Gesamtverband Kunststoffverarbeitende Industrie e. V. (GKV)
Plastics processing companies in Germany are facing a massive wave of price increases from their raw material suppliers and are only partially able to pass on the increased costs. This is the result of a recent flash survey conducted by the Gesamtverband Kunststoffverarbeitende Industrie e.V. (GKV) among the member companies of its supporting associations on the effects of the current crisis in the Middle East on the supply of raw materials.
Two thirds of the companies surveyed have already been affected by price increases from raw material suppliers just a few days after the military escalation of the conflict in the Middle East. Almost without exception, the remaining companies have received corresponding announcements. The suppliers cite so-called force majeure, with references to geopolitical and logistical factors, in particular the blockade of the Strait of Hormuz or increased freight costs (68%), the Iran war (63%) and generally higher raw material and energy prices (62%).
In this context, the GKV points out that existing contracts must be complied with. The force majeure declarations available to date are almost without exception too general and do not meet the legal requirements. “Plastics processors should not accept this behaviour, but should ask the respective raw material supplier to explain the conditions of the force majeure event in detail,” explains Dr. Oliver Möllenstädt, Managing Director of the GKV. To this end, the GKV has distributed practical handouts to its member companies. In fact, 39% of those surveyed have so far rejected the suppliers’ price demands, while just under a third (28%) have requested a specific explanation of the circumstances. One in three companies (37%) is looking into substitution with alternative suppliers or materials.
“Our companies find it particularly incomprehensible that suppliers are declaring force majeure for plastics, even though the raw materials arrived in Europe weeks before the blockade. We strongly oppose such artificial shortages and price hikes,” explained Dr. Oliver Möllenstädt. “Instead of continuing to tighten the price screw, plastics producers should consider how they can guarantee their customers a supply if the crisis lasts longer,” demanded Möllenstädt.
The price increases primarily affect PE and PP plastics and amount to between 40% and 60%. Due to these massive price increases, many plastics processors are forced to raise their prices for plastic products. In this respect, the GKV expects noticeable price increases for many plastic products in the short term. So far, only a minority of 10% of those surveyed have actually been able to pass on the majority of the additional costs. The majority of 58% are only able to pass on some of the costs, while almost a third (30%) are barely able to pass them on to customers. Even if it is possible to pass on costs, e.g. within the framework of price escalation clauses, these only apply with a delay in some cases. Earnings expectations are correspondingly negative: For 58% of companies, the developments have a very strong impact on the company result. For 3% of companies, the burdens are even threatening their existence.
The drastic price increases are hitting the plastics processing industry at an inopportune time. Many companies are struggling with declining sales as a result of three years of weak demand. These companies are now also facing liquidity problems as a result of the drastic rise in costs. The GKV warns companies in the plastics manufacturing industry against overburdening plastics processors with excessive price increases, triggering a wave of insolvencies among their customers and causing structural damage to Germany as a plastics location.
Read the entire press release now: