Driven by EU expansion and recovery in Germany, the European market for thermoplastics in 2006 had its strongest year since the turn of the century with volume demand growing well over 3% as per the latest report from industry consultants Applied Market Information Ltd.
Consumption of thermoplastics in Europe reached nearly 40 million tons. However not all materials or all countries benefited from this recovery in the market. Demand was relatively weak for HDPE and declining for general purpose polystyrene, but better than its been for some considerable time for PVC, LDPE and ABS. PP and PET performed slightly below expectations while there was very strong demand for linear grades of polyethylene.

Demand was largely driven by the recovery in the European economy. GDP growth in the euro area was almost double the 2005 rate and the highest since 2000. Germany was the principal engine behind this growth fueled by robust export growth and strong investment. Germany is also benefiting from the growth in Central Europe where local processing cannot always meet the rapidly developing demand for packaging and other goods and also lacks the skills for technical goods. Whilst production of many low cost or labour intensive items has been transferred to Central and East European countries, more highly skilled goods are still being sourced from the West and in particular Germany which has the advantage of its high level of technical knowledge and competency and its geographical proximity.

In contrast, both France and the UK saw overall market demand largely unchanged from the previous year. Both continue to see some loss of moulding capacity to Central and Eastern Europe and Asia which has led to declining demand for polymer particularly for electrical goods and appliances. Car production was also down substantially in France and the UK during 2006.

AMI�s regular plastics industry report has been extended to include the new EU countries of Romania and Bulgaria as well the Baltic States and Slovenia. Market demand in these countries has continued to boom thanks to accelerating economic growth driven by a strong export performance and ongoing investments in automotive production, consumer electronics and food packaging. At the same time domestic demand is rapidly increasing thanks to rising levels of employment and real wages. The process of integration into the EU has been another key driver for these economies as it has helped to open up trade and investment opportunities. FDI inflows now average 5% of GDP for the new EU countries as companies take advantage of the region�s relatively low costs, highly skilled labour force, political and economic stability and proximity to West European markets. Central and Eastern European polymer demand grew by nearly 9% in 2006 compared with just under 3% for Western Europe. However, with a total market demand of around 4.6 mln tons the region accounts for less than 12% of total European demand.


DISTRIBUTION OF THERMOPLASTIC DEMAND IN EUROPE 2006

The high and fluctuating cost of polymers continued to be an issue through 2006. Whilst prices for most materials did not move as rapidly as they had done during 2004 or the second half of 2005, most resin prices still edged upwards through the year thanks to the strong level of demand allied to some plant outages keeping supply of most polymers relatively tight. The much heralded Middle Eastern polyolefin material has yet to make much impact on the European market because of delays in new capacity coming on stream.

Commodity polymer market demand was largely driven by the strength of packaging markets, particularly flexible films for food packaging, injection moulded PP for thin wall packaging and HDPE for closures as well as the continuing growth in the PET bottle and sheet sector. Strong demand for building products particularly window frames helped to give the PVC market its best year in a decade with demand up over 3%. Growth in demand for insulation foam in building applications was also the main contributor to the exceptionally strong growth seen in EPS consumption in 2006. In contrast the general-purpose high impact polystyrene market showed no overall growth. It continues to suffer from substantially higher prices relative to PP and PET leading to increased substitution in packaging markets. The sector is also suffering because of the ongoing trend for the production of consumer electrical goods to be transferred to Asia.

END USE APPLICTIONS FOR THERMOPLASTICS IN EUROPE 2006

The engineering resin market saw growth of 5% driven by investments in automotive and consumer electronic products, particularly flat screen TVs, in Eastern and Central Europe. There was a notable recovery in ABS/SAN demand in 2006 with demand particularly strong for specialities which are less influenced by styrene costs compared with the commodity sector. ABS also have benefited from some substitution of polystyrene as the cost difference is not as great as it has been in the past.