A PIFA spokesman said: "Due to the competitiveness of the film and converting industry, producers have until now been reluctant to pass on recent increases in the hope that there would be some reversal of the situation. It is now obvious that this is not going to happen and raw material prices will undoubtedly escalate further over the coming months."
PIFA said that most producers are already 'working on non-existent or wafer-thin margins', and with the cost of some polymers rising by 27 per cent this year the reality is that non-recovery of these costs will result in rapid business failures as a result significantly eroded margins and severe cash flow problems.
The spokesman also pointed out the importance of securing a UK based manufacturing sector for film production and conversion in order to support the advanced supply chain systems most major packers now require.
Apart from the substantial increases in the costs of polymers, the industry is also being subjected to rises in the costs of other materials used in complex laminates for packaging, such as paper, solvents, inks, etc.
"Many buyers across Europe are returning from the holiday period finding that their suppliers are in a bullish position with tightening supply difficulties following the unusually high level of demand during the summer period - probably accentuated by the diversion of polymer supplies to Asia." said PIFA in a statement.
The position has been further exacerbated by a significant number of production problems at the polymer crackers and some manufacturers instigating 'force majeur' and allocation control. PIFA said that in September, it was already receiving reports that many grades of polymer were being sold out.
Rising oil and naphtha prices now look set to extend into 2005, and this is having significant consequences, particularly as the level of naphtha supply is causing some operations to shut down petrochemical plants periodically.
"It is highly likely that, as with the oil prices, the polymer price levels are reaching a new benchmark and until there is a significant shift in the high prices of feedstocks or the slowing down of the global economy and related demand for plastics, price levels will remain high for some time to come," concluded the PIFA.