European plastics market: How and when will the turnaround come?

Over the past few days, anyone interested in the plastics market has been eagerly awaiting the 2024 business figures from the big chemical companies such as BASF, Covestro and LyondellBasell. Internationally, things are not going badly for most of them, but in Europe they are rather poor. How can the turnaround succeed? Promoting the circular economy could play a role.

Written by Dr. Ulla Reutner

Close-up of a waste container with plastic waste, including packaging, cups, bottle caps and plastic film — Household plastic waste is already largely recycled. For many other materials, circular solutions still need to be developed.

BASF's Materials segment is one of the world's leading suppliers of high-performance plastics. It also includes precursors, in particular large-volume monomers, and base polymers. Its development is an indicator for the plastics market. The fact that sales in 2024 were 4.5% lower than in the previous year, and in the case of Performance Materials even 5.5% lower, does not bode well for the market as a whole. Slight volume growth of 2.1 percent combined with sharp price erosion in some areas led to this unsatisfactory result.

At least EBITDA grew slightly, despite higher fixed costs. Barely respectable, thanks to its global orientation. And in its forecast for 2025, the Group expects a further slight increase in EBITDA, driven by volume growth with stable margins. However, the European sites, especially Ludwigshafen, will be affected by low European market growth and high gas prices.

A male scientist wearing protective goggles and blue gloves works with a multichannel pipette in a sterile workbench — Covestro is investing around 100 million euros to secure its competitiveness. The strengthening of research and development is paying off in future technologies for the implementation of a complete circular economy.

Growth internationally, losses in Europe

This is the problem for most plastics manufacturers. Covestro is no exception. In 2024, the plastics manufacturer achieved a stable profit in the billions. In Germany, however, it is still in the red, even though it has increased its sales volumes even more than BASF. CEO Markus Steilemann stresses that the German business still has a future for Covestro. In view of the imminent takeover by the Arab oil company Adnoc, this cannot be taken for granted. A mid-triple-digit million-euro amount is to be invested in Europe, including Germany, but hardly in energy-intensive large-scale plants. The situation is better for the speciality business. Otherwise, further efficiency improvements are on the agenda.

Now it is up to the new German government. Steilemann calls on politicians to provide stable energy at competitive prices, to streamline approval procedures and further reduce bureaucracy, and to lower corporate taxes. In his role as VCI President, he expects Berlin to once again take a leading role in Brussels: "Politicians must now deliver - pragmatically, without ideology and with the courage to compromise. This is the only way Germany will remain an attractive industrial location.

Seasonally higher demand in several product lines

LyondellBasell Industries, the third largest polyolefins producer based in Rotterdam, is also affected by rising natural gas prices, weak global demand and low margins. However, the group also performed well with an EBITDA of 3.5 billion US-Dollar. Although margins recovered in Advanced Polymer Solutions, the global decline in automotive production limited the positive impact. The company sees a sign of recovery in the fact that North American domestic demand for polyolefins is expected to recover in 2024 after two years of decline. For the first quarter of 2025, it expects a seasonal improvement in demand for most product lines.

Portrait photo of Virginia Janssens — Virginia Janssens, CEO of Plastics Europe, said: "European plastics production is crucial for the future of the EU's industrial base and for greater strategic autonomy. Unless urgent action is taken, Europe will become increasingly dependent on imports of plastic granulate and finished products from regions where environmental standards are often lower.

Europe continues to lag behind Asia

Overall, the volume of plastics produced in Europe is stagnating - as it has been for around ten years - or even continuing to decline. Figures from Plastics Europe show a sharp decline of 8.3 per cent in 2023 compared to the previous year. A brief positive trend in the first two quarters of 2024 did not continue. In Asia, however, production continues to rise. Europe's share of the world market will fall from 22% in 2006 to 12% in 2023.

In the packaging industry, which accounts for the largest share of plastics in Germany at around one third, less is more. In the construction and automotive industries, the next largest users, the trend is mixed. Europe's carmakers are seeing an increase in production but are still nowhere near the production volumes of 2019. The construction industry is at best stabilising at a low level. More and more recycled plastics are being used there. In Germany in particular, where around a third of all plastics are produced, recycling continues to be very important. Plastic waste is largely used for material and raw material recycling, including energy recovery. The circular economy is working relatively well. But even the production of recycled plastics in Europe will decline by 2023. The reason: cheap imports.

A light-coloured plastic pipe printed with Uponor Aqua runs through two stainless steel rollers in a production plant — Plastic waste that is difficult to recycle can be converted into high-quality polymer products, such as plastic pipes, through chemical recycling. This is demonstrated by a joint project between Neste, Borealis, Uponor and Wastewise.

Plastics a strategic raw material for strategic EU sectors

The European association warns that the Clean Industrial Deal risks overlooking the importance of plastics production for Europe's industrial base. In this context, Plastics Europe strongly supports the EU's competitiveness and decarbonisation agenda. Managing Director Virginia Janssens says: 'They [plastics] provide key raw materials for strategic EU sectors such as automotive, net-zero technologies, healthcare, construction and defence, and they also play an important role in the transformation of these industries. Pointing to the risk that Europe could become increasingly dependent on plastics from regions with less stringent environmental standards, she warns: The window of opportunity to address the competitive challenges facing our industry and to create a more favourable investment climate is closing fast. […] Our industry cannot achieve our climate neutrality and circularity ambitions if we are not competitive enough to invest'. Their demands to the European Commission include an action plan for the future of the European plastics sector, the inclusion of the industry in innovation funding and the creation and protection of an internal market for waste, recycled and bio-based materials.

Promoting recycling technologies

Plastics Europe also proposes funding programmes for pilot plants and demonstration projects to bring new recycling technologies into practice more quickly. Industrial and application research should be specifically supported so that innovations do not get stuck in the early stages of development. In addition to competitive energy prices and the reduction of bureaucratic burdens, Dr Christine Bunte, Managing Director of Plastics Europe in Germany, also calls for targeted investment incentives for recycling technologies such as the collection, sorting and recycling of plastic waste. In addition, industry associations are calling for further safe recycling processes to be approved for use in the food sector as soon as possible.

Turning to a circular economy strengthens Europe's plastics industry

Both the environment and Europe's plastics producers would benefit from a circular economy, in which plastics are used as efficiently and for as long as possible and then recycled. Innovations that make recycling easier already exist - and many more will follow. Strengthening the recyclate market strengthens the whole industry. There is a lot of potential here. The gap between supply and demand for recycled plastics will continue to widen in the coming years and poses a fundamental problem for the industry," says Dr Oliver Möllenstädt, Managing Director of the Gesamtverband der kunststoffverarbeitenden Industrie (GKV, German Plastics Processing Industry Association). By 2030, there could be a gap of 3.5 million tonnes across the EU. To fill this gap, Michael Weigelt, Managing Director of TecPart - Association of Technical Plastic Products, suggests that post-industrial recyclates should be recognised as equivalent to post-consumer recyclates.

He also suggests that recyclate producers should be exempted from taxes, such as grid fees, and that their electricity costs should be reduced so that their products remain competitive with imports.

Imports will continue to be necessary on a large scale for both virgin and recycled plastics. However, imports of products that do not meet European standards must be stopped. The associations see the obligation to have imported recyclates certified by an independent third party, which is already provided for in the EU Packaging Regulation, as a step in the right direction. The promotion of chemical recycling, as called for by Wolfgang Große Entrup, Managing Director of the VCI, also supports the goal of a green transformation of the plastics industry.

Author

Dr. Ulla Reutner

Chemist and freelance specialised journalist