Analysis of the plastic tube market
Just a few weeks before the International Tube and Pipe Trade Fair, Tube 2008, in Düsseldorf, another sector is reporting successful developments. In addition to the steel industry, which is currently posting one positive result after another, the German plastic tube industry is charting a course for significant growth. As Dr. Elmar Löckenhoff, Managing Director of the Kunststoffrohrverband e.V. (Plastic Tube Association), states in the preface of the KRV business report 2007, the German plastic tube industry is also benefiting from globalisation. - This is shown specifically by the opening of the Eastern European markets - he admits.
- In the previous decades, plastic tube systems have continued to enter new areas of application and have supplemented or even almost replaced the range of hitherto traditional materials - declares Dr. Löckenhoff. - For example, at the end of the year, plastic tube manufacturers were close to succeeding in the area of gas pipes in residential installations, "The technical and scientific conditions for the use of plastic tube systems in this area of application have been created, therefore another market segment can now be conquered.
Two-digit Growth Rates on the Production Side
After a slight reduction in production numbers in the years 2001 and 2002, the German plastic tube industry is again reporting steady growth rates as of 2003. Particularly high growth rates - in the two-digit range, in fact - were achieved in 2005 and 2006. According to the association, 2006 was a "super year" for the German plastic tube manufacturers. In comparison with the previous year, total production increased by 70,000 tons to a total of 665,000 tons, which corresponds to a plus of 11.8 percent.
During 2006, the economic dynamics in the export market sparked improvements on the domestic market, as well. Thus group companies as well as owner-operated plastic tube producers in Germany started to expand their capacities through investments into new extrusion systems and injection moulding machines. At the same time, they also introduced measures for greater cost-efficiency. Accordingly, plastics and rubber machine producers, too, reported order increases of 15 percent. According to information supplied by PlasticsEurope Germany, the Association of Plastics Producers, consumption of standard plastics increased between 2005 and 2006 from 7.23 to 7.63 million tons, i.e. by 5.5 percent.
Recovery of Construction Industry brings Benefits
In Germany, plastic tubes cover a significant portion of the overall plastics consumption. As stated by the KRV, the construction industry accounts for a good 25.2 percent of the plastics consumption, and of this amount, about 27 percent is used in plastic tube applications.
Therefore it was very important for the sector that the construction industry, after a long dry spell, was able to contribute again to the economic upswing in 2006. This is also the reason for the increased plastic tube production for domestic use. In comparison to 2005, it rose by 68,000 tons (plus 14.3 percent). This level was last reported in 2000. Of the total German production, 24.4 percent was exported and the import quota amounted to a mere 6.0 percent.
The KRV estimates that the civil engineering sector, with a share of 89 percent, constitutes the largest user category of plastic tube systems. Of this share, 49 percent are allotted to the wastewater sector (disposal and rain water drainage), followed by the areas of drinking water, cable protection and gas. At a rate of 11 percent of the overall production, the building construction sector uses significantly lower quantities, although its turnover share is estimated to be disproportionately higher. In the view of the association, the overall turnover of the German plastic tube industry, valued at end consumer prices, about ? 2 billion annually, and the building construction sector is believed to contribute to this number with about 35 percent.
Runaway Export Success: Polypropylene Tubes
The use of polyethylene (PE) tubes for the construction of plastic tube systems has increased extremely over the past years. For the first time since 2004/2005, the production volume of tube systems of polyvinyl chloride (PVC) was surpassed. With 306,800 tons, PE tube systems held a share of 46.1 percent of the total production, followed closely by PVC systems with a share of 42.1 percent. Compared to 2005, all standard plastics reported welcome increases.
PE tubes posted a plus of 12.4 percent and PVC systems reported a growth of 9.9 percent. In the polypropylene (PP) sector, the increase amounted actually to 16 percent, which represents a market share of 8.1 percent of the overall German tube production. The latter can be contributed mostly to foreign trade. With an export share of 55.6 percent, PP plastics are far ahead of PE (24.5 percent) and PVC tubes (15.3 percent).
While the amount of residential building permits declined between 1996 and 2006 from 576,000 to 248,000, the annual production volume of plastic tube systems rose from 518,000 tons to 665,000 tons in the same period. This is an increase of 28.4 percent overall.
According to the KRV, the reason for this anti-cyclical development lies in the fact that plastic tube systems increasingly and steadily replace traditional materials and the tube systems made thereof. For example, plastic tubes are used as substitutes for concrete waste water pipes. Also with a view to vitrified clay tubes, the situation for plastic tube systems is positive. KRV calculations show that the market share of vitrified clay tubes dropped between 1996 and 2006 in the disposal sector by 18 percent overall as compared to PVC U-tubes. In the area of residential land drainage, vitrified clay tubes were all but replaced.
This development is also supported by survey results provided by the Deutsche Vereinigung für Wasserwirtschaft, Abwasser und Abfall e.V. (DWA), the German Association for Water Management, Waste Water and Waste.
They show that the share of plastic tube systems in the material distribution in German drainage networks increased in 2004 as compared to 2001 from 2.3 percent to a total of 6.0 percent. Concrete / reinforced concrete, fibrated cement and cast steel remained at steady levels considering all nominal diameters. At the same time, the share of vitrified clay tubes in the network material distribution was reduced from 44.2 percent to 40.0 percent. The volume increases of plastic tube systems in newly installed and reconstructed pipelines are estimated to have been even higher, since the numbers only consider the existing network.
Also in residential technology applications, there was a positive development for plastic tubes in 2006. Plastics tubes were able to capture some of the market share of copper piping in residential drinking water installations and improved by approximately 2 million metres, or a plus of 2.2 percent. According to the KRV, significant amounts of installed plastic tubes are used in the area of premises and building technology for area heating and cooling, which in total is estimated to represent about 65 percent of the German plastic tube production for premises and building technology.
Guarded Optimism for the Future
During the first quarter of 2007, plastic tube system production increased by 9.6 percent or 13,000 tons as compared to the comparable period of the previous year. At the same time, the growth of the materials used in pipe system production continued for polypropylene with a rate of 48.1 percent, for the polyethylene with 24.8 percent and for PVC with 12.2 percent. KRV Association members state that the production increases mainly flowed into waste and supply tubes.
Before the backdrop of the US real estate finance crisis, the German plastic tube industry approached the second half of 2007 with guarded optimism. In conjunction with the rising oil prices and the increased export costs caused by the low Dollar vis-?-vis the Euro exchange rate, the KRV fears an accelerated weakening of the German economy. On the other hand, the market penetration of plastic tube systems in all areas of application and the development of new market segments continues nevertheless. One example is the area-wide introduction of gas pipes into residential installations, which could provide the industry in this sector with robust growth rates.
