There was no one particular topic that dominated the plastics industry in 2017. Instead, the industry mirrored an emerging global diversity.
Following the UK's decision to leave the European Union, the cohesion of the EU is now being put to the test by developments in Catalonia. At the same time, the world is not necessarily making a united impression, with the US president's approach of going it alone – quite the contrary.
The EU seems to be serious about the circular economy. This will be a challenge for the plastics industry, but also an opportunity to rediscover recycling as a raw materials source for Europe. It is also urgently needed to secure a life necessity – water.
The automotive world has been shaken to its core by the diesel scandals. Although it was clear at the "IAA" in the autumn that the switch to electric cars could become a reality much faster than previously thought.
Hurricane disasters in the US served as a reminder that the forces of nature are unpredictable. What was impressive though was how well prepared the US plastics-producing companies on the Gulf of Mexico were.
This also showed that the plastics world has nothing to fear. Plastics will continue to accompany the human race as the new central class of materials. We are just at the outset of the polymers age.
China coughs, Europe catches a fever
Including the capital, Beijing, 28 cities in northeastern China suffered from historic smog catastrophes in the winter. It was the proverbial straw that broke the camel's back. Many industrial plants, including petrochemical companies, were simply shut down to relieve the situation. As a result, products such as benzene and toluene became scarce in China and had to be imported.
Key intermediate products like caprolactam (PA), MDI/TDI (PU) and styrene experienced price explosions, initially in China and then in shockwaves around the world. After the PE crisis in 2015, Europe's plastics industry got its next confirmation of just how close-knit the world has become. Rarely experienced waves of price increases hit individual sections of the market, completely out of the blue.
The price explosion of caprolactam in China, because of the smog there, caused notations to rocket worldwide. It was not only the price of caprolactam that shot up, but also its polymer, polyamide 6. The effect couldn't have been predicted, and it took the European value chain completely by surprise.
Since late spring, nerves have been frazzled in the polyurethane industry and, over time, the tone of conversations also went beyond "harsh". Not only did rocketing prices for the isocyanates MDI and TDI cause problems for companies, but there were also MDI bottlenecks after Covestro and Hunstman announced force majeure. With impacts on rigid foam insulation panels and fitting foams, the construction sector in particular seemed to suffer. BASF also stirred things up in the industry with its contaminated TDI for flexible foams.
In spring, short supply drove the cost of styrene and the price of downstream plastics to unprecedented highs. Unlike other styrenics, however, the situation with EPS remained extremely tense throughout the rest of the year. The three main reasons for this were the shift to EPS due to the intermittent tightness of the PU/PIR market, some EPS producers' failure to stock up on styrene in the high-price phase and the booming construction industry. EPS producers registered significant margin growth in the second half of the year, especially with insulation materials.
Protecting the oceans – from the European Commission's point of view, this is one of the most important challenges for humanity. The "Our Ocean" conference in Malta had significant contributions in 2017, where 700 participants from 112 countries made over 400 commitments totalling EUR 6 bn. Of this, EUR 550m from the EU budget and EUR 150m from industry are dedicated to preventing marine plastic litter, supported by the World Plastics Council, PepsiCo, Unilever, 3M and P&G, among others. The EU target for 2020 is a 30% reduction of waste in the sea.
The plastics industry is, in many ways, increasingly pro-active in the fight against the poor image of plastics – and against marine litter. Recent research shows that ten major rivers, including eight in Asia, are responsible for up to 95% of plastic waste in the oceans. A pressing task for the European industry is to support the implementation of waste management systems in Asia and raise awareness about the topic in this part of the world.
Our Plastic, Our Problem – a marine litter info-operetta (Source: Seas At Risk)
Record visitor numbers for anniversary edition of "Fakuma"
The 25th "Fakuma" plastics trade fair at Lake Constance in Germany was a total success. The anniversary edition of this five-day industry meeting in Friedrichshafen attracted 48,375 visitors – 2,654 more than the last Fakuma held in 2015 – and set a new record. Not only was organiser P. E. Schall extremely satisfied, but the 1,889 exhibitors from 38 countries were delighted too.
In keeping with tradition, the spotlight at Fakuma was on injection moulding machines, thermoforming technology, extrusion systems, moulds, materials and components. Themes like Industry 4.0, additive manufacturing, lightweight construction and e-mobility also attracted a great deal of interest. The "KI Group Summit" and other talks showcased trends in the industry, while for the first time, KI's daily visitors information "K-PROFI täglich" reported on the event's highlights each day.
The 25th edition of "Fakuma" had more visitors than ever before (Source: Schall)
The trade fair in Friedrichshafen / Germany is becoming more and more international (Source: Schall)
Bettina Schall, managing director of event organiser P. E. Schall, at the trade fair opening (Source: Schall)
More than 200 visitors attended talks at the "KI Summit" (Source: PIE)
The K-PROFI team published daily visitors information for the first time (Source: PIE)
KI Group managing director Andreas Hertsch and team were very satisfied with the event's progress (Source: PIE)
European car-manufacturing is a bit confused – as were visitors to this year's "IAA" International Motor Show in Frankfurt / Germany. Where does the future lie? In twelve-cylinder giants, old-fashioned diesel cars, SUVs or hybrids and small battery-driven e-cars? The only thing that can be said with any certainty now is that the automotive sector is characterised by many different approaches, and that the industry giants' opinions on the key issues of tomorrow are continually changing.
Apart from that, traditional car makers are no longer just competing with each other for customers, but are up against competitors from completely different camps. It is not just the big IT companies that are making an impact here. For example, Dyson, the inventor of the bagless vacuum cleaner, is aiming to launch an e-car by 2020. This is also a consequence of the radical change to electrification, basically triggered by the diesel scandal.
Whereas, until a few years ago, car makers were able to negotiate the high hurdles into the core competence of engine construction, they are much lower with electric engines. German car manufacturers especially must face the question of why they are not pursuing battery design for e-mobility with the same amount of passion as lightweight construction, and why they are allowing Tesla and others to get ahead.
Will e-cars advance from the niche faster than expected? (Source: PIE)
Internal combustion engine cars are not dying out yet (Source: PIE)
Smart technologies may soon absorb a growing share of revenues in the automotive market (Source: PIE)
After tensions over Catalonia's latest independence thrust escalated in October, the troubled waters appeared to calm somewhat ahead of the 21 December parliamentary elections. The separatists have agreed not to pursue a unilateral declaration of independence but let Madrid and Brussels thrash out the question. It is surely too early to calculate the economic damage the region – or Spain as a whole – has suffered, but many economists have revised 2018 growth forecasts downward.
The political and legal quandary has created uncertainty among the region's petrochemical and plastics players. Due to the lack of clarity, new investment projects in Catalonia are being pushed into the future. Hundreds of firms have decided to move headquarters to another part of Spain, among them DuPont Ibrica. The region is home to more than three-quarters of the country's polymer production, more than half its monomer production as well as many plastics converters.
Catalonia is home to a large share of Spain's polymers production (Source: PIE)
Two "big deals" – as a certain US gentleman would say – have dominated the plastics industry this year. For one of these, Phase 1 was completed with only minor changes compared to the original plans, while the second was not so lucky and suffered major setbacks.
Dow and DuPont will now be tackling the planned splitting of the company into three separate divisions. No major surprises are to be expected now that the investors have had their way.
The Swiss group could emerge as the loser from the failed HuntsmanClariant merger following activist-investor intervention, as there are now offers for the company as well as for individual parts of it. As far as the helmsmen at White Tale Holdings are concerned, the abandoned merger is only the beginning, and by no means the end, of their ideas for Clariant. It is becoming clearer who has the say here on how things are going to be done.
While Dow CEO Andrew Liveris has a lot to smile about … (Source: Dow)
… Hariolf Kottmann (Clariant, left) and Peter Huntsman are left out in the cold (Source: Clariant)
As hurricane Harvey slammed into the Texas Gulf Coast at the end of August, partly submerging the Houston megalopolis, it was immediately clear that this would be one of the worst storms in several centuries. In the aftermath, the world looked on with astonishment, however, at how quickly the region's petrochemical industry bounced back.
In only a couple of weeks, half of the ethylene and propylene feedstock capacity was back on stream, with PE and PP plants operating and distribution channels wide open again. Shipping to Europe was still a hassle, as Harvey's evil twin Irma quickly moved in and whipped up the waters around Florida. In the wake of the two storms, European polymer prices shot up like geysers, and many a supplier had to declare force majeure. With a record ten storms, the 2017 Atlantic hurricane season will go down in US meteorological history as the worst natural disaster in US history – to date.
Satellite image of hurricane Harvey (Source: NASA)
Recycling is a growing opportunity as well as a challenge
A bigger theme than ever, the EU has been actively pushing the topic of recycling and the circular economy. The Commission presented its "Plastics Strategy" in spring and aims to finalise it soon.
Meanwhile, European processors are increasingly recognising recycling as a feedstock source. EuPC's survey on recycled plastics materials use in Europe's plastics converting industry showed the quality of recyclate remains the biggest barrier to higher usage. Brand owners are not supporting recyclate use enough and regulations need to be adapted to improve this.
Pressure from Asia is also creating new challenges, with China's import ban on plastics waste. This has caused a stir, since waste previously "disposed" of in Asia has become a European problem again. Sustainable solutions are now urgently needed.
It is no big surprise then that polyolefins giant LyondellBasell has recently entered the European plastics recycling market, just as its competitor Borealis did last year. Something is apparently emerging from their side.
Excerpt from China's notification to the WTO (Image: PIE)
Recycling-compatible product design and the circular economy were among the hot themes this year. The "Ecodesign" label includes not only manufacturing products that are recyclable, but also sustainability aspects along the entire value chain. Manufacturers pointed to unsolved problems in product safety and food contact.
The global drive for a change of thinking in the plastics sector is greater than ever. At the World Economic Forum, the "New Plastics Economy" showed that 30% of global plastic packaging must be redesigned in order to make products suitable for reuse. According to Ellen MacArthur, design changes that lead to improved recycling could bring in as much as USD 1.6 bn. At the Fakuma trade fair, PRE president Ton Emans called attention to the need for immediate implementation of recycling-friendly design. By contrast, the EU aims to have a circular economy by 2030 in Europe, including an extensive landfill ban.
Video message from the European Commissioner for Maritime Affairs and Fisheries, Karmenu Vella on the EU plastics strategy.
Single-use plastic bags: developing countries take the lead
Since 2005, more than 10 African countries have banned plastic carrier bags including Kenya, Morocco and Tunisia. Environmental problems and awareness are leading to similar measures in South America and Asia. Half of India's states have now passed partial or complete bans, for instance. Many EU member states have also introduced fees on lightweight plastic bags to reduce usage – and waste. The German plastics packaging industry is already seeing declining sales of retail plastic bags due to the measures. Could these restrictions eventually affect the global plastic films market?
Single-use bags unfortunately end up contributing to the ocean plastics waste problem too, and the two topics go hand-in-hand. With over 4,000 km of coastline, Chile declared it will implement a ban in coastal cities by next year – a step to curb its marine waste. At the latest summit in Hamburg, the G20 also published a marine litter action plan that includes its support to reduce single-use plastic bags. This global topic is spreading.
World Trade: Protectionism and Brexit rear their heads
Free trade advocates found the going rough in 2017. Waving his "America First" banner, US President Donald Trump threatened to build walls with bricks as well as import tariffs, though after the Twitter storm not much more than intentions were in place.
Back in the Old World, continental Europe tried to prevent its island neighbour from burning bridges across the channel as the UK scrambled for the Br(exit) with nothing but WTO swim fins to keep trade afloat. While others raged, the EU and Japan calmly agreed that tearing down trade barriers is better.
A cargo ship sets off on a long journey (Source: NOAA)
Theresa May addresses the European Commission (Source: EU)
Trump pursuing his "America first" strategy (Source: donaldjtrump.com)
Sending a powerful signal that two of the biggest economies reject protectionism, the EU and Japan in July 2017 agreed in principle to create the world's biggest free trade zone. While there will be a transition period for "sensitive" goods such as automotive and some E&E products, duties on chemicals and plastics, which the EU considers "very competitive," are foreseen to be scrapped immediately.
For the plastics-consuming automotive and E&E sectors, the trade deal won't have that big of an impact. As the duties here are already minimal, there is no reason to believe prices will come down much. For the end markets, however, the picture looks entirely different, as competition between the two countries here is very intense.
For much of 2017, negotiations between the EU and the UK about the terms for the latter quitting the union were mired in the mud. A hard or a soft Brexit? Would the 46-year ties be severed on the scheduled departure date of 29 March 2019 with a deal on the single market, customs union and the status of EU citizens working in the county? Or would there be no agreement at all, true to Prime Minister Theresa May's premise that "no deal is better than a bad deal"? At year's end, many thought they heard the clock ticking louder.
For companies on both sides of the Channel, the political uncertainty was palpable. US chemical and plastics producer Huntsman, for one, threatened to relocate planned projects to China or the US.
Donald Trump's oft-repeated mantra is to "Make America Great Again", at any cost. However, his calls for ending talks on multilateral, cross-continent trade or climate agreements such as TPP, TTIP or the Paris Accord, and for renegotiating the NAFTA pact, did more to make America grate on the world's nerves again, without visible progress in protecting jobs. While in May cabinet ministers trying to smooth ruffled European feathers suggested their leader might have a rethink on the transatlantic trade agreement, in December the silence from Washington was still audible.
The current White House occupant has an axe to grind with countries whose industry he presumes to have a competitive edge on US players, from German car manufacturers to Chinese steel producers. Though most of the trade hurdles Trump has thrown up to date have hit the Chinese metals industry, on his recent trip to the People's Republic this didn't seem to be a topic.
Over the past year, the PIE editorial team has researched and written around 1,900 articles comprising more than 4 million characters for you. This includes 950 reports on companies and 217 market overviews, as well as 90 industry and association news items from Europe and around the world, for Europe's plastics companies. These have ranged from polymer prices and customs duties, to completed and failed M&As, as well as new products and applications, right through to Brexit and special snapshots from Brussels.
Added to this come 329 graphs and countless photos. "Plastic Fantastic" appeared on no fewer than 27 occasions and hopefully brought a smile to your face from time to time, and there were also interviews and op-eds. We published 325 price reports that covered 91 thermoplastic and thermoset types, recyclates, reinforcing materials and PU – from Western Europe, Russia, North America and China.
We even have more on the cards for the year to come. Until this time next year, when we take a look back, we would like to wish you a Happy Christmas and all the best for the months ahead.
