Executive Summary

It is estimated that the total market for plastics packaging in the UK increased by 19.8% between 1996 and 2000, from £2.8m to £3.4bn. This industry accounts for around 29% of the total packaging market, which has an estimated current value of £11.6bn. It is second only to paper and board in terms of market size. Demand has increased steadily because of the versatility of plastic packaging, which is used extensively in film, semi-rigid and rigid form by a diverse range of industries with a wide customer base.

The main polymers used by the plastics packaging industry are polyethylene (PE), polypropylene (PP), polystyrene (PS) and polyvinyl chloride (PVC). These are supplied to UK converters mainly by international chemical companies operating in the UK and continental Europe. There are many variants of the principal polymers, which are modified to suit their intended end-use application. Specialist machinery, moulds and dies are needed to make the varieties of plastic packaging that end users want, and the bulk of this equipment is imported.

Environmental issues have made an impact on the plastic packaging industry, but these have had only a marginal effect on total growth in consumption. Recently introduced EU packaging laws have ensured that more recycled plastic material is incorporated in the manufacturing processes. However, this has only slightly reduced the need for virgin polymer because of total growth in demand. Recycled plastic is also believed to be unsuitable for direct contact with food and beverages, which represent the biggest outlets for plastic packaging.

The current high cost of petroleum feedstocks, on which plastics manufacture is essentially based, is making a significant economic impact on the chemical industry's ability to continue production of low-cost polymers. Converters, and their customers, are being forced to adjust to a steep increase in their costs. To some extent, the increases are being contained by technical developments taking place in the supply industry. These enable less material to be used without comprising strength and effectiveness. Furthermore, some of the packaging is being redesigned to minimise the amount of polymer needed. One-trip packaging is still the norm for most consumers of bags, bottles and containers, but there is also increasing demand by commercial and industrial customers for rigid returnable plastic containers to store and transport goods.

Demand for plastic packaging is not expected to slacken over the next 5 years despite an increase in raw material costs. This is in addition to the increasingly stringent packaging laws which may force manufacturers and consumers in the UK to reuse bottles and containers, and the general trend to eliminate secondary packaging, which many consumers regard as superfluous. Converters in the plastic packaging industry have been very adept at using new and improved grades of polymers, together with the aid of very sophisticated machinery, to advance the boundaries in which they operate. Consequently, it is anticipated that demand during the period 2001 to 2005 will increase from £3.7bn to £4.4bn — approximately the same growth rate as was achieved in the previous 5 years.

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