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USA Film and Sheet market to recover in 2009 |
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SStretch and shrink film demand in the US is projected to increase 5.3% pa to US$4.1 bln in 2009, requiring 3.1 bln lbs of resin. Price increases will be constrained by moderating raw material prices, which will recede from 2004 and 2005 levels when plastic and other material prices spiked sharply. Film gains will be propelled by healthy expansion in the manufacturing sector and growing requirements for product packaging and the bundling and protection of goods during warehousing and distribution, as per Freedonia. Shrink film demand is predicted to grow 5.6% yearly through 2009, stimulated by the continued popularity of bulk purchasing and shrink film's rising use in the unitizing of multipacks for mass retailers. Shrink film provides a better seal and moisture barrier than stretch film, and is frequently used in tandem with corrugated trays as a case overwrap. Further shrink film advances will be constrained by the advantages offered by less energy- and equipment-intensive stretch films.
Demand for stretch film is projected to rise nearly 5% pa to US$2.3 bln in 2009. Material improvements in terms of strength and stretch percentages will stimulate gains as greater stretchability lowers costs by enabling pallets and other products to be wrapped with less film. Stretch hoods, which are elastic film tubes used to wrap stacked pallets, will exhibit the fastest growth of all products due to their significantly higher throughput compared to other pallet unitization methods. Stretch hoods also have energy and machinery cost advantages over shrink hoods.
Low density polyethylene (LDPE) film demand will account for 77% of all stretch and shrink film used in 2009. Linear low density polyethylene (LLDPE) will remain the dominant stretch film and exhibit the best overall opportunities due to the film's greater impact strength, elongation properties, and down gauging potential. Conventional LDPE remains dominant in shrink film due to its higher clarity, good drawdown characteristics and processing ease. Demand for polyvinyl chloride (PVC) stretch and shrink film is expected to grow 3.3% pa through 2009. The best opportunities are anticipated for PVC shrink film in areas such as labels and sleeves for beverages and foods. Other resins used in stretch and shrink films include polypropylene, high density polyethylene and polyethylene terephthalate.
| US STRETCH & SHRINK FILM DEMAND (million dollars) |
| % Annual Growth |
| Item |
1999 |
2004 |
2009 |
04/99 |
09/04 |
| Shrink & Stretch Film Demand |
2103 |
3205 |
4140 |
8.8 |
5.3 |
| Stretch |
1200 |
1780 |
2265 |
8.2 |
4.9 |
| Shrink |
903 |
1425 |
1875 |
9.6 |
5.6 |
The US economy continues to be trapped in the worst downturn since the Great Depression. However, recent economic indicators suggest that demand for many manufacturing products has started to stabilize in the first quarter of this year, meaning that business levels will stagnate at the current low levels for the next few months. Now that the economic trends have started to establish firm bottoms, expectations about the future will become more optimistic, and both businesses and consumers will respond with increased buying activity, as per Bill Wood. The severity of the downturn during H2-08 was the most pronounced. By year end, the Film Business Index had posted an annual decline of 12% and the Sheet Business Index was down 8%. In 2009, production of plastics film and sheet will grow moderately, followed by more robust growth in 2010.
As was the case in many manufacturing segments, declines in film and sheet at the end of last year overstated the actual decline in the underlying supply/demand fundamentals that would normally describe these markets. Recessions are self-fulfilling prophecies in which the collective perception of economic conditions becomes far more powerful than reality. So once a bottom is finally established, there will likely be a short burst of demand for most types of film and sheet as expectations are brought back into line with actual activity levels. This will likely be the scenario during H2-09. After that, increases in demand will be steady but gradual for a few quarters as employment levels ramp up and painful memories of the past recession begin to fade. This represents the start of the period in an economic recovery when the pending expansion becomes the self-fulfilling prophecy. This will not occur until 2010.
Simultaneously, interest rates are at a very accommodating level and benefits are anticipated of an enormous stimulus package. History shows that the trend for changes in film demand turns very early in the business cycle. Most film is used in packaging and other low-cost, non-durable products. Demand for these products is less volatile than those in the durable goods sector. Film and sheet manufacturers who want to anticipate the start of the next recovery phase must closely monitor the changes in the market�s momentum. A recovery naturally follows a bottoming-out, but because the actual economic activity levels are still quite low by historical standards, managers who ignore the trend of the graph will wait too long before they acknowledge that the recovery has started.
The market for polypropylene films performed much better than other film segments in 2008, and this trend will continue for the foreseeable future. Output of oriented PP film fell by only 3% last year, much less than the average for the film sector. For makers of polyethylene film, demand for food-packaging films held up much better than did non-food packaging and non-packaging products. All of the PP and PE film sectors will enjoy lower average materials prices in 2009 and 2010 than they did in 2008.
Plastics sheet had grown faster than most other plastics industry segments before 2008, and last year the sheet data declined at a slower rate than the overall average. This was mostly due to the performance of polypropylene sheet. In 2008, PP sheet output contracted by 5% while PVC and PE sheet were off by more than 10% |
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