Home Blogs Asian Chemical Connections European Processors Bemoan Volatility

European Processors Bemoan Volatility

Business, Company Strategy, Economics, Europe, Olefins, Polyolefins
By John Richardson on 30-May-2013

By John Richardson

THE blog listened to an interesting discussion yesterday, on the first day of the 2nd ICIS World Polyolefins Conference in Berlin, during which plastics processors tackled the perennial issue of volatility.

They complained that:

*Trying to build long-term relationships with producers is difficult because polymer sales guys only stay in their jobs 10 months on average. Thus, because of the constant turnover, a new guy will arrive, have something to prove to his boss and, as a result, will only care about pushing for the maximum price. If someone has been in a post for 2-3 years, say, he or she will have built up more equity with their boss and so is more able to be flexible on pricing in order to build long-term relationships.

*The producers are also investing less in sales teams on the ground because there is no point in chasing market share when the overall market is declining.

Europe, of course, also faces a petrochemicals feedstock disadvantage versus the US, and electricity costs that can be 3-4 times higher.

Where will the investment come from to upgrade European crackers, or will future growth be met by imports? The consensus view of the conference was that imports would become a more a significant factor.

Plus there is the unresolved Eurozone economic crisis, one of the root causes of which we maintain is demographics.

One converter, however, said that European petrochemicals players, with their excellent technical skills, are able to quickly and effectively switch grades in order to adapt to constantly shifting downstream markets. The converters are always seeking niche production areas, through heavy investment in R&D and customer research, he added.

A second converter, a carpets producer, said that the petchems producers can establish long-term relationships with their customers through providing technical support that enables innovation.

But, as a source with one producer pointed out: “That’s all well and good, but converters are not always willing or able to award us for technical support.

“If you’re not careful you provide it and, after a while, its cost ends up disappearing into standard, commodity-grade pricing.”

The blog will be travelling tomorrow and so there will be no post on Friday, but we will return next week.