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Global demand is increasingly being driven by developments in Asia, particularly in China, India and Indonesia. With over 60 percent of BOPP usage occurring in food packaging, it is the growth in demand in these countries for an ever-widening variety of packaged foods sold through supermarket outlets that is one of the principle drivers for this material. With large, youthful and growing populations, increased urbanization and rising incomes, it is the developing markets of Asia that will continue to underpin growth in BOPP film demand.
AMI's analysis shows that China alone now accounts for 40 percent of global production and demand and on its own accounted for 2 percentage points of the global growth achieved in 2011. It accounted for 95 percent of all new capacity installed in 2011. Although production has and will continue to be primarily to serve the domestic market, the volume of output now is such that even modest export volumes have the potential to disrupt other markets. Chinese exports, which AMI estimated were 6 percent of production in 2011, are largely targeted at neighbouring Asian countries, but material can turn up in any part of the world from time to time.
The strongest growing region in 2011 was the Indian sub-continent. The industry is developing here from a relatively low base. Although it has a population comparable with China its per capita consumption of BOPP film is ten-times less that of China. Demand growth is expected to accelerate driven by the opening up of the retail industry to foreign investment and rising income levels increasing demand for packaged foods and consumer goods. At least ten new lines are on order for India and Pakistan for delivery in 2012 and 2013 that will add close to 300,000 tons/year of new capacity. The region is also growing its exports and AMI believes that 20 percent of its production was exported during 2011.
Other emerging markets in Asia continued to show strong growth in 2011 and attract further investment with new lines coming on stream in Indonesia, Taiwan and Vietnam. There were also capacity increases in Nigeria, Saudi Arabia and Peru.
However, it is noticeable that there was no investment in new lines for the more traditional markets of Western Europe, Japan and the USA in 2011, where growth continues to be more much more modest. US demand was not too bad in 2011, expanding by nearly 3 percent - the highest in five years, but Western Europe saw only a 1 percent increase in volumes and demand actually declined in Japan. In Europe, the market weakened noticeably towards the end of the year because of the effects of the Eurozone crisis and in Japan demand was disrupted by the effects of the earthquake and tsunami in March.
The high level of investment in new BOPP lines in 2011 in the emerging markets continues to challenge global supply and demand with average utilization rates slipping to around 74 percent. Utilization rates are expected to continue to fall as new capacity comes on stream in the period 2012-2013 before then recovering as production is ramped up. According to AMI's report BOPP film capacity is expected to increase by over 2.5 million tons in the period 2011-2016 bringing total global capacity to nearly 11 million tons.
AMI believes the BOPP film market has the potential to continue growing at a strong rate of 6-7 percent/year over the next five years. This would add another 2.3 million tons of demand. As was seen in 2011 the strongest growth is likely to continue to be in India, driven by the development of the organised retail sector opening up to foreign investment; China, driven by government initiatives to increase domestic consumption and raise living standards of its rural poor; and the Middle East and Africa, driven by general economic growth within this resource rich region.