Plastic Valley to wrap around flourishing food industry
Consequently, if Poland doesn't manage to attract investment from key plastics users, such as the auto industry, the future could well be very bleak for the new project. However, there are still plenty of voices that suggest the future may not be grim at all.
The Basell-Orlen plant plans, with the help of zł.1.5 billion (€320 million) in bank credit, a yearly output of 720,000 tonnes of combined polypropylene (PP) and polyethylene (HDPE) by 2005. Meanwhile, Hungarian-based competitor and regional leader TVK is also busy constructing a similarly valued new plant that likewise is slated to come online in 2005, and which is projected to produce between 1-1.5 million tonnes a year. Given that Czech and Slovakian polyolefin plants are, reportedly, also stepping on the production pedal, some players within the industry, such as Paweł Pesta, CEO of Czech-based Cemopetrol, predict a million tonne regional excess of polyethylene by 2008, which will naturally lead to hot regional competition for clients. The question being: who is going to win them?
The Czech press have reported Paweł Pesta as claiming that most growth in the sector will be driven by the auto industry, which, considering that recent auto investments have (to local gall in this country) gone to Slovakia and the Czech Republic instead of Poland, might therefore seem to spell trouble for Basell-Orlen's competitive chances. Reports last Friday, meanwhile, that two Spanish plastics suppliers to the auto industry, Tajo and Maier, are planning to invest in the region, met with gloomy predictions in the local press. The Spaniards, it was predicted, will follow Hyundai and Rover south, and in so doing take a train of further auto-satellite investments with them.
Even Mark Webber, senior banker at the European Bank for Reconstruction and Development (EBRD), which is lending zł.408 million (E85 million) to the Płock development, concedes that recent parkings of auto capital in Poland's southern neighbors "will have an impact." He goes on, however, stressing, "We did not invest in the project on the back of a hope for auto investments."
Hartmut Lueker, president and general director of Basell-Orlen, meanwhile, denies that there'll be any impact whatsoever. "We don't see any disadvantages," he says. "These auto investments are all located within reach of our supply chain."
The biggest challenge for Basell-Orlen, according to Lueker, is the need to encourage local clients to convert to modern methods and materials. Hence the intensive marketing campaign currently being waged by Basell in this field. Orlen, meanwhile, is doing all it can to attract state-of-the-art converters to a Płock technology and industry park it has set up in a parallel investment together with the local authorities, and which it hopes will become a 'plastic valley' on the model of Silicon Valley in California.
"We hope it will become a one-stop shop for downstream industries," says Krzystof Lewandowski, the Płock park's supervisor.
One of the new investors to open up shop in Płock this May will be U.S.-based A. Schulman Inc., which uses polymers in its production of color concentrates for use, funnily enough, by the auto industry.
But, while auto industry investments have preoccupied the local press, the Płock plant may have other priorities anyway. According to the European Plastics Converters Association (EuPC), the auto industry consumes just eight percent of European polyolefin output, while a more significant consumer, accounting for nine percent, is the white goods industry. And while auto manufacturers have been plumping for the Czech Republic and Slovakia, producers in this latter sector have recently been favoring Poland as an investment destination, with U.S.-based Whirlpool's recent decision to locate in this country being the fourth such deal in the last nine months. No wonder Tajo and Maier are dithering: both supply plastics to the white goods industry as well as to automakers.
That said, though, it's the packaging industry that is the biggest European polyolefin eater, consuming 34 percent of all output, according to the EuPC. And considering recent sales increases noted by local food processors, as well as increasing foreign interest in Polish fresh produce, it looks as if the Płock plant may well end up riding on the back of Poland's food packaging and container industry. Exports, already significantly rising, are expected to boom now that customs barriers are being dismantled as a result of EU accession. Meanwhile, Western interest in Polish fresh produce is on a gathering roll. Global fruit and vegetable producer and distributor Fresh Delmonte's decision to up its export operations in Poland last December symbolizes a general trend, according to Jason Holway, a consultant at Zenith International, a UK-based food and drink consultancy.
"Polish fresh produce has a growing reputation for high quality," he says, pointing out that "a lot of German-produced organic baby food is now based on Polish ingredients."
Furthermore, UK-based consultancy Bradley Dunbar Associates is urging UK firms to take an interest in the Polish food-processing industry.
But it's not just food packaging converters that are likely to fall into Basell-Orlen's orbit. Local rising stars Plastbox, which makes industrial plastic containers and packagings, and Śnieżka, a paint producer whose recent IPOs on the Warsaw Stock Exchange were followed by financial results that beat all expectations, are also likely to be typical downstream clients.
"For a firm like Plastbox, being close to commodity providers lowers the costs and limits risks, making prices more stable," says Sebastian Słomka, stock analyst at PKO BDM.
And, according to a EBRD report, it's precisely the packaging and container-related industries that are expected to benefit from a symbiotic relationship with the Płock plant.
According to TVK figures, Poland is currently the Hungarian polyolefin producers' third biggest foreign client, yearly consuming plastics worth zł.196.8 (€40.9 billion). Poland buys abroad, largely because the Basell-Orlen's plant's predecessor plants, owned by PKN Orlen, were out of date, a fact which, according to Lueker, was the driving force behind Orlen's search for a partner in a new venture that would lure back local buyers, as well as attracting new ones. Indeed, only 60 percent of the plant's produce is targeted for consumption on the local market, with the remaining 40 percent to be taken off by Basell and sold on CEE, EU and other markets. The motive for EU petrochemicals leader Basell's entry into the joint-venture is to find a cheaper working base for its European plastics division, which is now outsourced entirely to Basell-Orlen.
Industry insiders say consumption is growing at a pace of five to eight percent. And since Poland already accounts for nearly half of all regional polyolefin consumption, according to plastics consultants AMI Plastics, Webber is, therefore, not alone in brushing off worries about a potential surplus.
"These plants tend to come in clusters," says Graham Harris, consultant at CMAI, global petrochemical consultancy, adding, "When a region is noted for a particular activity, and although there may be a short period of overproduction, it's usually soon absorbed by local growth, or pushes into export."
The Basell-Orlen plant plans, with the help of zł.1.5 billion (€320 million) in bank credit, a yearly output of 720,000 tonnes of combined polypropylene (PP) and polyethylene (HDPE) by 2005. Meanwhile, Hungarian-based competitor and regional leader TVK is also busy constructing a similarly valued new plant that likewise is slated to come online in 2005, and which is projected to produce between 1-1.5 million tonnes a year. Given that Czech and Slovakian polyolefin plants are, reportedly, also stepping on the production pedal, some players within the industry, such as Paweł Pesta, CEO of Czech-based Cemopetrol, predict a million tonne regional excess of polyethylene by 2008, which will naturally lead to hot regional competition for clients. The question being: who is going to win them?
The Czech press have reported Paweł Pesta as claiming that most growth in the sector will be driven by the auto industry, which, considering that recent auto investments have (to local gall in this country) gone to Slovakia and the Czech Republic instead of Poland, might therefore seem to spell trouble for Basell-Orlen's competitive chances. Reports last Friday, meanwhile, that two Spanish plastics suppliers to the auto industry, Tajo and Maier, are planning to invest in the region, met with gloomy predictions in the local press. The Spaniards, it was predicted, will follow Hyundai and Rover south, and in so doing take a train of further auto-satellite investments with them.
Even Mark Webber, senior banker at the European Bank for Reconstruction and Development (EBRD), which is lending zł.408 million (E85 million) to the Płock development, concedes that recent parkings of auto capital in Poland's southern neighbors "will have an impact." He goes on, however, stressing, "We did not invest in the project on the back of a hope for auto investments."
Hartmut Lueker, president and general director of Basell-Orlen, meanwhile, denies that there'll be any impact whatsoever. "We don't see any disadvantages," he says. "These auto investments are all located within reach of our supply chain."
The biggest challenge for Basell-Orlen, according to Lueker, is the need to encourage local clients to convert to modern methods and materials. Hence the intensive marketing campaign currently being waged by Basell in this field. Orlen, meanwhile, is doing all it can to attract state-of-the-art converters to a Płock technology and industry park it has set up in a parallel investment together with the local authorities, and which it hopes will become a 'plastic valley' on the model of Silicon Valley in California.
"We hope it will become a one-stop shop for downstream industries," says Krzystof Lewandowski, the Płock park's supervisor.
One of the new investors to open up shop in Płock this May will be U.S.-based A. Schulman Inc., which uses polymers in its production of color concentrates for use, funnily enough, by the auto industry.
But, while auto industry investments have preoccupied the local press, the Płock plant may have other priorities anyway. According to the European Plastics Converters Association (EuPC), the auto industry consumes just eight percent of European polyolefin output, while a more significant consumer, accounting for nine percent, is the white goods industry. And while auto manufacturers have been plumping for the Czech Republic and Slovakia, producers in this latter sector have recently been favoring Poland as an investment destination, with U.S.-based Whirlpool's recent decision to locate in this country being the fourth such deal in the last nine months. No wonder Tajo and Maier are dithering: both supply plastics to the white goods industry as well as to automakers.
That said, though, it's the packaging industry that is the biggest European polyolefin eater, consuming 34 percent of all output, according to the EuPC. And considering recent sales increases noted by local food processors, as well as increasing foreign interest in Polish fresh produce, it looks as if the Płock plant may well end up riding on the back of Poland's food packaging and container industry. Exports, already significantly rising, are expected to boom now that customs barriers are being dismantled as a result of EU accession. Meanwhile, Western interest in Polish fresh produce is on a gathering roll. Global fruit and vegetable producer and distributor Fresh Delmonte's decision to up its export operations in Poland last December symbolizes a general trend, according to Jason Holway, a consultant at Zenith International, a UK-based food and drink consultancy.
"Polish fresh produce has a growing reputation for high quality," he says, pointing out that "a lot of German-produced organic baby food is now based on Polish ingredients."
Furthermore, UK-based consultancy Bradley Dunbar Associates is urging UK firms to take an interest in the Polish food-processing industry.
But it's not just food packaging converters that are likely to fall into Basell-Orlen's orbit. Local rising stars Plastbox, which makes industrial plastic containers and packagings, and Śnieżka, a paint producer whose recent IPOs on the Warsaw Stock Exchange were followed by financial results that beat all expectations, are also likely to be typical downstream clients.
"For a firm like Plastbox, being close to commodity providers lowers the costs and limits risks, making prices more stable," says Sebastian Słomka, stock analyst at PKO BDM.
And, according to a EBRD report, it's precisely the packaging and container-related industries that are expected to benefit from a symbiotic relationship with the Płock plant.
According to TVK figures, Poland is currently the Hungarian polyolefin producers' third biggest foreign client, yearly consuming plastics worth zł.196.8 (€40.9 billion). Poland buys abroad, largely because the Basell-Orlen's plant's predecessor plants, owned by PKN Orlen, were out of date, a fact which, according to Lueker, was the driving force behind Orlen's search for a partner in a new venture that would lure back local buyers, as well as attracting new ones. Indeed, only 60 percent of the plant's produce is targeted for consumption on the local market, with the remaining 40 percent to be taken off by Basell and sold on CEE, EU and other markets. The motive for EU petrochemicals leader Basell's entry into the joint-venture is to find a cheaper working base for its European plastics division, which is now outsourced entirely to Basell-Orlen.
Industry insiders say consumption is growing at a pace of five to eight percent. And since Poland already accounts for nearly half of all regional polyolefin consumption, according to plastics consultants AMI Plastics, Webber is, therefore, not alone in brushing off worries about a potential surplus.
"These plants tend to come in clusters," says Graham Harris, consultant at CMAI, global petrochemical consultancy, adding, "When a region is noted for a particular activity, and although there may be a short period of overproduction, it's usually soon absorbed by local growth, or pushes into export."
