However, despite this, the industry continues to face many challenges. On the face of it, this should be an attractive, profitable industry with its high growth rates, a fragmented converter customer base and high barriers to entry, but the reality is that there appears to be no shortage of capital to fund new plants so that the business is continually plagued by over-investment resulting in persistent oversupply, weak pricing and poor returns with an increasingly powerful and globalized customer base. Much of the new investment has and continues to be in China which is by far the largest market both in terms of production and demand. Most of its production is geared to the local market, with producers managing the supply/demand balance by operating at low rates or not all. Concerns that Chinese producers will increasingly look to export to make their operations more viable, will probably not be realized any time soon in AMI’s view, given continuing high growth in the Chinese market. Chinese producers neither produce the grades nor have the sales infrastructure to sell extensively overseas. The impact will more likely be felt in the export of goods in BOPP packaging or finished products such as tape. There is also growing investment in BOPP production in the Middle East with its access to low cost sources of PP resin, which is more likely to impact global trade, as with relatively small local markets and good export infrastructures they will seek to target markets in high cost regions like Europe.
India has been another investment hotspot in recent years because of the enormous potential for BOPP film packaging there. It has a population similar in size to that of China but BOPP demand is currently a tenth of it. The flexible packaging industry has been developing very rapidly driven by strong economic growth and a rising middle class looking for more sophisticated packaged food and consumer goods. Growth is slowing in the markets of Western Europe, North America and Japan which will present challenges to the BOPP producers there which also tend to operate older, slower, smaller lines with higher costs. While packaging innovation, raw material and technology developments still tend to be driven by BOPP players in these regions, market growth, and more importantly converting operations are shifting to other lower cost regions of the world which will have implications for the viability of BOPP production in the West. While the industry undoubtedly faces challenges it does at least operate in the positive environment of global growth continuing at over 6% pa, supplying food and other packaging markets that are considered essentials in modern life. Economic growth in emerging and developing countries, rising standards of food safety and hygiene, growing demand for convenience and packaged foods and the demands of feeding the world’s growing population driving the need for cost effective food distribution and preservation, will all help to contribute to the growth in the global BOPP film market.
Global annual average demand-growth for bi-oriented polypropylene film is set to drop by about 2% in the next few years. Capacity, however, is set to expand by 33%, which could make for an interesting combat for market share. These are figures released by PCI Films Consulting. The study examines the BOPP film market from 2003-2008 and predicts where it is headed for the period 2008-2013. PCI predicts that demand will fall in every region, though that fall will be most pronounced as a percent of total demand in Western Europe, the only region where demand fell in 2008. The US$15 bln BOPP film industry experienced more positive buyer behavior in other regions: Growth in demand was seen in Eastern Europe, propped by investment in retailing, food processing and new converting equipment. In South East Asia, especially India, growth was stimulated by increased availability of film. North America experienced a 3% growth in demand in 2008 owing to the buoyant Mexican market, whereas demand in Central and South America remained relatively stable. Due to recent capital investment, supply and demand in China’s 1.8 mln ton market became more balanced, encouraging suppliers to plan the next expansion phase of their industry In South East Asia, especially India; growth was stimulated by increased availability of film. A leading manufacturer of film extrusion equipment has sold 10 new lines to China in 2009, equivalent to 375,000 tons of new capacity.
Demand and supply of bi-oriented polypropylene (BOPP) film is set to see strongest growth in nations such as Dubai, India and China as the current order in the sector swings from West to East. The report also confirms that the Middle Eastern BOPP film industry is expected to emerge as a significant regional production center in the future, doubling its size in the next three years. One of the major factors driving this growth is the support given by regional governments to downstream industries, which are capable of adding value to oil assets. PP resin production, film extrusion, flexible packaging, and food processing are all industries targeted for expansion in the region. Limited regional demand, however, means processors there will be pressed to find customers in export markets. In the next five years an additional 2.3 mln tons of new BOPP film capacity is expected to be commissioned, expanding the industry by a third, which will likely will cause a shakeup not only in the market’s leadership but also in its pricing structure. Middle Eastern BOPP film producers are confident of strong regional demand growth from flexible packaging customers and increased opportunities to export volume based on their lower costs of production. The report predicts that between 2009 and 2014 there will be a strategic shift in the balance of power away from the traditional suppliers of BOPP film. Previous market leaders such as Treofan and ExxonMobil, have already had to make room for new players such as Dubai-based Taghleef Industries and others emerging in India and China. In the last five years, Taghleef has invested in new low-cost equipment and also bought regionally based assets such as Radici Film, to emerge as one of the world’s largest BOPP film producers with a world-wide network of supply.
The Central and East Asian region, which includes South Korea, Japan and China, is now the world’s largest producer and consumer of BOPP films accounting for 46% of demand and capacity. The world BOPP film industry has expanded by 60% since 2003 with China commissioning the majority of new capacity. In 2008, while Asia saw demand grow by 7%, BOPP volume demand in Western Europe shrunk by 3.1%. Rising oil and resin prices in H1-08, saw Western European demand hit 781,000 tons. However, as oil prices collapsed in H2, buyers ran down film stocks which served to dampen demand. With the world economy entering a recession at the same time, BOPP film producers found the extra volume gained earlier in the year was more than matched by reduced demand in the second half. Demand in other Western regions, particularly Eastern Europe, held up more strongly thanks to investment in retailing, food processing and new converting equipment. North America experienced a 3% growth in demand in 2008, owing to the buoyant Mexican market, whereas demand in Central and South America remained relatively stable. In South East Asia, especially India, growth was stimulated by increased availability of film. Chinese supply and demand became more balanced during the year, allowing suppliers to plan further expansion of the annual 1.8 mln ton market. Global 5-year BOPP film demand forecasts predict average world growth of 5.7% with Asia continuing as the powerhouse while mature markets continue to slow down. World demand for BOPP films will continue to grow by an average of 5.7% pa to reach 6.75 mln tons by 2013. Growth in Asian demand is expected to account for nearly three-quarters of world growth over the next five years. In the next five years, an additional 2.3 mln tons of new BOPP film capacity is expected to be commissioned, expanding the industry by a third.
Demand for bi-oriented polypropylene (BOPP) film in Western Europe suffered a 3.1% fall in volume in 2008 following recessionary pressures and changes in purchasing patterns. Another report by PCI notes that this rate of growth contrasts starkly with the 7% growth experienced by BOPP film markets in Asia.
As per a report by Companies and markets, BOPP film, a part of the flexible packaging industry has emerged as one of the most popular, high growth films in the world. Lower costs and convenience has added to the growth of BOPP in the past few years, along with other flexible packaging materials. Moreover, the growth in demand for this film has been substantial both in developed as well as emerging markets on account of its recyclable nature and applications in a variety of non-food and food products. The BOPP film industry is categorized into two different segments - commodity and specialty films. Among the two categories, the commodity film comprises of around 80% of the market, as this is categorized by low margins and price competitiveness, while the specialty films which are mainly consumed in the developed markets account for the remaining 20%. Recent years has seen the consumption of BOPP in different markets such as food industry, tape/ adhesives, tobacco, certain industrial products, among others. The worldwide demand for BOPP film has been growing rapidly and since 2002, the global BOPP film industry has expanded by 72% with China accounting for the major production and consumption. Geographically, Asia was the largest market for BOPP, followed by Europe, and North America region. In the last few years, the emerging economies have witnessed an improved standard of living, urbanization and increased per capita consumption, and this has led to an increase in demand for BOPP films. Although the BOPP industry has continued to witness growth on account of favorable demographic and market factors, it continues to be plagued by the problem of over capacity as well as raw materials prices, particularly PP resins.