Downturn for polymer demand

Not since the early Eighties has the plastics industry in Europe experienced such difficult market conditions as seen in 2008. Demand for thermoplastics slumped by 8% compared with 2007, according to the latest report published by AMI (Applied Market Information). The downturn followed two years of better than average growth with demand reaching a peak of just over 41 million tons in 2007 but this masked underlying structural weaknesses of overcapacity, under-investment and poor competitive positioning for many plastics processors. Market demand began to slow during the first half of 2008 as concerns began to surface about the liquidity of the banks. Record high oil prices also put the squeeze on polymer converters. Even so few were prepared for the precipitous slide that occurred from August 2008 as the uncertainty created by the global economic environment translated into a rapid decline in consumer confidence and had the effect of wiping out five years of growth for polymer in just four months. In the last quarter demand declined on average by 20-25% for most resins. In analysing the reasons for this dramatic turn of events, AMI points to massive converter destocking during the final quarter of the year as the main culprit. As oil prices plummeted and with it polymer prices, there was a reluctance to buy stocks in a falling market and tie up capital given the financial crisis and the lack of liquidity.