The crowded European plastics market offers plenty of room for consolidation, both for converters and producers. Firms will merge or acquire their competition to create economies of scale and gain pricing power. Also, the ongoing rise of private equity will continue to change the way many companies operate, partly by facilitating a longer-term outlook.

These are some of the key findings of a new briefing paper, "Keeping Competitive in Commodity Plastics", prepared by the Economist Intelligence Unit (EIU, London / UK; www.economist.com) and sponsored by Alastian (www.alastian.com), the online polymer supplier launched by Basell (www.basell.com).

The paper, which is based in part on interviews with plastics industry executives, says the European industry must deal with two growing competitors: low-cost converters in Asia, and Middle East producers with massive natural advantages in raw materials. Although turbulence in oil prices is not a new threat, the combination of uncertainty and volatility is forcing firms to adopt new strategies, such as price hedging on commodity exchanges.

Overall, the European plastics industry stands to benefit from a greater focus on product innovation, the authors say. They see great potential for producers and converters to collaborate on technical advances and branding initiatives, such as the Borealis (www.borealisgroup.com) partnership with RPC (www.rpc-group.com) for a special type of ice cream packaging for Unilever. Summing up, the briefing paper concludes: "Most converters agree that long-term survival will require a focus on selected markets. These could be in products that don´t travel well, or niches where extra skill and expertise is required."

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EIU briefing paper: "Keeping Competitive in Commodity Plastics" as PDF document (196 KB)