MARKET STRETCH WRAP FILMS
Russian market of stretch wrap films was one of the most vibrant in packaging industry. Today Russia has capacious production facilities for this packaging category; in 2014 the country produced about 122 thousand tons of stretch wrap. By 2008 saturation point was reached so dynamics of production volume slowed down. In 2014 this industry saw approximately 4% year-to-year increase of domestic production in volume.
Today main producers of stretch wrap films in Russia are 6 companies: “Regent Stretch” (Moscow, part of “Regent” Group of Companies), “Upakovka I Servis (Packaging and Service)” LLC, “Lava” LLC (Smolensk Region), “VarioPak” CJSC (Saint Petersburg), “Biaxplen NK” LLC (Samara Region) and “Plastbalt” LLC (Kaliningrad Region)*.
“PZ (Polymer Plant) “Desnogorsky” LLC (Smolensk Region) can also be referred to relatively large manufacturers of stretch wrap films; production capacity of this company is about 2.5-3 thousand tons of stretch wrap annually.
Start of a new plant making five-layer stretch wrap film by “Biaxplen NK” LLC (Samara Region) in February 2011 was an important event on the review market. Production capacity of this plant constituted 9600 tons annually. In March 2011 company “Lava” started a new line producing stretch wrap. Also in November 2011 “Regent Stretch” completed installation of a new production line with capacity of 10 thousand tons of stretch wrap films annually. In November 2013 “Clarity” LLC started a new stretch wrap plant in Nizhniy Novgorod Region; in November 2014 installation of a new line producing stretch wrap films was finished in “UK IP (Trust Company Industrial Park) “Kamskie Polyany (Kama Fields)” LLC (Republic of Tatarstan).
Start of new cutting edge production facilities in 2013-2014 made a number of SME manufacturers of stretch wrap close. Besides, increased production volume at large companies and devaluation of ruble will have a strong impact upon the market of stretch wrap films and lead to decline of import in 2015-2016.
IMPORT OF STRETCH WRAP FILMS
Despite impressive volume of domestic production and start of new production facilities in Russia import of this category was large enough and was growing during 2009–2012. For instance, in 2012 it saw 10.5% year-to-year increase. However, in 2013-2014 new production facilities started in Russia in 2011-2013 reached peak of design capacity and import volume started to decline. For instance, in comparison to 2009 import of stretch wrap films in 2013 increased by 15.5 thousand tons or by 39.9% and constituted about 54 thousand tons. However, in comparison to 2012 import volume declined by 2.6 thousand tons or by 4.6%. In 2014 import volume reduced by 20 thousand tons against 2013. Most impressive decline of import was observed in H2 2014. Decline of import value also constituted about 50%.
Stretch wrap is supplied to Russia mainly from Malaysia and Poland; aggregately these two countries controlled about 40% of import in 2014.
EXPORT OF STRETCH WRAP FILMS
Export of stretch wrap from Russia is quite unimpressive: in 2014 it constituted just about 100 tons. Russian manufacturers distribute their products on domestic market and have no need to search for new markets abroad.
In 2014 Russia exported stretch wrap films mainly to Poland. Besides, significant part of export in this category goes to Ukraine. It should be mentioned that back in 2010 more than 90% of Russian export of stretch wrap went to Kazakhstan. But in 2011 Customs Union agreement was signed by Kazakhstan and Russia, so today foreign trade with this country is not monitored by Customs Service. According to experts, in 2011–2014 export of stretch wrap films from Russia to Kazakhstan was declining gradually. This trend was related to increasing production volume of local manufacturers and also to displacement of Russian stretch wrap with Chinese product.
DYNAMICS AND TRENDS OF THE MARKET OF STRETCH WRAP FILMS
Analysis of export, import and domestic production proves that Russian market of stretch wrap is at maturity stage. Growth of production volume slowed down significantly in comparison to 2005-2009. By 2014 newly started production facilities reached design capacity, some more new plants were opened and foreign trade with Ukraine (major supplier of imported stretch wrap to Russian) was almost stopped; these factors resulted in 2 times decline of import volume. Almost simultaneous start of several new production lines in 2011–2013 had a strong impact upon the market of stretch wrap films in 2014. In 2013 all of these lines reached design capacity and caused structural changes on the review market. Small manufacturers felt significant acceleration of competition and started to cut down their activities.
Start of LLDPE (linear low density polyethylene, raw material for making stretch wraps) production by “Kazanregionsintez” OJSC and “Nizhnekamskneftekhim” OJSC in 2099 also had a strong influence upon performance of the review market. Domestic production of LLDPE allowed significant reduction of prices for stretch wrap films in Russia in 2010.
Till recent Russian market of flexible packaging was one of the most vibrant. Development of domestic production, coming of foreign manufacturers, gradual switch to western packaging and transportation standards determined the need for new packaging materials including stretch wrap.
Until 2008 consumption of stretch wrap in Russia was growing by about 15% annually which almost by 2 times exceeded dynamics of same index in Europe. The market was growing mainly on start of new production facilities, renovation of old plants and increasing demand for stretch wrap by current consumers. This first of all concerned fast growing food industry and related sectors of economy.
Until 2008 there was no large-scale displacement of shrink wrap with stretch wrap. This was related to the difference in raw material cost and respective difference in ready product price: shrink wrap was made from domestically produced raw materials and was by 1.5 times cheaper against stretch wrap; domestic production of raw material for stretch wrap started in Russia only in 2009. At the same time more expensive stretch wrap provided 30% saving of packaging material in comparison to shrink wrap. Situation was changed when some Russian raw oil processing companies (including the above mentioned “Kazanregionsintez” and “Nizhnekamskneftekhim”) started industrial production of LLDPE in 2009. This helped Russian companies reduce price for their stretch wrap films.
Coming of new consumers influenced the review market in 2014. Recession made many manufacturers search for the ways to cut production costs and forced them to refuse traditional packaging in favor of stretch wrap. According to experts, this trend helps manufacturers of stretch wrap live through recession easier than other manufacturers of polymer packaging. More than two times decline of import from Ukraine also influenced the review market. In 2013 Ukraine supplied to Russia 23 thousand tons of stretch wrap films and in 2014 this volume reached only 11 thousand tons. This allowed Russian manufacturers increase production volume despite recession.
With consideration of the above factors and trends it can be assumed that in 2015-2016 production volume of stretch wrap films in Russia is to stay approximately at the level of 2014. However, reduced import can stimulate increase of domestic demand. In 2015-2016 volume of Russian market of stretch wrap is forecasted to constitute about 150-160 thousand tons.
MARKET OF SHRINK WRAP FILMS
Domestic production of shrink wrap in Russia in 2014 was estimated at approximately 123 thousand tons; in comparison to previous year this market saw 0.8% increase of production volume.
Experts highlight that since the end of 2008 production of shrink wrap by many manufacturers slowed down; some companies even started to cut down production. In 2010–2012 market performance improved a little: main consuming industries demonstrated increase of production during that period and this allowed increased production volume in sector of shrink wrap films. However, in 2013-2014 increase of demand practically ceased.
Almost every city has production facility making shrink wrap; the market has no manufacturers of federal level.
Recent trend of the market of shrink wrap is gradual switch to multilayer films. Multilayer wrap films have a lot of advantages over one-layer and this stimulated increase of demand for it as a packaging material. In 2014 multilayer shrink wrap constituted more than half of the review market in volume. Practically all manufacturers who started production of shrink wrap during recent 3-5 years make exactly multilayer films.
Of course, shrink wrap for multipacks constitutes not the largest part of production expenses. On the other hand, application of innovative or just new kinds of shrink wrap can help to save significant amounts.
Today Russia counts about 120 companies producing shrink wrap films. Only 50 of them make multilayer shrink wrap (mainly three layer films). However, new production facilities for making more sophisticated kinds of shrink film (like 5-layer wrap) were started in 2007–2010. Relatively small share of multilayer shrink films in production volume is related to large investments needed to start such plants.
Almost all shrink wrap films in Russia are produced from PVC. Recently production of polyolefin shrink wrap film was started by some plants in the country; this sector reached no impressive production volume yet. The largest manufacturer of polyolefin shrink wrap in Russia is “Profupak” LLC (Tver, production started in 2005); in 2014 production volume of this company reached 1.6 thousand tons. Another important manufacturer of polyolefin shrink wrap in Russia is “Em-Plast” LLC (Republic of Mordovia, production started in the middle of 2008). In 2014 this company produced about 1.7 thousand tons of polyolefin shrink wrap. In the beginning of 2012 the company started production of a new kind of shrink wrap film TM “Astra Film”.
IMPORT OF SHRINK WRAP FILMS
In 2010 import of shrink wrap films to Russia increased by 31.5% and reached 11 thousand tons; in 2011 it grew by 12.4% to reach 12.3 thousand tons. In 2012 import of the review category saw 55.9% growth and constituted 19.2 thousand tons in volume. In 2013 import increased by 15.2% and reached 22.1 thousand tons. In 2014 import volume of the review category saw practically no year-to-year change.
Import volume constitutes about 17-18% of domestic production of shrink wrap. Domestic production satisfies inner demand for the review category but in 2010-2014 industry faced some undersupply which was covered by import.
Shrink wrap films are supplied to Russia mainly from China, Germany and Israel; aggregately these three countries controlled more than 50% of import in 2014. Other large suppliers of the review category to Russia are Korea and Finland with cumulative share of 12%.
The largest companies supplying shrink wrap films to Russia are “Berry Plastics GmbH” (Germany), “P.V.Ran ltd.” (Israel) and “Dongil Chemical” (Republic of Korea) with cumulative 25% of import volume in 2014. Other large supplying companies are “Quick Pack Pacifiñ Co.” (Thailand) and “Novaro Enterprises S.A.” (Netherlands).
In 2014 estimated volume of Russian market of shrink wrap films constituted 145 thousand tons - by 1.5% more than in 2013 and by 45% more than in 2009.
EXPORT OF SHRINK WRAP FILMS
Export of shrink wrap films from Russia increased by 10.9% in 2010 and in 2011 declined by 15.6%. In 2012 decline of export volume continued and constituted 14.1%. In 2013 export grew by 13.3% in volume over 2012. In 2014 export volume of shrink wrap films reduced approximately by 30% against 2013.
It should be mentioned that export constitutes about 0.5% of domestic production of the review category. Main destination countries for export of shrink wrap films from Russia are Mongolia and Azerbaijan (cumulative share in export volume was 70% in 2014).
Export of shrink wrap films from Russia is mainly driven by companies “Gotek” GK, “Plastic” OJSC (Irkutsk Region) and “Ponate ARD” LLC (Moscow); in 2014 these companies aggregately provided about 95% of export volume.
Other companies exporting shrink wrap films from Russia are “UPM Kummene Chudovo” LLC (Novgorod Region) and “Zavod (Plant) “Technoplex” LLC (Ryazan Region).
DYNAMICS AND TRENDS ON THE MARKET OF SHRINK WRAP FILMS
One of important recent trends of the market of shrink wrap films was the switch to multilayer films. Such films have many advantage over simple one layer films and they find increasingly wide application in product packaging. As it had been already mentioned, in 2014 multilayer films constituted more than 50% of market volume. Growing share of multilayer films in market volume was mainly driven by increasing share of this variety in production.
During recent years manufacturers of packaging materials try to switch to new kinds of shrink wrap films offering significant benefits to consumers: technologically flexible product helping to avoid frequent re-adjustment of packing equipment and offering more attractive exterior of packed products.
Another peculiarity of Russian market of shrink wrap films is absence of large manufacturers. More than 75% of shrink wrap in Russia is manufactured by plants with production capacity of 600-800 tons annually.
It should be also mentioned that the market of shrink wrap films develops more vibrantly than the market of polymer films; during the review period annual growth rates on it were always higher in comparison to polymer films.
In 2015 Russian market of shrink wrap films is to decline by 1-3% in volume. In 2016 possible 1-3% growth is forecasted.
Summing up the results of 2014 we should mention that Russian market of packaging films found itself in recession like all other industries of Russian economy. Devaluation of ruble and almost triple increase of interest rates on bank loans resulted in rocketed production costs. According to experts, by the end of 2014 several large and medium companies came to the edge of bankruptcy (they stopped payments on loans and ceased to fulfill their obligations on contracts with suppliers). The above mentioned factors certainly have negative impact upon financial stability of manufacturing companies but there are more negative nuances. In 2014 prices for main kinds of polymer films increased fast and went high - by 15-35%. Meanwhile price for polymer packaging increased “just” by 5-10%. This situation cannot last too long. In the beginning of 2015 cost of flexible packaging is forecasted to grow by impressive 15-20%. All this together with deepening recession in main consuming industries will lead to abrupt decline of demand for polymer films early in 2015. By summer situation might improve. Significant decline of import gives Russian manufacturers the opportunity to increase their presence on the market.
* The companies are named in descending order of shares in market volume.