European Pigment Market Colored By Asian Competition

Pigment producers must boost product innovation and cut costs to meet growing demand by European plastics market.

As certain sectors of the European manufacturing industry move their business to Asia to take advantage of lower costs and market growth, plastic processors are also following to compete with Asian companies and improve their offerings to customers in Asia. As a result, the European masterbatch and colorants industry has lost customers to Asia and must become more competitive and price-driven to counteract the loss in profits, according to a Frost & Sullivan report released Wednesday.

The study finds that the plastic colorant market in Europe earned revenues of EUR292.6 million in 2005 and is forecasted to reach EUR339.3 million by 2012.
According to Frost & Sullivan Industry Analyst Robert Outram, the European Union (EU) plastics market is growing in most sectors of the industry and chemical class.

"Growth in the high density polyethylene (HDPE) and polyethylene terephthalate (PET) sector has been particularly good, with growth rates since 2001 ranging between 3.4 percent to 4.4 percent per year. This is an important sector of the plastic colorants markets as HDPE and PET are used in the making of plastic bottles and containers, often requiring some colorant," said Outram.

The expansion of the European plastic industry, particularly in high-price and technical applications such as films and automotive parts, is driving the plastic colorant market.

As Asian companies enter the market, resulting in price declines, these high-performance applications are providing opportunities to European pigment producers and allowing them to distinguish themselves as technology leaders, the report noted.

These opportunities, though, are being offset by increasing price pressures on European pigment producers. The cost of producing a kilogram of organic pigment is lower in India and China, than in Europe.

Due to low costs of construction, workforce wages and environmental controls in Asia, Asian pigment producers can usually charge EUR2 to EUR3 less per kilo for organic pigments, than European producers. 

Although tightening of environmental legislations in Asian countries is expected, the report said that it is unlikely these changes would make a significant impact to affect cost disparities.

"Competition for sales has largely been on a price basis as the degree of innovation in the market is limited and the market itself has noticeable resistance to evolving technologically," explained  Outram. "Consequently, the main tool competitors can leverage in the market is price."

The report suggests that in order to remain successful, European companies must invest in product innovation to differentiate themselves from their Asian competitors. European pigment producers will probably be acquiring Asian companies or developing relationships with them to move production to East Asia in an effort to control costs and remain competitive.