An eventful year with quite a bit of excitement for the plastics industry is nearing its end.
Structural problems in the PA 6.6 production chain caused major concerns within the industry. The very tight supply of – in some areas indispensable – PA 6.6, was a source of distress for several processors.
The industry also had to struggle with recycling issues after China decided to stop accepting the usual amount of plastics waste showing up on its doorstep. In the hectic hustle and bustle on the waste disposal market, the primary PET collateral damage went nearly unnoticed, hitting parties used to abundance "out of the blue."
The progression of the US president's "America first" maxim came as less of a surprise. While there is currently a break in the trade war, mainly for talks about disarmament, the punitive tariffs are far from repealed.
The themes of recycling and circular economy gained momentum in the last year. The public image of plastics is taking a hit and, regrettably, convincing solutions are hard to find. But this much is clear – the industry will not be able to escape the issue of sustainability.
The exceptionally hot European summer further raised public awareness about climate change. The Rhine river, which more typically comes with the risk of flooding, threatened to run dry and this has led to stronger consideration of the industry's dependence on a functioning transport infrastructure. Platitudes, however, will not help solve the growing logistics problems.
The mighty automotive industry seems to have trouble breaking free from the diesel debacle, for which it must accept its own share of the blame. A lack of humility combined with ignorant arrogance has been the fall of many an empire. Managers would do well to learn from the past.
Even pre-Socratic Greek philosopher Heraclitus knew that change is the only constant in life. Recent history has shown that flexibility is more important than ever, for which the digitalisation of our living environment is both the driving force and a requirement.
Several parties in the plastics sector have already made a move. After three years, the industry will once again meet up in 2019 at the "K" trade fair in Düsseldorf. It will be interesting to see what the Industry 4.0 and sustainability developments are.
Raw Materials
Even in the information age, without raw materials, we're a bit helpless. It's not possible to make something from nothing, and we do not live in the land of plenty. Resources sometimes become scarce, and then things get pricey. In 2018, it was particularly dramatic for polyamide 6.6, where the bottlenecks impacted the entire value chain.
Quite unexpectedly, PET supply gaps also occurred in the springtime. Market players were not prepared for this situation, which was likely unprecedented for most of them. The excitement was correspondingly high, since the handling was not practiced. But some things are predictable. The new, cheaper PE and PVC capacities in the US could be expected to lead to more deliveries to Europe. And sure enough, the first traces of this became visible.
After the momentum in the global polyamide market that began from PA 6 in previous years, it was dominated by PA 6.6 this year. The market was hard hit by the bottleneck on key feedstock adiponitrile (ADN). For years things had gone along well, with the margin-securing restrictive policy of the two US licensers for the sensitive ADN technologies. But then storms and icy winter temperatures shut down US plants. When they restarted, workers went on strike at Europe's sole ADN plant in Chalampé. And when they finally resumed work, the record-breaking weather in the summer brought shipping to a standstill on the Rhine river. The result was drastic shortages in the engineering polymer, with corresponding effects on prices and hectic avoidance attempts. Towards the end of 2018 it does not look as if a remedy is arriving any time soon.
Since the turn of the century, PET processors have always been able to count on the availability of sufficient quantities of their key material. This was attributable to the massive capacity increases in China, where the majority of fibre production has been relocated. The bottlenecks and volatility that have plagued polyolefins seemed like legends from a distant world. That is why this year, market players were rather surprised when China, in the course of the about-turn in its import policy on waste, suddenly needed all the polyester it was producing for itself. "What on earth is going on?" has been frequently asked in view of material shortages, force majeures and exploding prices. A new complexity flared up, and established world views began to falter. Towards the end of the year, the situation gradually eased. What remains is the realisation that PET, just like other polymer materials, is also subject to the laws of the market.
As expected, the first evidence of the new US production lines based on cheap shale gas raw materials appeared in the import statistics around the middle of the year. Especially PE deliveries to the EU increased considerably, also as a consequence of the trade dispute between the United States and the rest of the world – at present mainly with China. And with regard to PVC, underlying currents are swirling around in the Mediterranean region as well. One thing is certain: In the coming years, the balance with ethylene-based products will shift further – to the disadvantage of European production. Our raw materials industry will inevitably come under greater pressure.
It did not exactly come as a surprise. The US president's motto is "America first", and when it comes to world trade, this means punitive tariffs for opponents – be they supposed or real. This move is to encourage concessions for US products in order to secure US jobs. The situation with China has evidently escalated, with the petrochemical and plastics industry caught up in the fray. As a consequence of the reciprocate tariffs, trade flows, such as US exports of HDPE to China, are collapsing. Tonnages originally intended for export are filling up storage capacities in US harbours such as Houston.
Reacting to tariffs on aluminium and steel, Turkey has also raised the price on certain imports from the US, such as PVC, reducing trade flow here as well. The crude oil market is experiencing distortion and price spikes due to the resumed US sanctions against Iran. European car manufacturers are also a far cry from being able to breathe easy, since talk of punitive tariffs for this industry continues to crop up in Washington.
How Trump's Trade War Impacts 12 Bottom Lines (Quelle: CNBC)
China's restrictive import policy for plastics waste has caused a fair amount of trouble for European waste disposal and recycling markets, since it did not leave much time to find new takers. At first, some Southeast Asian countries stepped up – until they, too, followed China's example in putting a stop to waste imports.
Europe soon became aware of the dire limitations of its recycling capacities. In Germany, meanwhile, new players are positioning themselves in the waste management sector to get a piece of the action.
After China banned the import of certain waste at the start of 2018, several Asian countries have now followed suit in order to get a grip on the flood of plastics waste. Export to China and Hong Kong, Vietnam, Malaysia, India and Indonesia – previously important destinations – has dropped by 40% in the first half year compared to the first half year of 2017. This trend can be expected to continue, especially considering Malaysia and Thailand have made their temporary import bans permanent.
China's import ban has resulted in a considerable upswing in domestic recyclate demand. Up until summer, this left a noticeable mark on the European market. Film grades were particularly sought after, which is why LDPE notations were able to put a stop to a downwards trend that had lasted several months. The price of natural rLDPE film grades rose considerably between January and August, from EUR 40/t to EUR 960/t, according to PIE's figures.
Plastics was the headliner this year. Across Europe and around the world, the public, business and politics were buzzing with the topic at an unprecedented level. It seemed like every day there was negative news concerning waste, recycling and ocean litter. Industry and environmental groups are campaigning for their interests, from "Zero Waste" to eco-design to the recycled plastics market. The plastics industry's position? – "yes" to an EU circular economy, "no" to tax and product bans. Under pressure from the plastics strategy and the public, the industry is uniting.
The World Plastics Council – tackling plastic pollution (Source: PlasticsEurope)
The rise in marine pollution is causing global problems (Photo: European Parliament)
Following a campaign for voluntary pledges under the European Commission's plastics strategy in January, over 60 companies and industry associations made a commitment to plastics recycling. If implemented, 10m t of recycled plastics could be available by 2025, although demand is estimated at only about 5m t. Much remains to be done to improve the market for recyclates.
In Italy, an initiative to improve recyclate quality has been established, with tax incentives for using recycled plastics. France is eyeing a measure that would make packaging made of virgin materials more expensive. Recyclers across Europe are calling for minimum recycled content mandates for beverage bottles, targeting at least 35%. Most major brand owners and packaging manufacturers announced commitments this year, and by 2025 or 2030, some are aiming to produce bottles and containers made with up to 100% rPET.
The material is not the problem, but rather the handling of it. This is one of UNEP's conclusions in a report published alongside World Environment Day hosted by India, the theme for which was "Beat Plastic Pollution". Yet the world needs to rethink the issue, as marine litter has become a pressing problem for everyone. From Arctic waters to the Mediterranean Sea, there were record volumes of microplastics detected. Further research is needed on marine litter, and more investments should be made in waste management infrastructure, especially in Southeast Asia. The launch of Ocean Cleanup's first large-scale plastic purging project in the Pacific and hundreds of marine litter initiatives around the world are leading the way, but importantly, there has to be a stop to litter entering the oceans.
"Single-use" was named word of the year by Collins dictionary, and it's no wonder. Europe's governments brought the term into their dialogues and budgets. In France, the plastics industry is protesting against the planned ban on plastic tableware, Spain wants to ban disposables from 2020 and in the UK there is an avalanche of measures being considered to target plastics waste. At the EU level, the attempt to ban certain single-use plastic items rapidly gained momentum. Boosting this were studies on litter on beaches and in European waters. EuPC is concerned about the EU's hasty legislative actions and is calling for life cycle assessments and economic analysis. PlasticsEurope rejects the idea of a plastics tax and would like to see more dialogue.
A number of retail chains and tourism companies have also committed to banning plastic dishes, to-go cups or other disposable plastics from their premises. The replacements are not always suited to sustainability, though.
It was a summer that refused to come to an end. When, after Easter, the grim cold of the late winter gave way to a wave of subtropical air from the south, we more or less skipped spring. As early as April, a period of heat set in that continued until the end of October, lasting longer than since records began in 1881.
However, the numerous days of sunshine also had their downside: It hardly rained, in fact only half as much as usual (54%). Animals and plants suffered from the worst drought since 1911. The petrochemicals sector also bore the consequences of the long hot summer.
The drought resulted in the water level of many key traffic arteries falling – especially that of the Rhine. Due to the shallow water, many ships were unable to travel fully loaded. This drove up freight costs and led to serious logistics problems, so that several petrochemical production plants could no longer be adequately supplied with feedstocks.
Since the amount of feedstocks and raw materials that could be supplied by ship was insufficient, the output of several petrochemical plants was cut back or even halted completely. Vestolit, for example, announced an allocation system for PVC supplies from Marl, Celanese did the same for POM from Frankfurt-Höchst, and BASF also had to put customers on allocation for polystyrene and EPS. Soon afterwards, the supply of certain materials occasionally came to a complete standstill. On the long-suffering PA 6.6 market, there were delivery cancellations and hefty price hikes when producers like Solvay and Lanxess were unable to get hold of enough feedstocks. Before the end of October, Sabic announced force majeure for PE from its German site in Gelsenkirchen due to a lack of C2 from the BP refinery.
The hot summer days drove up the sales of cold drinks, which was naturally accompanied by a strong demand for PET bottles. However, this lively demand for PET coincided with reduced availability, since in Europe several plants for the PTA feedstock came to an unscheduled halt and imports from Asia were not very plentiful because of the increased demand from China. As a result, PET prices rose to their highest level for five years and remained there until the autumn.
The navigable channels of rivers were too shallow for many ships to travel fully loaded (Photo: Pixabay)
BP's refinery in Gelsenkirchen / Germany (Photo: BP)
Anyone looking for a topic that truly affects everyone will inevitably end up with digitalisation. No branch of industry and no sub-sector can ignore it nowadays. While digitalisation – or "Industry 4.0" – used to have the reputation of being a key subject of presentations given by corporate consultants, real applications are at last opening up that prove the potential of networking and cloud computing in combination with mobile terminal devices.
Machine and equipment manufacturers as well as software providers are also registering a higher proportion of turnover based on technology and services connected with digitalisation.
Digitalisation is extending existing business models or enabling new ones. (Photo: Panthermedia/pichetw)
Digitalisation is worthwhile – many of the attendees at the KI Group Summit were convinced. (Photo: PIE)
For some time now, profitable business models have been developing or supplementing existing products through digitalisation. For example, virtual assistants can guide customers through an order for a 3D-printed part, or a replenishment order for raw materials can be easily processed in an online shop. On another note, some machine manufacturers are integrating solutions for maintenance or quality assurance into their products, creating added value for the customers. In view of the speed and the large number of products and services that have been created or further developed this year, it is absolutely certain that 2019 will also have a great deal to offer in this respect.
Digitalisation has enormous potential: More flexible production and improved customer service can be achieved alongside a large number of other advantages. Yet it is also becoming evident that knowing the advantages does not necessarily eliminate the obstacles. Studies show, for example, that the high investment requirement and shortage of skilled staff are preventing companies from implementing a comprehensive digitalisation strategy. As a result, the proportion of companies with Industry 4.0 applications has risen by only 4% compared with the 45% in the previous year.
This year's KI Group Summit at the recent "Fakuma" trade fair dealt with the subject of digitalisation. With 150 participants, the event was very popular. It showed that digitalisation is on the advance in all company sectors and all branches of industry, but that there are no generally valid solutions. However, wherever suitable solutions do exist, it is possible to raise turnover. "The more digitalised you are, the higher the turnover" was the basic gist of a study from consultants Iskander Business Partner. However, only one percent of companies in the plastics segment use digital processes in production planning, said Martin Bastian, head of the German plastics institute SKZ. In summary, digitalisation is well worthwhile and has enormous potential that ought to be exploited.
The automotive sector and its suppliers have probably never been confronted with as many worries as they have this year. Apart from Brexit, bans on diesel vehicles in Germany, the new WLTP emissions test cycle, punitive tariffs and advancing electrification outside of Europe, the shortage of PA 6.6 is also threatening to interrupt production at French and Italian companies. European compounding capacities are only operating at half the usual speed. Furthermore, PA 6.6 prices have risen by around 20% since the end of 2017.
It was not only during the Fakuma plastics trade fair on Lake Constance that scepticism was rife. The production stoppages at many car manufacturers such as Volkswagen and Opel have also contributed to the unease. The first large plastics processors and component suppliers like Akwel, Grammer and Leoni have all scrapped their annual forecasts due to the marked slowdown in orders being called off – and the majority of small- and medium-sized companies are unlikely to be faring much better. In addition, the markets of North America and Asia are also weakening, and the majority of car component manufacturers do not expect the industry to pick up again until the beginning of 2019. Whether this is wishful thinking remains to be seen.
The European automotive industry witnessed a slump (Photo: Panthermedia)
PIE has done some self-reflecting research over the past 12 months, and ended up a little proud of the results. The editorial team will have written over 1,500 articles for you in 51 weeks. Of these, 734 were reports on companies, 263 were polymer price reports and 194 were market reviews – from the trade war between the US and China to the European Union's new plastics strategy and the record-low water levels of the Rhine river.
Accompanying the reporting were 378 graphs and countless photos. There were 12 interviews and 10 commentaries or editorials as well as 23 of our Plastic Fantastic articles that hopefully made you smile. The 263 price reports cover a total of 92 types of thermoplastics and thermosets, recyclates, reinforced plastics and PU. Along with Western European pricing, PIE reports on prices in Russia, North America and China.
We wish you all the best for the holiday season and in 2019!
