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CommentFlat landscape
By David Eldridge
Posted 2 May 2013
It’s a difficult time to be a forecaster in a big polymer company. Most global producers reported sales and profit growth in 2012. But – adapting the warning you usually see on share investment ads – past performance should not be used as a guide to the future. For the corporate economists, Europe is a particular problem. Economies are struggling or, at best, growth is sluggish, and it is impossible to predict when there will be an upturn. The forecaster is like an explorer looking at an unfamiliar landscape that is flat and featureless, with nothing on the horizon to head for. This flat landscape creates a dilemma because corporates need certainty to make their big decisions on the best course of action in the short and long term. Should we invest or cut? Expand or contract? It is often at this time of year, after first quarter results have been analysed, that decisions are made about adjusting operations. Maybe that is why BASF and Sabic both announced closures and job losses in April. Most producers have been operating their European resin plants below capacity levels to prevent a surplus of material entering the market, which pushes prices down. But operating those plants at sub-optimal levels makes them unattractive to their owners, adding further uncertainty to the European outlook. Polymer prices are usually an indicator that producers can use to help with their planning. However, prices in Europe have been flat all year. What can you learn from a trend line that is going neither up nor down? It is natural to hope that European polymer markets will improve and give the whole plastics supply chain a boost. But there is no sign they will improve any time soon. The construction market had a bad winter, there are cutbacks in car production and even the normally robust packaging market is limping along in Germany. No-one knows how long this hiatus will persist. In the meantime, we should keep looking out for some helpful signs.
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