British Plastics Federation warns that 40%-80% increase in polymer prices since 2009 are hurting plastic processors and will continue to push up finished product prices

Philip Goldsmith

LONDON , February 18, 2011 (press release) – The British Plastics Federation has warned that the major increases in plastics raw material prices experienced by processors will lead inevitably to further rises in the price of plastics products.

The BPF points out that raw material purchases can represent as much as 60% of the selling price of plastics products. ''All product sectors, be they plastics building products for construction and infrastructure projects, packaging for food distribution or technical components for the automotive and aerospace industries, have been hit and desperately need to pass the increases on to maintain viability'', said Peter Davis, the Federation's Director-General.

''Some grades of Polyethylene and Polypropylene have increased by 70% and 80% respectively since January 2009. In the last year alone Polypropylene registered a 40% increase. Similarly Polystyrene prices have almost doubled since January 2009 and some PVC grades are 40% higher. Nor are engineering plastics immune from the rises with price levels of Polycarbonate, for instance,mounting by almost 20% in the last year''.

''We have seen considerable press coverage devoted to food price increases and the cost of metals but less obvious are the changing economics of plastics'' he added. ''We use almost 5 million tonnes annually in the UK and plastics underpins our daily life. Some lighter crude oils are now trading at over $100 US / barrel and this increase will feed its way through to all petrochemical using industries of which plastics is one''.

Davis believes that ''In a strong sense this mirrors what some commentators have identified as 'a long-term, structural, rising trend in commodity prices' which is now contributing to inflation in both developed and developing economies ''

The supply situation for plastics has been additionally impacted by some 'force majeure' declarations as raw material producers have encountered difficulties increasing output since reducing capacity during the downturn. ''There are few state of the art cracker and polymerisation facilities in Western Europe as most new investment is going into the Far East and Middle East where growth and demand is higher'' said Davis. ''We have pointed out to the UK government the implications of this for the long term security of supply of strategically important industrial raw materials'' .

The plight of plastics processors was also revealed by the Bank of England in its December “Agents' Summary of Business Conditions” which states that ''materials cost inflation remained robust, with rapid increases in the prices of agricultural commodities, plastics, wood, paper, cotton and wool and metals''

''To ensure a viable supply chain and continuity of supply, it is inevitable that realistic prices, which reflect the full costs of plastics processors who are manufacturing finished and semi-finished products, will have to feed through across all the market segments,'' said Davis.

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