National Flexible - Twigg´s Times
With a wealth of experience in the packaging industry at the most senior levels, Barry Twigg - National Flexible´s major shareholder and CEO – shares his thoughts and ideas about the latest trends.
Packaging Film Price Trend – Through to 2015/More M&A in Flexibles
Three weeks ago we intimated that we would be visiting key packaging film suppliers in Turkey, Europe and the Middle East. Having completed our journey to these far flung international outposts and now having spent some time with some of the UK’s leading OPP and PET film suppliers, we are probably less confident now in the direction of packaging film price trends until the end of the year than we were before we commenced the journey!
Just 4 weeks ago (prior to the visits) there was hardly in a cloud on our future film supply horizon.
Film Price Trends – A Journey of Exploration
Each month, in addition to commenting on current events, we try and extrapolate the various conflicting information we get from the film suppliers and the market and give our forecast on medium term film price trends in flexibles. Currently the emphasis is on ‘Conflict’ as more of the Middle East oil producing countries seem to be embroiled in activities which could significantly affect the price of oil.
STOP PRESS – Basell call “Force Majeure” on European polymer supplies
News on polymer / film prices from Interpack Dusseldorf
LyondellBasell declared “Force Majeure” on polymer supplies from their French operation due to maintenance and shortages of raw material feedstock. This follows similar ‘outages’ and Force Majeure in the 1st quarter from three UK and Polish polymer plants, these supply both OPP and PE polymers. The announcements from Basell and their fellow polymer suppliers are usually a pre-cursor to price increases in flexibles. All the European film companies we spoke to in Dusseldorf indicated that they were awaiting further information on when supplies will revert to normal. Meanwhile Sabic have been seeking a €30/40 increase for June deliveries. Simultaneously Borealis reported bumper 1st quarter profits from their polymer operations.
Meanwhile, back in the UK
Film Supply 2nd ½ 2014 – It’s not just about the price!
Prices for film deliveries through May-June look to be stable which continues the price trends from the 3rd ¼ of 2013. This stability is despite small increases in feedstock prices for all types of polymers in January and February. The strength of Sterling continues to hold sway particularly against the Dollar. This Sterling/Dollar relationship is particularly significant to those film supplies emanating from the Middle East, as the Dollar is the primary trading currency for oil transactions.
This may partly explain how film prices from the Middle East region have remained stable in 2014 despite the imposition of a 6% import surcharge from January on film imports from the region (more protectionism). It may also explain the recent purchase by TI Group of Derprosa; this is in addition to their earlier acquisition of Radici, this now gives them film manufacturing facilities in Europe in both Italy and Spain.
Interestingly, we said in January “It is highly likely that
Food for Thought -A Consultant’s View on Flexibles
We saw this recently and felt it may provide you with food for thought:
As recently as the 1980’s there were four OPP manufacturing plants and two Cellulose producing plants in the UK. Investment subsidies for the building of OPP plants in Italy, subsequently emulated by Turkey, led to the closure of all these plants with the exception of Innovia at Wigton. As a consequence currently all OPP film is imported.
During this transformation period there was a major shift by Supermarkets and Brand owners in the food industry from rigid packs and plain film with labels, towards printed flexible packaging, with laminated film packaging in particular growing exponentially.
As a consequence two major developments occurred:
Spring Time for Film Supply
It’s good to be back! Having been fortunate enough to miss out on much of the UK’s February Monsoon season. Surprisingly for the first ¼ of any year nothing much has changed on the supply side of films. Since I have been away, the push by Polymer suppliers for increased prices on both PE and OPP in January is petering out due to market resistance allied to some over-supply in February. March seems to have followed suit and the market is strangely becalmed with little or no pressure at the moment for price changes in April.
The strength of Sterling against both the Dollar and the Euro has been a factor in creating this stability. As ever at times like this there are signs of some “dumping” at lower spot prices from some different overseas suppliers, these Guys are unlikely to maintain their presence in the UK once the Continent gets busy and/or some of the more unstable economies in the Middle East get back to their more normal demand levels. Currently we are told sales of film to both Egypt and Syria have been affected significantly due to the recent political upheavals.
On a somewhat different (but related) subject, it was interesting to note whilst I was away Treofan announced the installation of a new 30,000 tonne capacity BOPP line in Germany. Whilst we understand this will be predominantly producing “Special films” it is a major departure from the current locations of the new OPP plants in the process of construction.
Film Prices 2014 and Mergers & Acquisition Activity
Polymer suppliers welcomed in 2014 in a similar fashion to the way they left 2013; with a demand for price increases across both PE & PP polymers. Although the amounts involved were only €30-50 Euros per tonne, they follow similar requests for increases in December. At the moment there is no sign of these increases feeding through into the market, but film manufacturers continue to complain about “depressed margins”.
There is undoubtedly a current surfeit of film supply which is holding prices steady, particularly across commodity films. A similar over supply situation would exist within polymer, if we had a competitive market. However, as ever, major polymer suppliers are either closing down current capacity or leaving existing capacity “idle” in order to maintain a demand/supply balance acceptable to them. Thus Basell, Dow and Ineos all currently have “Outages” affecting both PE and OPP polymer supply.
It is difficult to believe this state of affairs can continue indefinitely. Bourge 3 came on stream last year and this will add significantly to the volume of polymer available from the Gulf. This polymer is based on lower cost energy than that in Europe, so prices should at the very least remain stable. In addition crude oil prices are falling and Sterling is stronger against both the Euro & Dollar. In theory all film prices should benefit from these benign influences which are a complete transformation from the circumstances which prevailed as recently as last September. We shall see what the first ¼ pricing structure brings. So for the present we are not buying forward in bulk.
Customer Satisfaction Survey 2013 – Winners
Many thanks to those completing our Customer Satisfaction Survey for 2013. We had our best response ever for which we are very grateful. Whilst the analysis of the results is complete, we know how busy everyone is in December so we are delaying circulation of the results until January (this should add to the excitement of Christmas!).
However, as promised, we have a free case of fine wine on its way to one winner who has already been notified of their good fortune. Additionally, in recognition of the 20 years since National Flexible was formed, 20 more bottles of some excellent wine are winging their way to 20 other lucky individuals.
I would like to take this opportunity to reiterate our thanks to everyone who completed the survey and wish each and every one a very Happy Christmas and a very successful 2014 to you and yours from all of us at National Flexible.
P.S. there’s plenty more to talk about in 2014 – see you after the break
Film Prices 2014 + UK Film Convertors Financial Health
“Prediction is very difficult especially if it’s about the future” (Niels Bohr).
Its 3½ years since we started writing these notes in which time we have called the market trends on film prices wrong just twice. However the September forecast of a major upturn was spectacularly wrong and I have been taken to task accordingly by those customers who joined us in buying forward extra stock. The reasons for the wrong call were highlighted last month, the prime one being the cancellation of the American plan to bomb Syria.
Fortunately little has been lost, a €30 ’softening’ of the polymer input prices for November is hardly a cause for heartache and if our market contacts are to be believed the December/January fix for polymer will recover this amount.
The real question then is where does this leave us for 2014 prices?
Overall Film prices in 2013 have been very stable, with some mid-year increases offset by the year-end reductions. However, there is a 3% import levy to be applied on film from the Middle East in January, plus in every year since 2008 we have seen film prices increase in the first ¼. Market Gossip at the recent K Show in Dusseldorf was that the ‘soft’ market in the final ¼ of 2013 would not continue and that some price recovery from the polymer suppliers would result in some small increases. However the current supply/demand favours price stability particularly if European demand remains at present levels.
As ever there are variables which would rapidly change this situation but with polymer plants operating at only 80-85% capacity, oil prices potentially falling and Sterling relatively strong, there is little to suggest any short term major increases in film prices. Last month we suggested de-stocking until Christmas. Despite the current stable price climate buying forward in January through to May would seem prudent as changes in any of the current benign influences would be likely to move prices up rather than down.
Film Price Stability – Our Thanks To The Russians
Is it only 5 weeks ago since the USA proposed to unleash its military might on the denizens of Syria? So much has happened since, most of which I missed due to a four week sojourn in the Algarve.
At that time the attack was forecast to coincide with the scheduled “outages” of no less than 5 major polymer plants across Europe. It was also due to occur when historically sales volumes across the flexible packaging industry tend to increase prior to Christmas. The concurrence of these three events had all the ingredients of a “Perfect Storm” when considered in the context of the previous actions of the polymer suppliers in straitened times. Little wonder then that we anticipated an increase in film prices for the final ¼ of 2013!
In the event thanks to the intervention of the Russians the Americans desisted. Equally as surprising was that there seems to be sufficient polymer available to fill the void created by outages. As a consequence film prices have remained stable. In October there is even a suggestion of a slight fall in the final ¼. The reasons given for this turnaround in price trends are difficult to ascertain, but our contacts in the market suggest: