Good news for converters and brand owners as BOPET supply crisis eases
A leap in supply from the Indian sector combined with a softening in demand as industry players rundown stocks built up at the end of last year have seen prices fall dramatically compared to peaks in early 2010, a PCI source told FoodProductionDaily.com.
“The recent ruling by the India Government to ban BOPET laminate packaging for chewing tobacco means an extra 70,000-80,000 tonnes has also suddenly been made available on the world market,” said the expert. “This means that supply is now outstripping demand – where as last year is was definitely the other way around.”
An Indian court is due to hear an appeal to lift the ban on 15 July. The analyst said he did not expect the PE industry in India to have the clout to succeed but the situation could change again dramatically if it did.
Prices for BOPET films, whichreached between €3.35 and €3.80/kg in February 2010, had dropped to €2.60 to €2.90/kg by June 2011, said the organisation.
European duties have been lifted on Indian exports, making them more competitive – with some producers reporting that material could fall to €1.80 - €1.90 / kg for container loads for July delivery.
Substantial new capacity from Indian and Chinese producers should also help avoid the extreme supply problems and price hikes experienced in the last 18 months.
These are some of the conclusions contained in the report - World BOPET Film Market Trends Statistical Update 2011 – by PCI Films Consulting.
2010 supply crisis
The crisis that came to a head last year was triggered as an upswing in BOPET demand was not met by the same jump in supply – particularly into Europe. The situation was exacerbated when major European producers moved capacity out of thin film production into thicker substrates for industrial uses such as photovoltaics.
A further tightening in the market occurred as converters tried to secure larger volumes in three-month orders or buy on a monthly basis. Supply shortages combined with market sentiment saw producers increase prices.
Flexible packaging growth
Flexible packaging remains the key growth driver for the BOPET film industry, accounting for 54 per cent of the total. PCI forecasts continuing growth of around 8.5 per cent per annum, though there will continue to be substantial regional variations in growth rate.
Capacity growth in Western Europe by end of 2014 is expected to be 100kt - with most targeted at European flexible packaging markets.
In Eastern Europe capacity is forecast to rise by 25kt by end of 2014. Most will be targeted at the East European flexible packaging markets, although some may be exported to Northern Western Europe.
Total capacity growth in Middle East by end of 2014 is predicted at 150kt – with 100kt of this thin films for packaging and industrial applications. Some of this will be targeted at European flexible packaging markets, some at other markets in the Middle East and African region, also North America, Asia and South America, said PCI.
Against this, demand growth is predicted to increase by 120,000 tonnes, said the PCI expert.
“If I were a buyer of PE films, I would be feeling more comfortable about supply likely to be available over the next two and a half years compared to 12 months ago,” he added.
However, he cautioned that the price of PE was linked to oil and that the material was in high demand despite the recent volatilities in supply and price.
“The fact is that there is nothing else out there – including bioplastics – that will do what a PE film will do. It is still very attractive and has important properties that are not matched by other products,” said the PCI source.
