The European polypropylene compounding market is going through a shift in power

UK research group AMI Consulting says the power has moved from the large buyers to the large sellers and from independent to integrated compounders in West and central Europe.

In a new report, AMI says that “seller power” has emerged from factors such as grade rationalisation, product development, economies of scale and success in driving down manufacturing costs.

Integrated compounders that also manufacture PP resin, such as Basell, Borealis and ExxonMobil, have gained greater power in the marketplace, says AMI. This has helped them to improve profitability at a time when PP resin has had poorer returns.

The independent compounding sector has lost market share in the meantime, says AMI. “Independents can’t compete on technology scale and application development compared with the integrated sector.”

It estimates European demand for PP compounds in 2000-2003 grew by 3-4% per year. Although slower than 6-7% per year growth rate for the period 1995-2000, AMI noted demand is still growing at double digit rates in central and eastern Europe. The automotive industry remains the main market for PP compounds. Other traditional markets have weakened in Europe, such as electrical appliances and furniture.