In February 2022, the Russian offensive into Ukraine descended like a black swan on the global economy, almost as powerful as the Covid-19 pandemic, and the turbulence that followed the initial stage of the crisis has slowly but surely been winding down – apart from the ongoing humanitarian tragedy. Global trade has largely adapted to the new reality, with Turkey and China becoming the largest importers of Russian polymers to replace EU member states, many of which have been forced to wean themselves off their dependence on Russian energy imports.

Europe is still dealing with the consequences of the bloody protracted conflict, as is its plastics industry. Sweeping sanctions imposed on Russia by Western countries have profoundly impacted global trade, leaving Europe caught in the middle. 

The impact is especially apparent in Poland, which borders Ukraine. “The Russian war in Ukraine has intensified the market’s instability [in Europe] with high energy and feedstock prices as well as access to raw materials,” said Anna Kozera-Szałkowska, managing director of Plastics Europe Polska (www.plasticseurope.org/pl). 

The energy crunch that wreaked havoc on the European economy in 2022 has eased overall despite recent spikes in natural gas prices, which in December 2023 were down 65% from the same time last year.

High inflation in the Eurozone in 2023 was also partly attributed to the Ukrainian conflict and sanctions against Russia. The latest figures look optimistic, with annual headline consumer price growth in the Eurozone falling to a preliminary 2.4% in November, the lowest mark since mid-2021. But looming fears of economic recession and consequently waning demand remain in the plastics market.

One of the main consequences of multiple economic challenges of past years is the growing competitiveness gap between Europe and the rest of the world, Kozera-Szałkowska said, adding that Europe’s share of global plastics production has fallen from 28% in 2002 to 14% in 2022.

Still barred from the European market, Russia doubled down on its efforts to forge stronger political and trade ties with those still willing to cooperate with the country. For example, Iran has disclosed plans to deepen cooperation with Russia in the petrochemical industry.

Turkey emerged as one of the key beneficiaries of the political crisis between Europe and Russia, according to Barbaros Demirci, freelance market research consultant. For instance, Europe now has to increasingly rely on pipelines that transit natural gas from Azerbaijan and Iran through Turkish territory. The infrastructure is being expanded with projects like TANAP on the Southern Gas Corridor, Demirci added. 

On the other hand, the conflict has had a certain negative impact on the Turkish economy, contributing to the national currency depreciations over the past couple of years, Demirci said. 

Sibur (Moscow; www.sibur.ru) plans to export 1 mn t of polyolefins to China and Turkey in 2023, 67% more than in the previous year. These quantities are being redirected from Europe. The reorientation to new markets came with logistical difficulties that nearly halved margins. Occasional reports indicate that Russia offered its products to prospective customers not party to sanctions with discounts to gain a foothold in the local markets. 

In the meantime, Ukrainian polymer manufacturer Karpatnaftokhim (Kalush; www.knh.com.ua) has been scrambling to resume operations, but with no success so far. 

And EU countries were forced to move on from Russian gas after Moscow capped its pipelines to Europe. Companies have built waterborne terminals for liquified natural gas (LNG), and now many countries are vying to supply Europe. In October alone, Qatar clinched three major deals to provide the fuel to companies in three EU countries as it battles the US and other major producers.

The short- and mid-term outlook for the European plastics industry remains somewhat vague since there are too many factors at play, some of which are hardly predictable. 

From a Polish perspective, “Plastics converter demand is expected to decline in Q4 not only because of lower demand from related industries but also due to possible policy of reducing inventories pursued by many processors at the end of the year,” Kozera-Szałkowska said. 

The observed economic slowdown, inflation, energy crisis, and geopolitical unrest have had a negative impact on market dynamics. Against this background, it is extremely difficult to give an accurate prognosis for the coming weeks, let alone more extended periods of time, she noted.

However, some optimism for the Polish plastics sector comes from the latest forecasts from the Polish Chamber of Commerce, which estimated a 5.3% increase for total Polish exports in 2023 and further growth of 11.3% in 2024, Kozera-Szałkowska added.

While the people of Ukraine must constantly deal with the war, those further west face less influence on their daily lives from the conflict. But since an end of the hostilities is still unlikely any time soon, the possibility remains that the conflict could ring more unpleasant surprises to the plastics industry and beyond in 2024.

Plasteurope.com has decided to end the year on a slightly different note. Instead of taking you, dear reader, to another website with our picks of the year, we’ve decided to make things easier and brought everything under the common roof of the Plasteurope.com website and magazine. From automotive over financial reports to recycling, we’re bringing you an analysis of the year that was, with hints of what you could look forward to in 2024. Our goal, simple as always, is to help you make better business decisions. Hope you enjoy reading our Year-Enders 2023!