2018 Film Prices + Whales And Blue Plastic

Posted on 22 Nov 2017

2018 film prices

It’s that time of the year again- Budgeting and as ever the most common question we are asked by our customers is, “What figures should we budget for next year’s film prices? A glib response would be “We have no idea”, but not only is that not acceptable it’s simply not true. Based on historical trends we have a very good idea, but first of all we need to consider the key variables, these are;

1. The cost of film polymer
2. The price of oil
3. The value of sterling against the euro/dollar

Cost of film Polymer

This variable has been dormant for most of 2016, with surprisingly few “plant outages” from the major polymer producers. However Borealis a key “swing supplier” due to their massive Borouge capacity. Borealis saw profits fall 10% in the 3^rdquarter of 2016, this was despite higher sales volumes and whilst they are planning to build more PP supply capacity in Europe, historically they have reacted to falling profits by closing capacity to “repair margins”. There is a good chance that this will happen in 2018.

The price of oil

Despite record outputs from the US shale producers, with the commensurate fall in US imports, currently oil prices have risen to over $60 a barrel this is some 30/40% above 2017 lows. With OPEC & Russia combining to curb oil supply, it’s unlikely that oil prices will fall back any time soon.

The value of Sterling

Finally we come to the most difficult variable, where everyone can have a guess. Ours would be that the Brexit negotions are going to be a “bumpy road” without much UK upside. However the downside of either a UK government collapse or a collapse in the negotions would push sterling very near to parity with the euro. So unfortunately we don’t see much potential upside here either.

Conclusion

Based on the variables highlighted (and with a very cloudy crystal ball), we believe film prices will increase further. The increases of the last few months has not yet fed through fully to the market due to stockholding and price absorption by the print convertors who live in fear of losing work. However our 2016 benchmarking exercise (of which more next month) highlights that the financial problems at Pulse and Cornwallis are not isolated instances. Our 2016 analysis of financial results from 26 UK companies, film convertors, shows not only were some losing money last year, but in several cases this was despite increases in sales volumes. This situation cannot continue indefinitely without further business failures or printer plant closures. Therefore in view of all the foregoing we see 2018 as a potential year for some 10-15% film price increases, with the current push for higher prices from film manufacturers growing stronger in the first ¼ – ½ of 2018.

Whales & Blue Plastic

Last month I made no apology for revisiting “Poisonous Publicity for Plastic” as I had no intention of raising the subject again for a few months. However, for those of you that watched BBC’s “Blue Planet” Sunday evening (14 million) saw the sight of a devastated blue whale holding on to her dead calf day after day, it really was heart wrenching.

Then came the shock, based on no evidence whatsoever and with no conceivable reason for saying it, David Attenborough stated, quite convincingly, “The baby whale had probably died due to “plastic”! No explanation was given as to how or why this could have happened but it enabled Attenborough to regurgitate all the spurious plastic waste statistics of 8 million tonnes of plastic waste enters the seas year after year. Marine life of all types is being decimated due to plastic ingestion etc… What he failed to mention was earlier in the programme we had seen sharks feeding ravenously on a giant adult whale carcass. At that point there was no mention of plastic was made so presumably death was simply natural causes. There was obviously more publicity to adverse for plastic to be gleaned from a dead baby whale and a grieving mother.

Nevertheless despite this lack of evidence the BBC on Monday had another peak time one hour phone in on “the evils of plastic”, particularly plastic packaging. I have been on this “Hobby Horse” for some years now, all to no avail. Where are the major food companies, supermarkets and film manufacturers when these debates are held? Regrettably they are neither seen nor heard. Eventually the whole of the packaging food industry will pay for this inertia, either in plastic taxes and/or restrictions on plastic use and when these things happen we will have brought it all on ourselves!

Should you have any views on any of the items raised please feel free to comment either here or join me on LinkedIn