Around 85% of plastics companies in German-speaking Europe are struggling with lower sales than a year ago. Almost half of the companies are compensating for lost orders with short-time working measures. Many are pressing ahead with process optimisations, maintenance activities and development projects. There is uncertainty, however, as to whether the lowest point has been reached. After all, one third expect the coronavirus crisis to bottom out by mid-2020, but one third cannot even make predictions yet. More than three quarters of respondents consider the type and extent of the lockdown to be appropriate, while almost 20% see it as going too far.

These are the results of a readership survey conducted by Plasteurope.com’s sister publications Kunststoff Information (KI, Bad Homburg / Germany; www.kiweb.de) and K-PROFI among decision makers in the second half of April 2020. With 560 responses from across all sectors of the plastics industry and plastics processing markets, the survey draws what is likely the most comprehensive and reliable picture of the current state of industry.

A “complex picture”, as the general manager of German association of plastics converters GKV, Oliver Möllenstädt, already noted a few weeks ago regarding the very different situations in the various value chains of the German plastics industry. KI and K-PROFI’s latest survey fully confirms Möllenstädt’s statement.

Starting with the good news – as many as 15% of those surveyed in April 2020 report higher capacity utilisation rates than a year ago. The range of “winners” goes from 4% of distributors to 19% of processors. However, these are all the positive results from the survey.

About 85% of respondents reported a drop in sales – over half (56%) saying even by more than 40%. Around 15% are missing more than 60% of their previous year’s volume, and 5% report a drop of over 80%. Generally, capacity utilisation grows in line with the export ratio and the number of employees. Micro-enterprises with up to 20 employees are much more affected than larger companies.

Across sectors of the plastics industry, producers have the highest capacity utilisation, followed by plastics traders and processors. Above-average declines have affected machinery manufacturers, end-users, distributors and recyclers.

Around 80% of plastics processors failed to reach their previous year’s capacity utilisation in April. As expected, the best performers were packaging manufacturers, with 40% reporting growth. Every third processor for the medical sector and every fifth construction supplier also exceeded its prior-year level in April.

The value chains for manufacturers of technical parts and electrical and electronics suppliers are significantly weaker. The automotive supply industry is looking downright catastrophic – with 70% of those surveyed not even achieving 60% of their 2019 production, because a good fifth of the vehicle suppliers only classify themselves in each of the capacity utilisation ranges of 0-20%, 21-40% and 41-60%.

Over one quarter (27%) of entire product areas have disappeared for manufacturers of consumer goods. Certain services are also entirely absent in the technical areas. This applies to 25% of automotive suppliers, 23% of technical parts manufacturers and 14% of E&E suppliers.

By contrast, many companies are currently reporting that they have begun manufacturing or trading in medical products that are in short supply or created relevant production capacities with partners. The survey shows that 12% of processors, 11% of distributors, 10% of machinery manufacturers and 6% of producers are involved here in various ways.

Despite the massive losses in sales, 76% of those surveyed consider the state interventions in the context of the infection control measures to be appropriate. Only 18% find them to be excessive, and for 6% they do not go far enough. The respondents most likely to view the measures as excessive are in consumer-oriented processing segments – consumer goods manufacturers (27%) and packaging producers (25%) – as well as the hard-hit automotive suppliers (20%). Another noteworthy result is that the type and extent of the lockdown is appropriate for 86% of the employees of large companies with more than 500 employees. The situation is different in small businesses with up to 20 employees. Here, only 60% selected this attribute, while 26% consider the restrictions to be excessive and 14% view them as insufficient.

There is a broad consensus in the German-speaking plastics industry regarding the effectiveness of the prescribed infection control measures – 96% of respondents consider them to be effective, with 43% of respondents giving a rating of “very effective” and 53% a rating of “fairly effective”.

Will the economic downturn in the industry continue or has it already bottomed out? For one seventh of the respondents – precisely those who are not experiencing declines – this question does not arise. The largest number of the remaining survey participants is uncertain, with almost one third estimating that the bottom will be reached by the middle of 2020. A quarter are betting on this summer and the time after it, and one third says a bottom is not yet in sight. The overall picture is one of collective insecurity.

Two details to note are that the confidence increases with the companies’ export ratio – 16% of surveyed companies with export quotas above 75% believe that the bottom has been reached or already passed. Plastics producers, distributors, traders and recyclers are more confident than the industry average, and one third of them expect to have the worst behind them by the middle of this year.

Many companies are compensating for their slump in orders with short-time working. Companies implementing short-time working account for 47% of those surveyed. About a quarter of respondents from each of these companies reported reductions in working time in each of the ranges of 10-20%, 21-40% and 41-60%. Around 6% have reduced their personnel capacity by 61-80%, and 3% even by 81-100%.

A significant proportion (44%) of plastics processors have installed short-time working and are making use of the full range of reductions. Larger companies tend to make more intensive use of short-time working than smaller ones, internationally oriented companies more often than companies with a domestic focus. The highest “market penetration” of short-time working is achieved in recycling (67%), machinery manufacturers (56%) and distribution (54%). For raw material producers, on the other hand, the quota is just under a third.

Within plastics processing, medical suppliers, packaging manufacturers and construction suppliers are only using short-time working to a small extent (between 11% and 25% of companies), and if at all, then only to a very small extent. Automotive suppliers are at the other end of the scale, where around 92% are implementing fewer working hours, 51% with reductions of over 40%.

In the biannual “KI Dialog” survey, KI asks about the significance of various challenges facing the German-speaking plastics industry, especially plastics processors. For the current survey, KI added certain coronavirus-relevant topics to the seven most recent major challenges in order to identify shifts and new priorities.

For 58% of those surveyed, the most important challenges from the crisis are the lack of demand (“sales volume”) and the capability of upstream suppliers to deliver, their own delivery capability (37%), wage and salary costs (37%) and restrictions in the transport of goods (34%). These four challenges with direct customer relevance have also shown the largest increases. Among internal actions in companies, occupational safety (27%) and customer communication (24%) are turning out to be significantly more important than before the crisis.

The biggest downshifts across the industry are the search for personnel and the shortage of skilled workers, as not only the results of this survey but also empty job markets prove. Various costs such as for energy and materials have also decreased in significance during the crisis; accordingly, selling prices are less challenging than before.

Offerings of institutional assistance are only tentatively accepted in the German-speaking plastics industry. Between 10% and 15% of those surveyed are making use of subsidies, loans (from the state-owned KfW bank), chamber of commerce consultations or regional networks. The only upward outliers are the disproportionately frequently used subsidies, which are regarded as useful by up to 34% of enterprises with a maximum of 20 employees, and the regional networks, which are helpful to 30% of companies with 100 or more employees.

Industry-wide, cooperative communication and coordination with suppliers (78%) and clients (76%) is the most effective of many activities in the crisis. The perception of industry branch associations as useful increases with the degree to which the branches are organised in their associations. About half of machinery manufacturers (49%), almost as many polymers producers (44%) and a third of plastics processors (35%) consider these advantageous.

Using external consulting expertise is common practice in many areas. The most sought-after qualifications in the crisis are occupational safety and medicine – 51% use them, and 38% find them helpful. The larger the company, the more external occupational safety expenditures are considered helpful – this is even the case for 49% of the largest companies with more than 500 employees. Next in line are advice on IT and digitalisation (40% use it, 30% find it helpful), legal advice on liability issues (26% use it, 16% find it helpful) and expertise on corporate organisation (17% use it, 8% find it helpful). Support in the last area is mainly sought after by medium-sized enterprises. Otherwise, not surprisingly, large companies in all sectors use external experts significantly more than small businesses.

Plastics companies in German-speaking Europe are currently filling free capacities in various ways. The more extensive the decline in commissions from processors, the greater the intensity of maintenance and optimisation work – and vice versa. In addition, the crisis is encouraging companies to rethink strategies, initiate projects and tackle long-overdue issues.

The overall situation in the German/speaking industry is split. The technical value chains are deep in the red, while those closer to consumers are doing comparatively well. Short-time working relieves the pain but is not a suitable long-term solution. Thus, after only a short period of crisis, business financing has become challenging for one fifth of all companies across the industry. The fact that one third of businesses cannot predict when the bottom might be reached is cause for concern.

Two details encourage tentative optimism. Firstly, the responses from feedstock production, which appear to be more positive than average. Along with the chemical industry, producers are regarded as early cyclical drivers of economic development. And secondly, the strongly export-oriented companies that expect to bottom out relatively soon – perhaps exports can be the first thing to boost demand until internal demand picks up again.

What the survey’s comments section clearly shows is that many decision-makers recognise flexibility, digitalisation, diversification and the reduction of interdependencies as (new) factors for success. Most businesses can rely on strong solidarity among employees to withstand the consequences of the coronavirus crisis.

Methodology and basics of the coronavirus survey

As a collaborative project of Kunststoff Information (KI) and K-PROFI, subscribers as well as newsletter recipients and users of K-AKTUELL.de were invited to participate by email. The survey ran from 15 April to 22 April 2020. All participants completed the same questionnaire digitally. The responses of 560 participants were used. Of these, 51% self-classified as plastics processors, 10% as distributors, 8% as plastics producers, 7% each as plastics machinery manufacturers and plastics traders, 5% work in plastics applications, 4% in recycling and a further 8% in other branches of the industry, such as service providers, associations or research and teaching. Of the plastics processors, 26% are involved in packaging production, 21% in the manufacture of technical parts, 14% in automotive supply, 13% in the production of building materials, 8% in pipe and profile extrusion, 5% in the production of consumer goods, 4% in medical technology and 3% in the production of E&E parts. 6% of the participants see themselves in processing for other buyer markets.