The plastics market is growing in the European Union (EU) in virtually every sector of the industry and chemical class, remarks Industry Analyst Robert Outram. Growth in the high density polyethylene (HDPE) and polyethylene terephthalate (PET) sector has been particularly good, with growth rates since 2001 ranging between 3.4 and 4.4 per cent per year.

In recent years, several sectors of the European manufacturing industry have shifted their business to Asia to benefit from cost advantages and capitalise on market growth in the region. Plastic processors have also followed suit in order to compete with Asian companies and improve their offerings to customers in those regions. This has adversely affected the European masterbatch and colourants industry, which has lost customers to Asia and therefore become more competitive, price-driven and less profitable.

The plastics market is growing in the European Union (EU) in virtually every sector of the industry and chemical class, remarks Industry Analyst Robert Outram. Growth in the high density polyethylene (HDPE) and polyethylene terephthalate (PET) sector has been particularly good, with growth rates since 2001 ranging between 3.4 and 4.4 per cent per year. This is an important sector of the plastic colourants markets as HDPE and PET are used in the making of plastic bottles and containers, often requiring some colourant.

Growth of the Plastics Market to Propel Greater Demand for Plastic Colourants

To a large extent, expansion of the European plastic industry is driving the plastic colourants markets. The industry is witnessing growth, particularly in high-price and technical applications such as films and automotive parts. With price decline brought about by the entry of Asian companies, these high-performance applications provide opportunities to European pigment producers and allow them to distinguish themselves as technology leaders. However, European pigment producers are facing growing price pressure. The cost of producing a kilogram of organic pigment is lower in India and China than in Europe. This is attributed to low costs of construction, workforce wages and environmental controls in the regions. While tightening of environmental legislations is expected in these countries, it is unlikely to make a significant impact on bridging cost disparities.

Competition for sales has largely been on a price basis as the degree of innovation in the market is limited and the market itself has noticeable resistance to evolving technologically, explains the analyst. Consequently, the main tool competitors can leverage in the market is price. With competition focused on price, driven by masterbatchers and plastic producers, price erosion of colourants has occurred. As a result, funds available in the market for innovation and development of new additives have dwindled and products are becoming commoditised further. Thus, an effective business strategy will become crucial for survival. European participants are likely to acquire Asian companies or form alliances with them in order to shift production to the Far East to curb costs and remain competitive. Focus on product innovation will become essential to successfully differentiate themselves from Asian competitors.