Energy costs could trigger plastics rationalisation

By Paul Gander

- Last updated on GMT

Related tags: Energy costs, United kingdom, Material, Cost

Energy costs could trigger plastics rationalisation
Soaring energy prices on top of raw material and labour costs could see UK plastics packaging leading a Europe-wide process of consolidation in the...

Soaring energy prices on top of raw material and labour costs could see UK plastics packaging leading a Europe-wide process of consolidation in the sector, says RPC chief executive Ron Marsh.

Industry faced massive hikes in energy costs when contracts were renewed last October. In some, but by no means all, cases this meant an increase of 100%. RPC is among the companies claiming to have been hit by rises of this magnitude.

"We have been successful in passing on those price increases to our customers," says Marsh. "But since then, energy costs have risen again."

RPC's complaints about its cost burden have met with some scepticism, given a record half-year turnover last September of £300m, and a 20% increase in operating profits. Marsh shrugs this off: "We want to stay in business. Our margins as a group are around 7%. A doubling of energy costs would translate as a halving of profits, and we'd be sunk."

Nonetheless, as a broad-based international supplier, RPC is in a much stronger position than most in the industry. "The vast majority of our industry is in a poor financial state, and most owners are looking for the exit door," says Marsh. "You certainly do want to see some rationalisation in the industry."

Philip Law, public affairs director at the British Plastics Federation (BPF), says: "Energy pricing is the number one issue affecting the plastics industry as a whole." He adds: "We do have some concerns about competitiveness, internationally and with other materials."

In comparison with other packaging materials, plastics is doubly handicapped by the lack of a climate change levy agreement. "Without this, manufacturers cannot obtain a rebate, so their costs are unmitigated," Law explains.

Most manufacturers have had to increase prices, says Law, while looking hard at energy efficiency. "Some multinationals are also able to look at putting investment into countries where energy costs less," he adds.

According to Marsh, labour costs have already focused RPC's attention on central and eastern Europe. "Now you have to superimpose energy costs on that. We will be investing disproportionately in parts of Europe other than the UK," he says.

Related topics: Packaging materials

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