Europe plastics polymers 2020 output severely impacted by pandemic

Author: Yashas Mudumbai

2020/06/23

LONDON (ICIS)--Production of polymers used for plastics packaging are to be severely impacted in 2020 across Europe on the back of the coronavirus pandemic-induced lockdowns, according to forecasts by ICIS.

Output of polyvinyl chloride (PVC), widely used in the construction industry, is expected to fall by more than 500,000 tonnes this year compared to 2019.

Polycarbonates (PC) output is expected to post a decrease of more than 15% year on year; PC is mainly used for electronic applications.

PS: polystyrene; HDPE: high density polyethylene; LDPE: low density polyethylene; LLDPE: linear low density polyethylene; PP: polypropylene 

FALLS ACROSS THE BOARD
“The fall in demand for PVC has varied by country within Europe. Germany and a number of central European countries saw a fall of demand of around 40% at the worst point in April whereas Italy, France and the UK saw larger drops in the region of 60–70%," said Robert Searle, ICIS Petrochemicals Analyst.

“As well as a huge hit to domestic demand, the key export markets of Turkey and India also saw demand fall as lockdown measures were imposed.”

The expectation is for PVC production to improve slightly in July, but with stocks already being high the outlook remains uncertain.

Despite the packaging sector not being as heavily impacted as others due to lockdowns across Europe, every polymer used, except polyethylene terephthalate (PET), is forecast to see a significant fall in production this year.

PET is expected to maintain similar levels of production to last year, with output expected to rise by 0.27% in 2020, year on year.

Even though PET consumption is expected to marginally fall this year in Europe, ICIS Analyst Susan Mair said that the rise of domestic production means the impact would not be that severe.

"The European market chose to rely more heavily on domestic production. The decline is not considered particularly significant due to being somewhat boosted by sales in larger formats and food packaging," said Mair.

"Even with consumption expected to decline the expectation is the operating rates will in fact rise in 2020, although they will below that of 2018 rates.”

Up to 45% of polyethylene (PE) in Europe is used in packaging applications, and expectations are that output will be reduced in 2020.

There were already some technical difficulties for PE production in the first half of the year in Europe, along with difficult market conditions.

DISTANT RECOVERY
With the pandemic’s impact, sentiment in the PE market continues to be downbeat, according to ICIS PE Analyst Lorenzo Meazza.

“Moving into the second half of 2020 for PE, the expectations are of a long supply and demand balance, lower plant utilisation rates year on year in Europe, and increasing dependency on imports,” said Meazza.

In terms of recovery for production, it is likely to take much longer than expected because of the changes in end consumer behaviour for other sectors like electronics and the automotive industry. It is forecast that only in 2022 will the demand for polycarbonates go back to the levels seen in 2019.

Front page picture: PVC pipes, used in construction
Source: European Council of Vinyl Manufacturers (ECVM)

Focus article by Yashas Mudumbai 

Additional reporting from Will Beacham, Michele Bossi, and Valentina Cherubin

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