Ceepackaging

Analysis

Demand for BOPP falling in Europe

In the first half of 2008, the rapid increase in world oil and PP resin prices stimulated BOPP film demand in the 781,000 tonne European market as buyers stocked ahead of expected price rises.  However, in the second half of the year, oil prices collapsed and buyers ran down film stocks, which dampened demand.  With the world economy entering a recession at the same time, BOPP film producers found the extra volume gained earlier in the year was more than matched by reduced demand in the second half.

Elsewhere, the US$15 billion world BOPP film industry experienced more positive buyer behaviour.  Growth in demand was seen in Eastern Europe, thanks to investment in retailing, food processing and new converting equipment.  In South East Asia, especially India, growth was stimulated by increased availability of film.  Surprisingly, even North America experienced a 3 per cent growth in demand in 2008, owing to the buoyant Mexican market, whereas demand in Central and South America remained relatively stable.

During the year, supply and demand in China’s 1.8 million tonne market became more balanced, encouraging suppliers to plan the next expansion phase of their industry.  One leading manufacturer of film extrusion equipment has already sold 10 new lines to China in 2009, equivalent to 375,000 tonnes of new capacity.

For buyers of BOPP film, PCI’s report also confirms that the Middle Eastern BOPP film industry is expected to emerge as a significant regional production centre in the future, doubling its size in the next three years.  One of the major factors driving this growth is the support given by regional governments to downstream industries, which are capable of adding value to oil assets.  PP resin production, film extrusion, flexible packaging and food processing are all industries targeted for expansion in the region.

In noting this trend, Simon King, report co-author comments, “Middle Eastern BOPP film producers are confident of strong regional demand growth from flexible packaging customers and increased opportunities to export volume based on their lower costs of production.  While not questioning the long term viability of these plants, our analysis suggests that in the short term they will have to be very strongly export-focused to provide high production efficiencies”.

Over the next five years PCI notes that there will be a strategic shift in the balance of power away from the traditional suppliers of BOPP film.  Treofan and ExxonMobil, previously the main market leaders, have had to make room for new players such as Dubai-based Taghleef Industries and others emerging in India and China.  In the last five years, Taghleef has invested in new low-cost equipment and also bought regionally based assets such as Radici Film, to emerge as one of the world’s largest BOPP film producers with a world-wide network of supply.

In the next five years, an additional 2.3 million tonnes of new BOPP film capacity is expected to be commissioned, expanding the industry by a third, which will result in the Top 20 World Producer rankings looking very different to that of today.