While the BOPP film industry is undoubtedly one of the strongest growing sectors of the flexible packaging industry, over-enthusiastic investment in recent years has also driven down margins and utilisation rates around the world and the industry now looks set for a period of readjustment.
Investment rates having slowed notably from the giddy heights of the early 2000s, utilisation rates should steadily improve over the next five years, bringing some relief to hard pressed BOPP margins according to the latest global report from industry consultants AMI.
However, with market demand still advancing at rates of over 5 per cent per year globally, and much higher than this in developing regions, the risk remains that there could be another surge in investment to reverse this trend.
A fragmented supply structure and lack of market leadership in these regions has the potential to further exacerbate the problem. According to AMI the demand for BOPP film globally has reached nearly 4.5 million tonnes.
Market growth has been strong as demand picked up after the global recession of 2001-2002 and the use of BOPP film has expanded in less developed markets. While Asia represents the largest regional market accounting for 40 per cent of global demand in 2006, there has been substantial increases in BOPP film use in the Indian sub-continent, the Middle East and Russia.
In conjunction with this these areas have also seen increased investment in new lines. Russia, for example, has seen five new BOPP film plants come on stream in the period 2005-2007.
For the more advanced, mature markets of Western Europe, Japan and NAFTA market growth has moderated to move closer to GDP growth compared with 4 times in the 1990s, reflecting the well-developed nature of the BOPP film market in these regions, some switching of conversion activities to lower cost regions and increased imports of converted goods, particularly tape products.
In the case of Western Europe and North America, utilisation levels have been maintained thanks to strong growth in export markets although capacity build up and improved utilisation in these areas is likely to result in a decline in export opportunities going forward.
Growth for Western Europe, NAFTA and Japan is forecast by AMI at an average of just under 2 per cent per the next five years, compared with nearer 9 per cent per year for the rest of the world.
BOPP film is mainly used in food packaging which for 2006 accounted for two-thirds of demand.
The largest use is in the packaging of dried foods, which includes products such as crisps, snack food and coffee. The other large market is biscuits/bakery packaging. This application tends to be of more importance in the advanced economies rather than developing markets, because of higher levels of consumer spending on these products.
Non-food applications include tobacco overwrap films, label film, tape film and capacitor film.
Market growth is largely driven by developments in food packaging because of the higher added value these applications attract through the application of various barrier properties and the high standards required for printing and finishing.
"The global BOPP film market” is a detailed multiclient report and is available from AMI Consulting.
