Ukraine war threatens fragile European plastics industry amid heavy Western sanctions

24 Feb 2022 --- Crude oil prices have shot up today after Russia launched a long-feared invasion of Ukraine on three fronts. The price and availability of fossil fuels and metals integral to the packaging industry are expected to take a significant hit, although analysts remain hesitant to speculate on the rapidly-developing crisis.

While Western leaders had hoped diplomacy could deescalate tensions along the Ukrainian-Russian borders, full-scale bombing campaigns and ground assaults have begun – even targeting the captial Kyiv, which reports describe as “under siege.” 

Oil prices have now shot to US$105 per barrel, the highest in over seven years. Gas, for which much of Europe relies on Russian exports, had also risen dramatically, with Dutch gas futures jumping 13.8% when trading began yesterday. 

These developments could not come at a worse time for the packaging industry, which for the past year has been embroiled in an embittered struggle between plastic converters and polymer suppliers, fighting over surcharges due to already booming energy costs. 

Invasion implications 
The Ukrainian war adds to many disastrous circumstances, including drastic weather disruptions, cyber-attacks and the COVID-19 pandemic, which have caused historic price inflations throughout global markets. 

Sanctions against Russia could damage needed oil and energy supplies for the European plastics sector. The Polymers Alliance for Europe (PEA) has refused to comment on how war and sanctions could compound these issues for the plastics industry, telling PackagingInsights it “won’t give any input or position after an internal conversation.” 

The PEA, along with its mother organization European Plastics Converters, is set to host a webinar meeting between over 600 polymer and converter players on March 3 to settle disputes, warning “the parties will either flourish in Europe or fail together.”

With the prospect of Western leaders preparing more severe sanctions against Russia as a means to cripple the country’s economy, which relies heavily on oil and gas, further turmoil could damage the already delicate situation in Europe’s plastics industry and the PEA’s hopes of settling disputes. 

Battle for the environment
Another chief concern for the PEA is that if industry players do not resolve their differences, many plastics converters will simply move to cheaper markets, which could mean a rise in the use of more energy-intensive conversion methods such as coal power. 

This, in turn, could pose further threats to industry efforts at lowering its environmental footprint and achieving the UN’s Sustainable Development Goals. 

PackagingInsights is monitoring the situation and awaiting further expert analysis. More coverage is planned. 

By Louis Gore-Langton