In my career I have worked within a polymer manufacturing business. My abiding memory of the business was that when the business was good it was very good and when it was bad it was dire. What was termed ‘good’ usually meant there was a global lack of capacity and so price rises could be made and they would hold and so profits would be great. This state usually lasted until everybody invested in more capacity and then there became over capacity and the price would fall and profits would disappear into losses until capacity once again approached a balance.
On average the business made a profit but this boom or bust existence meant a very erratic working existence. In good times I would be able to travel and attend conferences, buy new equipment, instigate research projects and maybe even recruit additional staff. In bad times everything shut down, travel was banned and no new equipment was allowed unless it gave a cost reduction in film manufacture, staff numbers were reduced, sometimes by natural losses and other times by compulsory job losses.
At one time there were less than a dozen key film manufacturers of these half could be regarded as worldwide suppliers. Over time there was rationalisation of these bigger suppliers but at the same time there was also a massive increase in the number of smaller manufacturers entering the market. Some of these were buying second-hand equipment from the big players and although the technology was old and the machine efficiency was low the running costs were also low and the labour costs even lower. Other market entries were subsidised strategic investments by various countries that either regarded the material as a strategic material for other business growth or a method of reducing import costs. Some of these subsidised companies produced sufficient material that they exported it and as their costs were subsidised they were able to offer it at low process depressing the overall market prices. There were several court cases of polymer film ‘dumping’ that lasted many years.
The world is changing yet again. Apart from the volatile cost of oil, which has seen around a threefold to fourfold price increase in a year, there is also the wish by many of the oil producing countries to want to get the added value out of the oil by entering the downstream manufacturing businesses. Similarly China wants to be self sufficient in film manufacture instead of a net importer and so they too have been investing like mad to get enough machines installed to achieve this. This massive increase in capacity does mean that the supply will outstrip demand and the prices should fall.
Currently the film prices have all be rising for almost all of the past year. It is only now that some of the prices appear to be levelling off or declining slightly. However this is also running up to Christmas when it is common for companies to de-stock and require less material because of the holidays taken, both by the manufacturing workers but also by their customers. Hence it is uncertain if this is the end of all the current run of film price increases or if they will again rise after the New Year.
Naively I thought that this type of price increase (20% - 25%) would provide a trigger for companies to start switching away from oil-based films towards biopolymers of various types. To some extent this has occurred but nowhere near as rapidly as I was hoping for. This might be because of my over optimistic nature but also because of a number of other factors. The supply of the biopolymers is limited because the size of manufacturing plant is small because existing business is small and also the price is high, again because of the lower volumes. Until they have more customers they will not invest in bigger manufacturing plant to help make the volumes available and gain the price reductions from the larger scale. The other part of the equation I had not really thought through is that many of these biopolymers are energy intensive in their manufacture and so although the raw material is not oil based the energy to process then is and so their manufacturing costs have risen exactly the same as the oil based polymers and if the energy for manufacture is greater the manufacturing cost will be greater too and this will make reducing the costs harder to achieve.
The one thing I am certain of and that is if I thought the market was erratic and difficult when I was part of the business I am certain that it is more difficult and unpredictable now than ever it was then.
I do not know about you but I shall be watching the developments of film price with interest and also will be trying to follow how the markets move from one film towards another as the relative prices change with costs and volumes.
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