Plastic tubing: market share in wastewater sector increases
Consisting of approximately 60 companies with an annual turnover of roughly EUR 3.7 billion and about 13,500 employees, the plastic tubing industry doesn’t represent a huge slice of the German economy. By way of comparison, the German plastics industry as a whole, including producers, processors and equipment manufacturers, realises annual turnover of over EUR 70 billion. However the plastic tubing industry plays an important role in the construction and maintenance of gas and drinking water supply systems, sewers and sewage pipes, as well as sanitary and heating systems. Other significant application areas for plastic tubing systems can be found in chemical, pharmaceutical and environmental engineering, as well as in the provision of geothermal energy and the production of biogas.
Thanks to the diversity of its fields of application, the plastic tubing industry was able to return to a growth path fairly quickly after the financial market crisis of 2008/2009. According to the Kunststoffrohrverband e.V. (German Plastic Tubing Association) in Bonn (www.krv.de and www.wipo.krv.de), industry production increased by almost 10% in 2011 over the prior year. With that a respectable 4% average annual growth rate was achieved over the last decade.
One factor leading to success here is the fact that plastic piping systems wrest ever larger shares of the wastewater market from other piping materials. By now, according to KRV calculations,
plastic pipes have been able to increase their relative market share in this sector to 20 per cent compared to concrete pipes.
Current economic challenges
Of course the plastic tubing industry, like any industry, isn’t immune to the negative effects of the European sovereign debt crisis on the real economy. Nevertheless, writes KRV Managing Director Dr. Elmar Löckenhoff in the association’s annual report, “long-term we’re on an upward trajectory.” He also notes that the industry does of course face a number of economic challenges –including strong competition in the markets for standard applications – due to excess capacities, ever shorter and more pronounced raw material price fluctuations and increasing corporate consolidation in the marketplace.
The report cites the example of increasing concentration in the building materials market. Especially hard hit are those plastic tubing manufacturers who are active primarily on the German market because they have limited export opportunities. Overall the German plastic tubing industry exports just over one fourth of its output, predominantly tubing systems for specialized applications with high potential for value creation. Compared to other industry sectors, the German plastic tubing industry’s export ratio would be considered rather low. Take, for example, German steel tubing manufacturers; they export over 90% of their production. Nevertheless KRV considers the export business an important pillar supporting domestic economic activity.
A total of 700,000 metric tonnes of plastic tubing systems were produced in Germany in 2011, 89% thereof (about 623,000 tonnes) for civil engineering applications. Among those the market for sewage pipes generates the largest amount of sales for plastic tubing – more than half of all output is used in wastewater applications. Drinking water applications account for 19.6%, cable conduits for 12.5% and plastic gas supply pipes for 6.2%. A key success factor is the increasing acceptance of plastic piping systems in wastewater technology mentioned earlier. Incidentally total output in 2011 only narrowly missed the record mark of 710,000 tonnes set in 2007.
With a share of 11% of total production volume, sales to the construction sector (as opposed to civil engineering) are significantly smaller. Applications in this subsector are dominated by building services engineering, followed by industrial and agricultural uses. The plastic tubing industry was able to leverage positive developments in the construction sector, which KRV in turn credits to German government economic stimulus programmes and a shift in investor behaviour toward investments in physical assets. Accordingly manufacturers of plastic tubing system for use in housing and building services engineering benefited from increased order backlogs in home construction.
The ranking of the various materials used in the production of plastic tubes has been unchanged for several years now. Since 2005 most tubes and moulded components have been manufactured using polyethylene (PE). This type of plastic accounted for 355,000 tonnes at the most recent count, polyvinyl chloride (PVC-U) for 261,000 tonnes and polypropylene (PP) for 84,000 tonnes.
By contrast there have been changes in foreign trade in recent years. While imports are far lower than exports in terms of volume, recently exports by German plastic tubing systems manufacturers have increased by a smaller percentage than imports. Nevertheless a clear foreign trade surplus was recorded again in 2011, with 179,000 tonnes being exported and only 56,000 tonnes being imported. However KRV views the diverging trends of imports and exports as evidence for increasing competitive pressure coming from other EU member states.
Business climate worsened in 2012
While KRV saw an “overall satisfactory sales development in the year 2011,” this trend did not continue to the same degree in the following year. While the industry recorded production increases in PE and PVC-U pipe systems in the first quarter of 2012 over the reference period in the prior year, there were decreases in PP and glass-reinforced plastics (GRP). Specifically a respectable production increase of 12.3% in PE pipe systems and 2.2% in PVC-U was offset by a 4.9% decrease in pipe systems made from PP and an 8.7% reduction in GRP pipes. In total the first three months of last year saw a production increase of 4.6%, to 188,659 tonnes (1st quarter of 2011: 180,372 tonnes). Thus sales volume was again positive and above the prior year.
According to KRV, this positive sales trend was not mirrored by the trend in corporate earnings, which were “squeezed hard due to volatile raw material prices.” The association further explains that the increase in the price index for plastic pipes was sharply below the changes in raw material prices, especially for PE and PVC-U. Exorbitant increases in commodity prices from the beginning of the year to April of 2012 were responsible for a marked increase in production costs over the prior year. As in other industries, the plastic piping industry views ever shorter and more pronounced raw material price fluctuation as a growing challenge for their earnings situation.
The German Plastic Tubing Association has produced the quarterly KRV Business Climate Index since 2005, tasking an external consulting firm with the calculation of a current, reliable indicator gauging business developments and future expectations of participating manufacturers of plastic tubing, moulded components and plastic piping systems. The Business Climate Index for the first quarter of 2012 already indicated that the economic situation was changing. While the Business Climate Index for plastic tubing was only marginally lower than in the year before and while business expectations had actually increased, the index for the business situation in the first three months of the year showed a significant decline compared to the fourth quarter of 2011.
The very next Business Climate Index, for the second quarter of 2012, dropped massively compared to the first quarter. Both the current business situation index and the business expectation index for the third quarter of 2012 declined sharply.
According to KRV, increased raw material costs and delayed or cancelled construction projects, including major ones, were mainly responsible for the sales volume decline among plastic tubing manufacturers in the second quarter. A drop in orders due to changed price requirements in the market compounded the problem. The declines affected the utility and sanitation sector as well as the industrial tubing sector. Only the building services sector posted a positive index in the second quarter, thus maintaining at a steady level.
According to the companies, the rather low level of expectation for the third quarter was reflected in an overall increase in restraint regarding enquiries and requests for proposals, as well as in expectations of a decline in major construction and industrial projects. Except for the building services subsector, plastic tubing manufacturers expected future sales numbers in all other sectors to fall below prior-year levels again.
Tubing in focus: the Tube 2014 trade fair
Every other year Düsseldorf becomes the focus of attention as it hosts the world’s leading trade fair covering all aspects of tubing. Following an extremely successful Tube 2012, the next International Trade Fair for Tubes will once again take place in conjunction with the industry leading trade fair wire at the exhibition centre in Düsseldorf from 7 to 11 April 2014. Besides tubes and related accessoiries, innovative manufacturing and processing technologies and many other aspects will be exhibited at Tube