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News Release from: Economist Intelligence Unit
Edited by the Manufacturingtalk Editorial
Team on 09 June 2006
Price-management techniques in plastics
market
European plastics companies are being forced to adopt new strategies in response to several significant competitive threats, according to a new briefing paper from the Economist Intelligence Unit.
European plastics companies are being forced to adopt an array of new strategies in response to several significant competitive threats, according to a new briefing paper from the Economist Intelligence Unit Low-cost rivals in Asia, the growing prominence of Middle East producers with significant raw-material advantages and sustained oil-price turbulence are all conspiring to drive change in the European plastics market
This article was originally published on Manufacturingtalk on 30 Mar 2006 at 8.00am (UK)
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The majority of European plastics firms are adopting a mix of strategies in response, such as increasing efficiency, improving technical innovation and product branding, and increasing the level of integration across their supply chains.
Others are investigating less proven approaches, such as adopting new price-management techniques and distribution methods.
While it is far from clear right now which of these differing approaches will succeed in the long run, all of these factors are transforming the industry.
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The findings are published today in Keeping competitive in commodity plastics, an Economist Intelligence Unit briefing paper sponsored by Alastian.
The conclusions are drawn from interviews with 20 senior executives in the plastics industry together with extensive desk research.
The main findings include the following: * The Middle East and East Asia are becoming increasingly tough rivals.
The European plastics industry is grappling with two growing competitors: low-cost converters in East Asia, and Middle East producers with natural advantages in raw materials.
Previously content to focus more on oil extraction and exporting, firms from oil- and gas-rich countries are steadily moving up the value chain to compete against European producers directly.
* Oil-price instability is buffeting the plastics business.
Turbulence in oil prices is not a new threat, but it's one that both rising demand in China and uncertainty in the Middle East are exacerbating.
The uncertainty surrounding crude oil prices is forcing firms to adopt new, as yet unproven strategies, such as price hedging on commodity exchanges.
* Efficiencies are being driven in the front office, not just on the production line.
Cost cutting and process innovation are no longer solely for production and conversion plants, but are now being applied to a range of commercial activities.
For instance, after a slow start, a growing number of firms are now going online to streamline the way they buy and sell both raw materials and finished products.
* Much scope for further consolidation exists.
The crowded European plastics market offers plenty of room for consolidation, both for converters and producers.
Firms will merge with and acquire each other to create greater economies of scale and to gain pricing power.
The ongoing rise of private equity will also change the way many companies operate, partly by facilitating a longer-term outlook.
"The pressures of globalisation and oil-price uncertainty are intensifying competition within the European plastics industry," said James Watson, the editor of the Economist Intelligence Unit's report.
"In order to cope, firms are not only striving to operate more efficiently, but are also exploring the possibilities of new business models too." "This report offers a useful analysis of the forces behind change in the European plastics market and its prospects for the future," commented Niels Nielsen, Alastian's general manager.
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