The UK-based plastics packaging company said it was puzzled by the strong upward trend in raw material prices in Western Europe while seeing tariffs tumble in other regions.
“Raw material costs have continued to perplex buyers in Western Europe,” said a company statement. “We experienced price increases every month of the first six months of 2010, while watching prices fall in North America and the Far East.”
It added that in June raw material costs were some US$300 per tonne lower in China than in Western Europe and, in some cases, shipped from the same European factories.
Polymer tariff review
BPI chief executive John Langlands told FoodProductionDaily.com that it was time for an overhaul of the current 6.9 per cent tariffs imposed on polymer imports into Europe.
“Polymer is our main raw material so this is clearly a big issue for us,” he added. “We were surprised that European prices have climbed so high and the difference between costs here and those in North America and particularly the Far East are as high as they have ever been. We believe that it is the appropriate time for the European Commission to review this duty making it possible to source raw material competitively. We are competing globally and we are requesting a level playing field wherever possible.”
BPI said that polymer prices had increased during each of the first six months of 2010 and that the average LDPE Platts price was the highest ever recorded for a six month accounting period. Rising raw material costs were behind the initial increases but the upward trend had been further driven by a tightening of supply with output from new Middle East plants failing to reach expected levels. The chief executive estimated that greater Middle East supply could make itself felt in H2 2010 or in the first half of next year.
The firm added that polymer prices had eased in August but that some suppliers were already pushing for further price hikes in September. Langlands believed it was “uncertain” whether these further price increases would be achieved. In North America, prices peaked in April before falling back. However, price rises were also being mooted her next month.
Half year results
BPI delivered its critique of raw material prices as it posted improved profits for the first half of 2010 ending 30 June.
The company saw revenues jump by more than 12 per cent to ₤261m and profits leap 40 per cent to ₤13.1m - mainly as a result of selling off its Stockton site in the UK.
But the underlying performance was less buoyant as it confirmed that “operating profits fell by only 10 per cent to ₤12.2m, despite significantly higher input costs”.
Performance in the food packaging sector, such as bakery and frozen foods, had been steady but there had been pressure on margins because of the limited ability to pass on the full extent of higher raw material costs to consumers, said the chief executive. A new eight-colour printing press is currently being installed at Zele in Belgium and this would enable further growth in sales of printed film to the food industry, said the firm.
BPI said it expected volumes to remain sound and steady in the second half of the year but that performance would depend on “respite from polymer price increases and improved operational efficiencies”.