means of self-imposed targets, levies and bans. Far from limited to the EU alone, the plastic bag ban movement appears to be sweeping the globe.
One goal, different approaches
From voluntary agreements to reduce plastic bag consumption in Austria, to the Dutch ban on complimentary plastic bags at check-out counters, the measures were plenty and varied. A number of German stores stopped offering free bags, while others introduced fees. Obstacles encountered in neighbouring France pushed back the implementation of a nation-wide ban, while - across the Atlantic - California passed a state-wide ban on single-use plastic bags. Beyond the western world, Israel's Knesset voted in favour of a plastic bag charge, and Morocco imposed a ban on the manufacture, import, export, sale and use of plastic bags.
The levy imposed in the UK had the desired effect (Photo: Veolia)
The Brexit shocker
The world woke up on 23 June to the feared yet unexpected reality that Britons had voted in favour of leaving the EU. Prime minister Theresa May plans to commence the exit proceedings before March 2017, and once the ball gets rolling, negotiations about the terms need to be wrapped up within two years. This means the final Brexit could take place in early 2019.
All signs currently point to a "hard Brexit", which means the UK would lose its free access to the EU market - a horror scenario for the country's GBP 23.5 bn plastics industry.
The British Plastics Federation has already called for free trade with the European mainland even post-Brexit. That is not surprising considering that the EU accounted for two-thirds, or GBP 4.9 bn, of total UK plastics industry exports in 2015. Apart from that, the segment is highly dependent on raw material imports. In this reality, the introduction of tariffs would be disastrous.
As if that were not enough, UK plastics companies also face staffing problems and restrictions imposed on the free access of EU nationals will only worsen the segment's existing skills shortage. About 18,000 of the 170,000 workers employed across the UK's 5,200 plastics companies come from EU member states.
Feedstocks: Let the games begin
The excitement that had prevailed in 2015 largely subsided, even if many players nervously awaited developments in spring, worried that the market would once again be undersupplied and hit by a wave of price explosions. Their fears proved unfounded - there was no repeat of spring 2015.
With each passing month, processors' confidence grew, and producers increasingly found themselves having to defend the high margins they had been enjoying since the spring of the preceding year. All their efforts proved in vain, as a creeping erosion started to set in by mid-2016 at the latest. In the case of PE, margins have now returned to the level they held in February 2015.
A tanker carrying ethane making its way to Europe (Photo: Ineos)
Much to the chagrin of European producers, the long-expected wave of LLD/HDPE imports from recently started global production lines finally arrived, pulling notations down with it. In November LDPE prices actually exceeded those of the higher-grade LLDPE (C6) material from European production lines - turning the reality that had prevailed for some time on its head.
PP on the other hand took the opposite route as the second half of the year got underway. That being said, notations started rising from the very low base they had been designated to by the earlier decline in propylene. Only on a few rare occasions has the gap between C3 and ethylene been as pronounced as it was in 2016.
All the while the European polyethylene market is busy bracing itself for the imminent arrival of material unleashed by the US shale gas revolution. Companies across the world are building new carrier vessels with which they intend to transport cheap US ethane gas to their own sites, where they will process it into PE. At the same time, the large petrochemical clusters surrounding Houston and New Orleans are creating the necessary logistical infrastructure to allow local producers to ship the polymer manufactured at their mammoth plants to customers around the world.
Engineering thermoplastics also got caught up in the ongoing global production capacity shifts. The massive rise in caprolactam and PA 6 capacities in China, whose origins already date back several years, in 2016 helped pull down European notations for these materials. Local producers have found themselves entering previously unknown territory, as the listings certifying the quality of their product and which have for years worked to their advantage, are becoming increasingly meaningless. Headed into 2017, they have already announced their intention to lift prices. Whether they will succeed in doing so is another matter entirely.
TDI: Isocyanate takes to new heights
The price of toluene diisocyanate (TDI) reached staggering heights in 2016. In the few months between March and November, notations went on what appeared to be an unstoppable increase, rising from EUR 1,800/t to more than EUR 2,600/t. Some months even saw hikes of EUR 200/t.
Despite the uptrend, by mid-2016 there was no indication of a real bottleneck in availability. Although processors desperately tried to nail down material, PU manufacturers were able to meet all their orders. That being said, the general upheaval gave rise to wild price fluctuations. It was only later in the year that the situation was worsened by actual problems at production plants, including Covestro's TDI and MDI facilities.
The market was eagerly awaiting the volumes from BASF's new plant for the PU feedstock, which players hoped would help bring prices down somewhat. However, after experiencing a number of start-up problems, the line at group headquarters in Germany recently had to be switched off again following a technical glitch. When it will be capable of producing commercial volumes again remains unclear. However, it is quite unlikely for that to be the case in 2016 - after all, once the repair works are completed, the 300,000 t/y plant will first have to be cleared for operations by the relevant authorities.
USA: Changing Times
The US is undergoing a sweeping transformation; as a result of the shale gas revolution the prevailing status quo in the petrochemical segment has changed irreversibly. Mammoth PE capacities are coming on stream in the country, heralding dark times ahead for European production lines.
As if these economic shifts were not enough, in autumn a political earthquake rocked the world. The election of Donald Trump as 45th president has left Europe aghast and insecure - not least as a result of the protectionist attitude displayed by the future commander in chief.
It remains unclear in how far the Trump presidency will change the industry. However, his election campaign espoused a clearly protectionist economic agenda, summed up by the slogan "America First." Trump has already called on US companies to reshore their manufacturing activities and is demanding higher tariffs for goods originating from countries like China. "American cars for American roads, American airplanes to connect our cities, and American vessels on the ocean" - that is the motto of the real estate magnate, and it effectively sounds the death knell for free trade agreements like TPP and TTIP. Experts are hoping that his inauguration speech in January will afford a clearer picture of what his presidency will entail.
A number of massive C2 projects are due to start up across North American in 2017. By the end of next year, ExxonMobil, Dow, ChevronPhillips, Formosa Plastics and Sasol Ineos are planning to bring on stream an additional 4.5m t/y in PE capacities on the US south coast, mainly Texas. By 2020, another 4.5m t/y are set to follow, which would lift total polyethylene capacity in the US to 25m t/y, while North America as a whole would be home to more than 31m t/y.
These capacities point to a rise in the growth rate of the US plastics industry, which currently posts annual sales of about USD 300 bn. Polymer producers, whose revenues stood at USD 72 bn in 2015, stand to benefit, as do companies specialising in plastics exports, which totalled USD 32.4 bn last year.
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Iran: a return to the world stage
Following the lifting of the sanctions imposed on it, Iran's return to the world's economic stage caused quite a stir this year. German machinery manufacturers especially are eager to activate their previously hidden connections with the country, whose more than 77m inhabitants make it a big and well-established market for industry as a whole. Their expectations for great things ahead may just come true - at least that was the impression gained at the Iranplast fair held in spring. European processors are hoping that Iranian PE will make a return in their home turf - a turn of events that would allow them to avoid bottlenecks of the kind encountered in 2015.
But all that glitters is not gold. Although Iranian news agencies report of new investment and projects almost on a weekly basis, most of these turn out to be mere declarations of intent. That being said, the country has resumed oil deliveries. However, a number of obstacles continue to haunt the petrochemical and other industry sectors. US banks have adopted a very cautious approach vis-à-vis Iran - and that is mildly speaking. Apart from that, the country's petrochemical plants tend to be quite old and it will take several years for them to be brought up to today's standards. What's more, there were a number of explosions and large-scale fires at Iranian petrochemical facilities this year, the causes of which remain unclear. What is certain, however, is that Iran will remain a hot topic in 2017, too.
It was raining the day Iranplast opened its gates (Photos: PIE)
The opening ceremony of Iranplast
The new projects and expansions planned in the country are centred on the west coast
The official welcome for international visitors
Containers of all shapes and sizes were readily displayed
The one issue that dominated the automotive segment in 2016 was the quarrel between Volkswagen and its upholstery supplier Prevent. Other matters like tolls and electromobility paled in comparison to the mudslinging between the two. Aside from breaking a previous taboo, the quarrel pegged David against Goliath - and the outcome also mirrored the biblical tale.
The conflict will shape the automotive industry for some time to come. In the past, the number of very few incidences of similar constellation had resulted in "irreparable damage to the relationship", often followed by bankruptcy. Some suppliers expect Prevent to go down this path, too. "This company will not get any more orders from any vehicle manufacturers," several insiders said.
On the other hand - if VW deliberately initiated the quarrel to hide its poorer than expected sales performance, that would cause severe damage to the trust placed in the German automotive producer.
The current system - summed up by VW's chief buyer Ignacio Lopez in the 1990s - dictates that the car manufacturer determines what, how, where, when and at what price a component is made. Applying a one-shoe-fits-all method, suppliers generally have to save around 2% a year. Until the Prevent incident, no OEM dared to challenge this unwritten rule, afraid of losing orders. That being said, the prevailing market reality prevents suppliers from banding together against their overpowering customers.
Recycling: A rising star undergoes a transformation
As 2016 got underway, demand for recyclate was still quite respectable, even amid the ongoing decline in the oil price. Suppliers of higher-grade materials in particular testified to strong order activity. As the year wore on, however, the secondary market came under rising pressure - not only as a result of low virgin prices but also due to the rising number of calls for higher recovery rates. As 2016 draws to a close, the secondary feedstock market has emerged as one of the key future raw material sources in Europe, virgin material producers included. Nothing illustrated this better than Borealis' acquisition of recycler mtm plastics.
In June Plastics Recyclers Europe (PRE) presented its strategy paper "Plastics Recyclers Europe: 20 years later and the way forward - Making more from plastics waste." In it, association president Ton Emans relativises the "quantum leap" witnessed in Europe over the course of the past 20 years. "With only 26.3% recycling rates, and landfill and incineration still having much higher share, we cannot rest on our laurels," he said.
The low virgin material price is one of the obstacles to higher recycling rates, PRE says, pointing out that while a decline in waste exports to China has cushioned the effect somewhat, it is still necessary to install better and more efficient sorting technologies for plastics waste. Apart from that, the secondary market needs to be supported and expanded as a new future feedstock source.
Although large differences remain in terms of the recycling practices adopted by EU member states, southern Europe continues to make great strides. In a study released in autumn 2016, Spain's Cicloplast asserts that the country's household plastics recycling rates rise by 8.3% year-on-year in 2015, reaching 445,000 t. In France, too, 2016 saw the initiation of new projects to increase the amount of recyclate used as a feedstock for plastics processing. With that in mind, the country's "ORPlast" (Objectif Recyclage Plastiques) project started offering grants of up to EUR 200,000 for processors willing to adjust their production.
The hard road to a circular economy
The "Circular Economy" package presented by the European Commission in late 2015 remained of central importance to the European plastics industry this year, too. There is widespread consensus that the shift from a linear to a circular economy offers both environmental and economic opportunities. Despite this, the industry has so far taken only baby steps in this respect. An important milestone was achieved in September when the leading European plastics associations published a common statement on the matter, the central tenet of which was "Zero plastics to landfill 2025."
A key news item in 2016 was the decision by three key industry associations - PlasticsEurope, EuPC and Plastics Recyclers Europe (PRE) - to launch a common strategy paper containing recommendations for the creation of a truly European circular economy for plastics. At the same time, the three associations in October set up the "Polyolefin Circular Economy Platform," which aims to promote recycling activities in Europe. The platform is supposed to help plastics industry players across the entire value chain meet the EU's goal to recycle 55% of all plastics packaging by 2025.
In a collaborative project with Henkel, Austrian packaging producer Alpla took a significant step towards the circular economy goals when it launched a new detergent bottle using 15% recycled HDPE. By October, the pilot project had produced about 60,000 bottles at Henkel's German facility. Despite the success, Alpla CCO Nicolas Lerner points out that a number of obstacles remain before a truly circular economy can be established. "The latest data shows that Europe still has a long way to go before meeting its ambitious goals. The pressure to do so will rise in the years to come," he said.
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Tragedy strikes at BASF: "We live, suffer, and grieve with each other"
17 October 2016 was a black day in the history of German chemicals group BASF. The explosion that occurred at group headquarters that day ended up claiming the lives of four people, with many more injured. "I am deeply sorrow-stricken", chief executive Kurt Bock said, adding that, "All of BASF is grieving."
The North Harbour at BASF headquarters in Ludwigshafen has been a key reloading point for combustible liquids like naphtha and methanol since 1976. The port helps BASF meet its feedstock needs: About 50 different products are unloaded here and transported by pipeline into the adjacent storage tanks. (Photo: BASF)
