Costs will rise – the squeeze is on.
Everywhere I look there are papers on the ‘Carbon footprint’ and either asking or describing what is being done to change things for the better. However this does not appear to be as easy as was thought.
As we all will have seen the cost of energy is rising. There has been a very steep rise in the price of crude oil from less than $20 / barrel through to in excess of $120 / barrel. This impacts the coating industry in many ways. The costs of energy used to produce the raw materials, the raw materials used to make the polymer films as well as the energy cost to metallize the films means combine to make the cost of metallizing significantly more expensive this year than it was last year and with every expectation that it will be more even more expensive next year.
In addition to the cost of oil there is also the competition for materials that is also driving the price upwards. As China and India grow so quickly there becomes an imbalance between supply and demand for materials that in the free market results in price increases. Also as economies prosper the workforce want to benefit from the prosperity and wages rise.
Thus there are a number of predictable reasons for prices to rise sharply and continue rising for some time.
In addition to this there are the variations that arise from the way the market reacts to the changing economics. One example of this is the move to bio-materials. It is possible to grow crops that can be used to create energy, either directly as a fuel or to produce an intermediate that can be used as a fuel. It is also possible to grow crops that can be used to produce polymer films. As the cost of oil rises there has been a rush to plant crops to produce either fuels or films. Unfortunately this has had some unusual effects. Farmers have switched crops quickly from whatever they used to produce to new crops to service this growing bio-materials market. As this switch has been uncontrolled it has resulted in food shortages and this has force up the price of food. Thus it is equally as likely that farmers will switch back as quickly to capitalise on the higher food price. Thus, until there is some control over the type and quantity of crops planted, it is likely that there will be a series of price fluctuations depending on changing quantities of crops planted.
There has also been a significant increase in the amount of land being cultivated and the effects of this have not yet been seen. It is however predicted that the irrigation of crops will increase and this will lower water tables such that water will become scarce and the costs of this will rise too.
So is there anything to look forward to, I hear you ask yourselves. Well, yes, I think there is, although this too might depend on your viewpoint. The Middle Eastern States have combined to build the largest chemical complex in the World. This is intended on taking their own oil and processing it into all the downstream products that is often done by their current customers. As the oil is running out they are intent on diversifying their economy to take advantage of what remaining resource they have. They plan to build refineries to produce ethylene and propylene amongst other materials. Already they have industries gearing up by either buying new production facilities or by buying existing businesses to later expand. As this expansion means that some polymer films will be made close to where the oil is produced and refined it should mean a reduction in some of the shipping costs. This increase in production may also mean that there is likely to be a glut of material for a while this too could result in a reduction of some film prices for a time.
This article is just scratching the surface of what is a complex subject that I am sure will have many more surprises to come. The reason for my raising the topic is just to make sure that everyone is aware of the trend and expected changes to come. This will hopefully give everyone time to plan what actions they are going to take to help minimise the impact of such changes.



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