The price of plastic products could go up by 12% soon because of the rise in oil prices, plastics producers say. The sales of the main companies in this business will be worth the same, as the amount of products sold will go down.
The raw materials for plastic products (PVC, polyethylene and polypropylene) are made from oil derivatives.
The current quote of crude oil on the New York Mercantile Exchange (NYMEX), $41/barrel, has gone up more than 50% in real terms compared with last year, sending ripples across most industries worldwide.
One of the economic sectors affected by the increase in oil prices is the plastics and plastic products industry, which was hit by the increase in the price of the raw material it uses for its manufacturing process.
"Our raw material has become about 4% more expensive lately, which goes for both polypropylene and PVC," Ion Neacsu explained, economic manager of Prodplast SA Bucharest, the leader of the Romanian plastics market, whose turnover stood at 14 million euros in 2003.
Its turnover rose 10% to 6.2 million euros in the first half of 2004. Prodplast's four factories make PVC products, injection-moulded items, polyethylene goods and moulds for injection-moulded products.
Raw material prices have increased by approximately 7%-8% since the beginning of the year, which is reflected in the final product price. Finished product prices will be about 10%-12% higher by the end of the year, Neacsu explained.
The company's representatives expect sales to drop quantitatively this year, mainly because of the low purchasing power of consumers.
Imported raw material was the first to be hit by the ripples caused by the surge in the oil price worldwide, as it is obtained from oil derivatives. Prodplast covers almost 40% of its raw material needs through imports, Neacsu stated.
Twenty-five percent of the raw material used for processing in 2003, namely polymers, was made in Romania. This represents 95,000 tonnes out of the 379,000 tonnes used by domestic companies.
Imports of polymers chiefly came from European Union members, such as Hungary or the Czech Republic. Polymer exports totalled 254,000 tonnes.
Another effect of the increase in prices across the industry is that the growth of plastic products is below expectations.
The sales of companies on the plastic products market exceeded one billion dollars last year, up 25% from 2002 in nominal terms.
"The raw material price went up 8% this month alone," says Florica Condrea, economic manager of Munplast SA Bucharest. This company manufactures foils, blow-moulded and injection-moulded products, leather replacements and accessories for the clothing industry. It logged turnover of 4.3 million euros in 2002.
Raw materials have become 15% more expensive on the average since the beginning of the year, with price increases ranging from 18% for polypropylene to 12%-13% for polyethylene. According to Condrea, finished product prices have been unable to keep up.
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