The serious over-capacity that has faced the bi-oriented nylon film (BOPA) industry in recent years appears to be nearly over, concludes a recent study from PCI Films Consulting.
Since 2004, the world BOPA film industry has doubled in size and rapidly outpaced demand growth. PCI‘s Managing Director, Simon King, states that, “The massive increase in capacity that occurred in the past has finally been absorbed into the market and our projections for demand growth over the next five years suggest that new capacity is required to satisfy world demand”.
Capacities for BOPA film production grew at high rates between 2004 and 2006, with China alone seeing the entry of 10 new producers into their domestic BOPA film industry. In addition, suppliers in other mature markets, such as North America expanded capacity to meet local and export needs, making the over-supply situation even more acute. This excess capacity intensified competition and caused world production utilisation rates to fall by 20%, putting pressure on prices and margins and expanding the market horizons of most suppliers as they sought business to fill their plants. The solution was to idle capacity, re-engineer some lines to produce other films and to run lines at reduced speeds. Some producers even exited the industry altogether.
The excess capacity has now largely been driven from the market, partly by the rationalisation of production and partly because of the growth in demand (at an average rate of 8% pa since 2004). Looking to the future, flexible packaging converters in all parts of the world, interviewed for this report, suggest that historic levels of demand growth are not going to slow significantly in the years leading up to 2014. As a result, in order for world requirements to be met, further capacity must be introduced. This is already being addressed by some industry players, with future capacity expansions being planned for 2010 and 2011. But, PCI are confident that the industry will need more capacity, as it is likely to struggle to meet future needs after 2012 with what it has already installed and currently has on order.