Rainer Huneke (57) entered the plastics trade in 1969, making him one of the most experienced managers in the European plastics industry today. He has led Biesterfeld Plastic (Hamburg / Germany; www.biesterfeld-plastic.com) – see Plasteurope.com Web of 23.03.2006 – from its founding in 1989 and has turned it into one of the top players in the field of European plastics distribution. Despite the negative industry trend, the company recently opened another regional sales office at Cologne / Germany. The industry expert spoke with Daniel Stricker, senior editor of PIE, at Biesterfeld´s Hamburg headquarters about the company´s strategy and the current developments in the polymers market.


PIE: Mr. Huneke, how did business develop for Biesterfeld in 2005?

Huneke: The explosion in the price of oil and petrochemical feedstocks did not exactly leave us unscathed. In many cases, we had to push through drastic price increases but still did not achieve our targets for all our products. The relative stagnation in engineering polymers despite the quotas, been compensated through strong growth in the standard plastics. All in all, I expect our annual result for 2005 to be slightly above 2004.


PIE: Biesterfeld Plastic has been growing strongly and you want to continue growing. Concretely, what are your plans for the future?

Huneke: If you want a picture of what plastics distribution will look like in the future, you need only look at the market structure of competitive products like glass, paper/cardboard and metal. Here, the share of products sold through distributors is much higher than it is with plastics, and I expect the trend to move in a similar way in our industry. We want to offer our sales partners and customers an efficient service wherever they want it. This means that our regional expansion is still far from complete. For example, the Biesterfeld Group recently acquired full control of our sister company, Biesterfeld Siemsglüss International. With its structures in the US, Central and South America and Asia (where the main emphasis is on China and India), the group can also offer us an outstanding basis for expansion.


"Our regional expansion is not yet over"


PIE: In recent years, Biesterfeld Plastic has become strongly engaged in European countries outside Germany, especially in southern and eastern Europe. What are your expectations for those markets?

Huneke: In southern Europe, we have been able to win strong local distributors as our partners, and have thus followed our customers as they expand. In fact, we now transact 60% of our sales in that region, and I anticipate further significant growth, especially in Turkey and Greece. Building up an organisation in eastern Europe was also a strategic decision allowing us to participate in the growth of our customers. On the whole, however, this region will develop more slowly than many people expect. High growth percentages do not always mean high absolute figures.


PIE: What role does the German market play for you today and what role will it play in the future? What signals do you want to send the market by restructuring your German sales organisation into three sales offices: north, south and west?

Huneke: Germany is and will remain our domestic and core market, and it is certainly the biggest plastics market in Europe. With today´s microelectronics, centralisation does not have any streamlining effect anymore. On the other hand, it is vital now and in the future to give customers the best possible personal service. Companies can send invoices – also electronically – but business is still person-to-person. Our aim is to bring the support of the field sales force and the order processing as close as possible to the customer so that they see Biesterfeld as their neighbour – if you like, to give the company a face.


"Germany is and will remain our domestic market"


PIE: With more than 4,000 customers in Germany alone, you supply an enormous variety of companies of all sizes. How can you satisfy the very different demands of these customer groups?

Huneke: Our service includes central product management, regional marketing structures, key accounting, extensive technical support and, not least, a wide- ranging and comprehensive supply of global brands from leading manufacturers. We believe that, in this way, we can offer a tailor-made service for all customers and are especially happy when we can help customers to grow.


PIE: For a long time now, people have been expecting more from you as a distributor than just distributing granules. What demands do customers make on you today and what will they want in the future?

Huneke: We provide support in everything from mould design and material selection – including management of material specifications of the OEMs – to production optimisation and material flow. The fact that we were able to win the Fortis Bank as a partner when we recently opened our new offices shows that we take the effects of "Basel II" seriously and endeavour to help our customers by providing the full range of our expertise. Fortis is one of the few banks that is already very much pan-European. In addition, through BIT-Serv (Biesterfeld Information Technology), we offer very economical and highly practical Internet-based CRM systems that more and more customers are asking for. We are delighted that we can share our experience and developments with our partners.


PIE: How big is your influence on decisions taken by manufacturers with regard to volumes and market prices?

Huneke: Our influence on pricing is very small. Here, as ever, prices are dictated by supply and demand, even though the market players sometimes forget this. For some products, 30% of all trading volume is conducted by distributors, which means that producers depend on accurate reporting as a basis for their decisions on where to spend their money. I think I can say that we have set standards here.


"Our influence on pricing is very small"


PIE: The LME has started its futures trading for LLDPE and PP. Have you been watching developments and if so, how realistic do you see the prices established there? Are the promised reference prices actually being created? Do the daily prices reported by some international price reporting services to which the LME brokers refer really reflect everyday plastics trading in continental Europe?

Huneke: We have followed the establishment of the LME´s plastics future platform closely and studied its rationale. We have been offering longer-term contracts at average prices for many years, but have met with little response. So why should this now be any different with LME? In order for reference prices to be developed, there must be a minimum number of daily transactions. I doubt that this is the case, particularly as the players must have high nominal capital to be admitted to trading. As a result, the potential group of players is very limited. In any case, there are already enough reference prices on the market, including, of course, the Plasteurope.com tables. I find that producers are increasingly distancing themselves from reference-related contracts, and I think that is right.


"Price fluctuations will continue and even increase"


PIE: Some LME brokers regard distributors – particularly because of their large inventories – as a key target market for hedging. Do you share this view?

Huneke: We as distributors are primarily sales and marketing specialists. The hedging function until now has been the province of traders and brokers. For them it may be interesting, but it is not for us at present.


PIE: In recent years, many people have complained about the increasing volatility of polymer prices. Do you see calm returning to the market?

Huneke: The scale of the swings has not necessarily increased in the past few years, but the amplitude has become shorter. In other words, movements have become faster. In my view, the reason is the growing together of the triad markets. Through the modern possibilities of IT, it is much easier for Europe, North America and Asia to influence each other, with the result that we now can almost talk of a world market price for feedstocks and, to a certain extent, also for polymers. This world market price is subject to considerably more regional influences than before, and this increases fluctuations in the system. And I do not see any calming down – quite the contrary. Some feedstock contracts have been changed from quarterly to monthly, and others will follow soon. As a result, of course, the price movements of polymers will become greater. What´s more, if the LME´s futures trading, driven by the speculative financial market, becomes established, the whole situation will exponentiate, as experience in other markets has shown.Whether we like it or not, we must get used to the fact that the swings will continue and probably even become stronger.


"We should observe good business practices"


PIE: Autumn 2005 saw very sudden and exorbitant price increases, especially for polyolefins. Have you experienced similar market situations in the past?

Huneke: Yes, on several occasions. During the first oil crisis in the 1970s, for example, the price of PE rose from DM 0.60/kg in August 1973 to DM 4.00/kg in August 1974. There were similar developments in 1978/79 and during the second oil crisis in 1981/82. However, the high-price phases never lasted longer than 12 months and usually came to a very abrupt end. In August 1974 I went to the office in the morning with PE standing at around DM 4.00/kg. When I went home in the evening, the product was being traded at DM 0.50/kg. From this, we can draw a clear lesson for everyone involved: Even in unusual market situations, we should behave correctly and observe good business practices. After all, this sort of thing happens several times in a lifetime.


PIE: Mr. Huneke, I will look forward to our next meeting. Thank you for this discussion.