The plastics industry faced with the Russia-Ukraine conflict
Faced with the Russian-Ukrainian conflict and the dramatic increase in the cost of raw materials, Hubert Quincelet gives us his analysis on the need for adaptation within the plastics sector, as well as as its future prospects in light of the current situation.
Speaking on RCF Radio, the founding president of AEP Group, which alone produces more than half of France’s flexible packaging, discussed the various challenges to all aspects of the plastics industry presented by the current conflict in Eastern Europe.
According to him, the current events have only served to accentuate volatility on markets linked to the plastics industry which has been around for years, well before the Russian oil crisis.
The need to constantly adapt
Specialising in the manufacturing of polyethylene films, used in food packaging and miscellaneous consumables, for which oil remains the main raw material, the group finds itself in a rapidly changing situation, with sharp increases in price due to the war. While Hubert Quincelet is concerned the next few months, April, May and June, will prove difficult because the cost of raw materials has doubled and they are in short supply, based on his analysis, it will not get worse.
His concerns are therefore more long term, due to the damage caused by the substantial additional costs of buying raw materials on the business’ cash reserves. Already, the sector’s various players are having to recoup the extra costs on the selling price, at the risk of seeing their customers seeking new and more economical packaging solutions.
Faced with these constraints, AEP’s challenge is adapting to this new reality while maintaining production levels – reducing is out of the question – by coming up with alternative solutions for the supply of raw materials, like relying on other suppliers, particularly in the United States.
Then by increasing selling prices and passing on extra costs directly to buyers in order to preserve the profitability of the activity. Hubert Quincelet makes clear this is not a choice for him or his clients. And finally, through the rationalisation of energy expenditure on gas and electricity for production plants. While efforts to reduce bills started before the Russian-Ukrainian conflict, pushing them to the maximum now seems vital in order to remaining virtuous when it comes to energy consumption.
Future prospects for the plastics industry
AEP’s dominant position on the French market means that it must lead by example when it comes to building a circular economy through continuous adaptation. For example by taking into account the recyclability of materials or using those which have been recycled during the production processes to reduce the need for fossil fuels and limit the impact of the plastics industry on the environment. This sector remains of capital importance to the current economy according to Hubert Quincelet, mainly because plastics’ have a wide range of applications and also offers undeniable advantages compared to other competing materials such as glass or metal. Despite the pollution problems raised by their mass use, he is adamant: plastic remains a virtuous resource and will be part of our lifestyles for many years to come, hence why the industry needs to come together, to reinvent itself and innovate, in order to make the plastics industry attractive once more.