Material Price Hikes Stymie UK Plastics Recovery

By Anthony Clark, Posted 15 July 2011 10:46 am GMT

A full two third of the UK’s plastics industry expects to see an increase in turnover but profits won’t necessarily follow due to price hikes for raw materials, that’s according to the latest BPF Business Conditions Survey. Materials availability is also an issue, says the federation.

June’s Business Conditions Survey was compiled from responses from 100 member firms. Respondents to the survey included companies supplying products to the construction, automotive, packaging, electrical and electronic, general mechanical goods and healthcare sectors.

The results of the survey indicate a continuing healthy outlook for industry with 66% of respondents predicting an increase in sales turnover in the next 12 months – up from the January 2011 Business Conditions survey where 64% forecast an increase in turnover.

BPF director-general, Peter Davis, said: “With two thirds of plastics companies predicting an increase in UK turnover that’s good news for UK Manufacturing generally. We are a key strategic industry supplying into all parts of the economy. However, the building and construction sector remains flat and raw material and energy costs increases means turnover doesn’t reflect volume sales.”

Another growth indicator is the expansion of the workforce highlighted by several member firms. Thirty-four percent of respondents signalled a commitment to increase staff in the next 12 months – an increase over January’s figure of 23% – with 13% of firms intending to increase their full time staff by 6-10 %.

The shortage of raw materials remains a major issue with 55% of companies highlighting difficulties in obtaining supplies of polymers such as PET, HDPE, LDPE, PC, acrylics, elastomers and additives including pigments such as titanium dioxide. As a result of the scarcity of these materials, all respondents indicating that they have experienced raw materials price increases.

“It’s little wonder most plastic companies expect no increase in profitability despite rising turnover, when they have all, without exception, had to grapple with huge raw materials price increases. As a result 25% of respondents do not forecast growth in turnover in the next 12 months,” said Davis.

According to the survey, 35% of respondents exporting to Western Europe predict an increase in turnover with 25% positive about export business in Eastern Europe.

Davis added: “Plastics companies were positive about growth in European markets, which is a large but mature market. However, further Eurozone turmoil may threaten exports. Companies must look for opportunities in China and India.”