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European associations question force majeure declarations
European and national trade associations serving the compounding and other downstream sectors of the plastics industry have ques- tioned the large number of declarations of force majeure by European polyolefin producers this year. They have warned that these declarations have had dire consequences, including low availability and shortages of material and significant price increases that may undermine the plastics converting industry in Europe as a whole. The European Compounders
and Masterbatchers Associa- tion (EuMBC) noted that there had been 11 such declarations in recent months. It also questioned their legality, noting that force majeure is defined as an extraordinary event or circumstance beyond the control of the supplier, such as a war, strike, riot, crime, hurricane, flood or earthquake. The EuMBC said that a supplier would only be relieved from fulfilling its contractual obligations towards its custom- er under such circumstances. However, the association said that so far it has not seen convincing evidence to justify these recent declarations of force majeure, and that only technical issues were being cited by suppliers. It added that it had started further investi- gating the matter in order to appropriately respond to this critical situation. Meanwhile, the European Plastics Converters Associa-
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to expect next. Thus, there is a growing danger that customers may switch to alternative packaging materials. “Unless we have security of
A series of plant outages across Europe have restricted polyolefin supplies in 2015
tion (EuPC) noted reports from major national associations that compounders and processors are struggling to obtain adequate supplies of polymer to discharge their contractual obligations towards their customers. “This is particularly damaging at a time when many EU states are trying to claw their way back to recovery and in particular when the EU plastics industry is in such a great position to be in the vanguard of growth with its potential to deliver customers and broader society carbon savings and resource efficien- cies,” said Alexandre Dangis, EuPC’s managing director. Dangis also noted that
shortages inevitably lead to increases in polymer prices, and that raw material costs can be up to 60% of the cost of a plastic package. Converters who cannot pass this on are thus at risk. “I am afraid that the force majeure could well lead to processing companies departing the EU to re-estab-
lish themselves in Asia where, on the face of it, a more favourable polymer supply situation persists,” he said. All this was echoed by the
four largest national organisa- tions representing the plastics packaging industry in Europe. Elipso in France, IK Germany and the BPF and PAFA in the UK came together to call on polymer producers to invest more in European polymer production facilities in view of “a significantly worsening supply situation”. For plastics packaging converters, they added, managing this situation “has been a high wire balanc- ing act amid conditions not witnessed for many years”. Recent times, the four
associations stated, have seen supply interruptions becoming increasingly common and allocated supplies for PE and PP. Meanwhile, rapidly rising ethylene prices are driving up the price of several polymers and there is no indication of any immediate return to normal supply conditions or even what
supply for our raw materials then we do not have a truly sustainable plastics packaging industry, which has tradition- ally accounted for more than one third of Europe’s polymer consumption,” the four organisations said. Part of the problem, they added, is that producers increasingly prefer to invest in the faster growing markets of Asia and the Americas. Europe’s ageing plants are therefore more likely to suffer from the maintenance issues frequently cited as a cause of the force majeures. The only solution to this is more investment by producers. “Europe is a global leader
and powerhouse of innovation not only in plastics packaging technology but also in waste management organisation and techniques such as recycling and the incorporation of recyclate into plastics packaging products,” the associations stated. “The development of this expertise here in Europe can support the stronger evolution of plastics packaging markets and indeed the acceptance of plastics packaging around the world. For this we need the polymer producers to invest in the production of their raw materials here in Europe.” ❙
www.compounders.eu ❙
www.plasticsconverters.eu
May 2015 | COMPOUNDING WORLD 5
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