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Advisory Board of K 2022 releases statement: Part 1 - Market and Economy

For 70 years now the K trade fair in Düsseldorf has mirrored the unique global triumph of the era-defining material that is plastic. Like under a
focal lens, the latest technological developments and the most economical solutions for the processing and application of polymer materials can be found here every three years. Business deals are initiated in Düsseldorf and global industry trends defined here, too. All parties involved intensely discuss the topics that move the industry. This sets decisive impulses for the future.

The 22nd edition of “K” in 2022 will again present the latest material developments, machinery, processing and moulding technologies as well as the versatile applications for plastics and rubber in comprehensive breadth and depth at the as always fully booked Düsseldorf Exhibition Centre. This will provide experts with the best possible orientation. Digitalisation will play a leading role – as it already has recently. The changes in the key buyer “automotive” market will also continue acting as technology drivers here. The questions of “Circular Economy” penetrate all steps of the value chain. K will once again clearly influence and impact the roadmap and “guard rails” of future development.

Diversity of applications forms the basis for success

The decades-long inexorable global rise of plastics and rubber to become the leading class of materials of our time is based on cheaply accessible raw materials – essentially by-products of refineries – with an incomparably versatile range of applications for the materials. And so, after average annual growth of over 8 percent since 1950, polymer materials are indispensable and omnipresent in almost all products of the world we live in today.

Packaging for food and fast-moving consumer goods but also the diverse containers for storage and transport are constantly growing in number. Depending on the region and its development status they account for up to half the input materials. Without plastic packaging ensuring supplies for almost eight billion people would be logistically impossible. For the expansion of infrastructure in both construction and civil engineering plastics are required for water, power and gas supply, in insulation, window profiles and lots more. A quarter to one third of the materials produced are used in these sectors.

Although mobility – from automobiles and heavy-duty transport to rolling stock and aviation – accounts for a markedly lower volume of plastics and rubber consumed, ultimately about 10%, this field still proves a crucial technology driver due to its high requirements. This also applies to the very demanding medical applications in both devices and appliances and in direct applications on/in the human body. Furthermore, many fast-moving consumer goods such as household appliances, furniture, toys or sports and leisure items of all kinds can only be realised by means of polymer materials.

This means that the polymer value chain across the board has remained relatively stable even when individual application markets experience times of crisis. In 2018 and 2019, for example, the automotive industry showed some insecurity, especially in connection with the strong and rising call for e-mobility and, hence, the dispensing with combustion engines. This led to temporary declines in the corresponding segments of the plastic and rubber industry. At the same time, other segments such as packaging, for instance, defied this trend due to the application benefits, on a global scale in any case but also in Europe despite all growing criticism by environmentalists.

One of the most relevant sectors of business in Europe

In 2020 the plastics industry (production and processing) in the EU27 generated sales of over EUR 328 billion with 1.47 million employees in almost 51,700 mostly small and medium-sized enterprises. This figure was established by the producers’ association Plastics Europe according to Eurostat data. The value added makes it the seventh biggest line of business in Europe, on a par with the chemical and pharmaceutical industries. The bottom line is that this sector contributed EUR 15.8 million to the EU’s trade balance surplus.

According to Plastics Europe data, demand from the packaging sector in Europe accounted for the highest share in plastics materials at 40.5%. With a 20.4% share the construction industry continued to rank second and the automotive sector third at 8.8%; these were followed by electrical and electronic industries at 6.2%, consumer goods, household appliances and sports goods at 4.3% and agriculture at 3.2%. Consumption from all other users such as the furniture sector, industry, medicine and household appliance manufacturers totalled 16.7%.

In regional terms about two thirds of demand for plastics in Europe continues to be accounted for by Germany (23%), Italy (14%), France (9%) as well as Spain, the UK and Poland (7% each). The last third is spread among more than 20 other countries.

Covid: global declines in production and machine production

The shockwave of the Covid pandemic hit almost all walks of life in 2020. The diverse safety measures, and especially the prolonged lockdowns in many states and regions, also had an impact on large areas of the plastics industry. Many important applications collapsed across the board. So it comes as no surprise that 2020 saw declines in the consumption and production of plastics and rubber as well as in the associated machinery production for the first time again since the great global economic crisis in 2008/2009.

The producers’ association Plastics Europe puts global plastics output (excluding fibres) at 367 million tons for 2020 compared to 368 million tons in the previous year and 359 million tons in 2018. After steady growth over that past 20 years the production focus has clearly shifted to Asia now. Today, over 50% of plastics are produced there already. Last year alone, the by far leading country China increased its share to 32% corresponding to over 110 million tons. The European market share, in contrast to this, again decreased slightly from 17.2% in 2018 and 15.7% in 2019 to some 15% or slightly more than 55 million tons (2019: 57.9 million tons, 2018: 61.8 million tons). In 2008 Europe still held a 25% share in global production. The NAFTA region, on the contrary, asserted its position with a slight increase to 18.8% translating into 69 million tons.

According to data provided by the International Rubber Study Group (IRSG), the rubber output was already down by 1.1% to 28.8 million tons in 2019. Here, synthetic rubber accounted for 15.1 million tons and natural rubber for 13.7 million tons. 2020 then saw the output drop by 5.7% to 27 million tons in total. Especially the lockdowns in the three most important supply countries for natural rubber – Thailand, Indonesia and Malaysia – are responsible for this, say the IRSG. Demand declined concurrently by 6.2%.

The cuts caused by the Covid crisis are also clearly noticeable in the figures for the plastics and rubber machinery sector. In 2018 global production value had reached the so far all-time high of EUR 36.8 billion, according to a survey done by VDMA. 2019 already saw this figure drop slightly to EUR 36 billion, above all as a result of the insecurity in the automotive industry. During the first phase of the Covid pandemic with lockdowns in 2020 global production value plunged by 4.5% to EUR 34.3 billion.

In 2021, on the other hand, production picked up again almost brilliantly, by more than 11%. Despite further lockdowns and the omnipresent supply chain problems, production reached the new record value of 38.6 billion euros.

At the forefront of this development are the Chinese manufacturers. After years of sustained growth, they expanded their share of global production to 35% in 2021 (2020: 34.4%). This is almost 5 percentage points more than in 2017. Despite their technology leadership, the share of German machinery manufacturers fell below the 20% mark for the first time in a long time, at 19.6%. Nevertheless, after a sharp decline in 2020, significant increases were also recorded here again.

The global market for plastics machinery - the international trade business across the borders of the manufacturing countries - also showed a strong comeback in the following year after a significant slump in 2020. At 23.7 billion euros, it almost reached the peak value from 2017. What is remarkable here is that the German mechanical engineering sector now had to relinquish its long-standing top position to Chinese manufacturers. However, this was to be expected after their steady rise over the last ten years. With a 23.9% share, China is now the world's top exporter for the first time. Germany is followed by Japan with 9.1%, Italy with 8.6% and the USA with 4.5%. Europe (EU27+UK) continues to show its traditionally disproportionate regional strength
with a total of 46.6% share of world exports and 40% production share.

Supply chain issues thwart European processing

Processing is at the core of the plastics and rubber markets. It is the industrial-mechanical conversion of materials into products that generates the sales that prop up the complete supply chain. In line with its wide-ranging applications this sector of industry has a broad-based and small-scale structure and exhibits the typical SME character of the processing trade worldwide. Customer proximity is one of the crucial success factors here. For simple products this can be understood in a regional sense by all means. For more demanding tasks, however, the most efficient technical solution for the customer is preferred – relatively independent of the distance.

During the Covid crisis companies whose products are closer to people’s daily needs naturally fared better. Partial segments such as producers of hygiene packaging and medical technology articles even experienced short-term boom effects. Most segments, however, took a “beating”. For many manufacturers of technical parts, especially in automotive supplies, the second and third quarter proved downright disastrous.

Leading processing industry in Germany also affected

According to the Confederation of the Plastics Processing Industry (GKV) German plastics processing, which is leading in Europe, posted a 5.6% decline in sales to EUR 61.5 billion at the end of the year. Unenviable front runners here were technical component manufacturers who suffered 12% losses. For plastics consumer goods the decline was slightly lower at 9%.

The processed volume fell less by 2.8% to 14.2 m tons. This can be attributed to the high-volume applications in packaging and construction which use simple and, hence, low-cost materials most of the time. Despite the varied crisis management tools deployed for safeguarding jobs, the number of employees was down by 4.1% to 322,000 people.

By contrast, the GKV reported quite a strong increase in turnover for the following year 2021. Figures rose by 12.6% to EUR 69.4 b. Sales, however, rose disproportionately slowly, by 5.6% to 15 m tons. This means a fair part of the increased turnover can be attributed to the very marked raw material price increases. In particular, technical components manufacturers remained under enormous pressure to produce results. After the outbreak during the first nine months of the year the situation then worsened further in the fourth quarter due to the next wave of the Covid pandemic. On top of this, the war in Ukraine at the beginning of 2022 has made the situation in the European and German plastics processing sectors even more insecure.

The impressions from other major markets in Europe, North America and large parts of Asia were scarcely better. However, encouraging signals did come from China already in mid-2020. In the fourth quarter some progress was finally also made in Europe and North America. With the increasing relaxation of pandemic measures plastic processing also picked up again.

But things turned out differently. In North America natural events such as storms and extraordinary cold and heat waves temporarily paralysed large regions. Additionally, global supply chains – most of them originating in Asia and reaching out to the other continents – collapsed because pivotal products such as semi-conductors were not available in sufficient numbers. To make matters worse, the logistics systems were severely challenged and, in parallel, many plastics production plants in Europe failed to restart after the Covid shutdowns. As a result, large parts of processing in Europe were faced with empty material warehouses and plastics prices skyrocketed to hitherto unseen levels. Since important buyer industries such as automotive manufacturing were forced to lower output because of the supply chain failures, sales were lost. The war in Ukraine has exacerbated these challenges yet again since February 2022.

In this at times dramatic crisis, however, the companies in the sector are proving to be extremely robust. The financial crisis in 2008/2009 and the raw material “drought” in 2015 have obviously caused many companies to install corresponding defence mechanisms that prove their worth. Equity capital ratios were improved, costs have “breathing space” and the state also provides supports at decisive points – like with labour costs (short-term work).

Major challenges are mastered

It is to be hoped that the Covid pandemic will finally come to an end in 2022. The global problems in raw material supply, supply chains and logistics will definitely be sorted out step by step – this is ensured by the laws of the market. Then the plastics world will again turn to its questions in Düsseldorf in autumn. Probably not quite with the global presence of the last events yet but definitely in a very focused way.

The circular economy was justifiably the central theme of the last edition of the trade fair in 2019. As a result of legal requirements and diverse efforts and initiatives, the recycling rate in Europe (former EU28 plus Switzerland and Norway) continued to climb steadily. In 2018, the most important recovery routes were energy recovery at 42% and mechanical recycling at 33%, while around 25% of plastic waste was landfilled. Ten years earlier (2008), 30% was still thermally recovered, 21% recycled and 49% landfilled. For packaging recovery (energy recovery and recycling), all European countries now achieve rates above 30%, 17 countries at least 70%, ten more than 98% and some even 100%. In 2018, more plastic packaging was recycled for materials (42.4%) than for energy (38.5%). Less than ever (19.1%) was still landfilled.

The topic is thus being worked on intensively, but the implementation of extensive reuse/reclamation is still in its proverbial infancy. K 2022 will show the progress made so far and at the same time set the necessary course for the coming years and decades. Many solutions have now been formulated and thought through, and decisions are due. What remains clear is this: Without plastics, a future for mankind in its current size and shape is simply inconceivable.

Source: Messe Duesseldorf