2020 The Shape of Things to Come

Posted on 12 Nov 2019

2020 The Shape of things to come

“Forecasting is always difficult, particularly about the future” (Neils BOHR)

Nevertheless, it’s budgeting time once again and by far the most pertinent questions we are asked every

year at this time are;

What is going to happen to film prices?

Along with

Do we foresee any problems with supplies?

But, this year we also have

   ‘What are we doing to address the ‘plastic problem’?

With Brexit on the horizon (or not) forecasting supply side changes for 2020 is particularly difficult. This is because added to the many normal variables we encounter year by year we have the desire by many customers to change to more environmentally acceptable materials from standard plastic films. In addition, they want packaging films that will avoid the proposed plastics packaging tax to be introduced in 2022.

Whilst we cannot have any specialist insights into all of these variables, we can offer an informed insight

into some.

1. Exchange rates

We calculate packaging film imports into the UK as being between £800 million and £1 billion.

The majority of this trade is in Sterling, thus, the outcome of the Brexit negotiation is particularly

relevant to our business sector. Various forecasters see the Pound as high at €1,40 if

negotiations progress well and approaching parity should they fail. Against this background any

forecast must have caveats. However, since the original vote we have seen Sterling fluctuate

from between €1,16 to €1,06. 

During this time we have held prices stable by judicious purchases of bulk film prior to Sterling

falling, coupled with forward buying of currency and price support from our overseas suppliers.

As a consequence, we believe prices can hold stable, certainly until mid-year, 2020, at which

time the political situation should be much clearer (we hope). (Anyone wishing to place bulk

orders to July, please just ask).   

2. Oil prices

Here again currency fluctuation has a major part to play. Over the last year, we have seen oil

price fluctuation between $80 to $40 per barrel. Whilst the value of Sterling against the

Dollar obviously affects UK costs. In these circumstances, polymer prices have fluctuated

significantly less than could have been anticipated. This has been simply due to weakening

demand for Polymers, particularly from the automotive industry.

We also believe the current ‘War on Plastic’ will inhibit Polymer price growth, due to demand, and

reductions in some plastic products. Thus, in the absence of any major increase in the conflict in

the Middle East we anticipate continued price stability from Polymer.

Packing film supply is a Worldwide industry. Therefore, the growth in new film manufacturing

facilities in Turkey and Eastern Europe (400,000 tonnes) reinforces our view that despite Brexit

the UK is not a market the Europeans film manufacturers will not easily risk losing. Amazingly,

China has 20 NEW film production facilities either in planning or construction with a plated

capacity of over 600,000 tonnes!!

3. Plastic Pollution - New films for 2020

‘Environmental films’ is probably an inept description of the new films being developed to

address the problems of plastic pollution. Many of these films are UK centric as Europe has, in

many cases, recycling facilities for both PP & PE. So, whilst the following films are, by definition,

still Biaxal they are either easier to recycle in the existing waste streams or alternatively include

recycled content in their structure.

BOPE

This film is being developed to replace OPP in flowrap and FFS applications. Whilst still in the

development phase we have seen significant improvements in the latest trials undertaken and

as a consequence are confident that these films will be a useful addition to a wide range of food

packaging applications.

Their major environmental benefit is that they can be recycled with other PE products such as

plastic bags. This is particularly helpful where the supermarkets are providing plastic waste

return facilities and/or deposit return schemes.

OPP with 30% recycled content

We have trialled this film successfully across a full range of current OPP applications. Currently it

consists of post-industrial recycled content, allied to virgin polymer. But where collection and

cleaning facilities do exist, these will eventually enable the use of post-consumer recycled

content.

The benefit of these films is that they may avoid the proposed plastic tax as they comply with

the requirement for 30% recycled content and can be used in food contact applications 

BOPET with 70% recycled content

These films have up to 70% post-consumer PET content within their structure. This material

could be recycled with PET bottles through the supermarket packaging collection schemes,

which at some point are likely to be supported by a deposit return scheme. These films will also

not be subject to the proposed packaging tax. 

Summary

Overall, we anticipate the current price stability to be maintained. We believe, at least until mid-year 2020.

Currency movement is most likely to be the biggest driver of price changes in either direction as

the volume of oil from fracking should contain Polymer prices. This over supply, along with the increases

in Worldwide film manufacturing capacity should contain raw material costs. One ‘wild card’ must be

the cost of plastic PRN’s. In 2019, they increased by up to 500% at one stage, resulting in a plastic waste

tax of £300 million in the year. 

Indonesia and Vietnam are both considering banning or reducing imports of plastic waste. Should this

happen, the cost of PRN’s could well reach £1000, 400% each, above current levels. As a consequence,

the price of all packaging films would increase, as the total cost to the plastic packaging industry would

be £1 billion – we shall see. 

As ever I welcome your views on any of the points made and why not join me on LinkedIn for more

regular contact. https://www.linkedin.com/in/barry-twigg-3a440b53/

#DontHatePlastic