Sectoral Report of Bank Austria Economics Department:
Plastics processing slow to pick up pace in 2010
- Massive setbacks with double-digit falls in production and sector sales in 2009
- Sluggish recovery in sector activity, still accompanied by substantial downsizing
- Sector remains competitive and has advantages in the production of packaging and in technical plastic components
The processing of plastics in Austria was hit hard by the recession year of 2009. Production plummeted by 10 percent and sector sales revenue plunged by 12.6 percent to EUR 5.5 billion. The fact this contraction fell short of the industry average only serves to underline the role played by plastics processing in stabilising Austrian industry. This is a finding of the latest sectoral report published by the Bank Austria Economics Department. In 2010, economic activity in this extremely competitive sector should pick up again, albeit slowly.
Almost two-thirds of the plastics produced in Austria are exported. Consequently, development in the sector is closely linked to export trends, which in years of dynamic growth generates positive impulses but in the recession year of 2009 was largely responsible for declining sales in the sector. Export revenue from plastic products ready for sale dipped by 14 percent last year, while packaging materials and technical plastic components dropped 17 percent. "Of the EUR 800 million decline in sales that was recorded in 2009 for plastics processing, more than EUR 700 million was attributable to lower exports", explains Günter Wolf, author of the study.
In the meantime, activity has consolidated in the sector, as demonstrated by the growing optimism of plastics companies that supply industry as well the upbeat mood of business enterprises. "Besides the economic surveys, for a few months now price indicators have been signalling a sharp increase in demand for plastics and more solid demand for plastic goods", says Wolf, "the massive decline in prices for untreated plastics at the end of 2008 was almost completely made up again by April this year." The recovery has admittedly had a stuttering start, as shown by the minus 2 percent in production output for the first two months of the year and the roughly minus 4 percent in employment by April 2010.
Sector analyst Günter Wolf is convinced that "based on their competitive strengths, plastic processing companies in Austria should survive periods of weaker demand – as we will see at least in 2010 and probably also in 2011 – relatively unscathed in business terms". Consumption of plastics will remain subdued, at least in Western Europe since the key customers of plastic processing companies, such as construction and major capital goods sectors, are only anticipating weak upswings. Economic growth is set to remain below the 2 percent mark. All told the sector will lack any key driving forces in the coming years, which is why production in the sector will not grow much faster than 2 to 3 percent each year.
Austria's plastics processing companies are more than competitive by European standards. In the last ten years the sector has almost always grown faster and in 2008 and 2009 contracted much less than the EU-27. At the same time, plastic goods helped to boost the trade surplus. Bank Austria economist Günter Wolf explains that "the success of the sector is based above all on the production of packaging and technical plastic components. Plastic goods contribute 3 percent to Austrian exports, which therefore easily surpasses the corresponding EU-27 figure of 2 percent."
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