The first quarter GDP data were partially released: Czech Republic -2.2%, Slovakia: -3.9%, Hungary: + 2.2%, Romania: + 2.4%, Romania: + 2.4%.
Other Central European countries will release their data this week. It is clear from the data that the decrease is significant everywhere compared to what was originally planned. Where earlier and stricter restrictions have been introduced there, the rate of decline is greater. Where restrictions and less severe ones were later introduced due to the spread of the epidemic, the decline is smaller. However, the reverse is true in terms of restarts, countries that stop later will start again later. This means that on an annual basis, this will no longer be a significant difference, with GDP growth figures likely to level off by the end of the first half of the year.
As a result, economic growth in Central Europe will show a “unified picture”. The decline in economic performance in 2020 is certain for all countries. Companies face the same problems in every country. Decreased liquidity, lack of orders, unpredictability of production. Even companies that work with relatively high capacity utilization are in trouble. Because their order backlog is point-to-point, it may not be repeated next month.
The reason for the problems is that it is not clear how the structure of consumption will change in the next period. Current production structures, including in the plastics industry, have been adapted to the consumption structure of the last 10 years. If there is a change in consumer behavior, demand, this rearrangement will also affect the structure of production. Now we only see the forefront of change. There seems to be no rapid reorganization yet, the production and consumption curve is not yet "V" shaped. The recovery is slow. Everyone was expecting it would be faster. The vast majority of companies operate at 30-70% capacity utilization. And this is not sustainable for months. Most companies are already starting to run out of reserves. So far, everyone has tried to keep the workforce confident in a quick recovery. However, it is feared that actual redundancies in the plastics industry will also begin in the coming months.
Most of the companies we surveyed, regardless of their current level of production, expect weak demand for both June and July. The first “normal” month is expected in September.
As a result of likely rising monomer prices, polymer prices will only be able to follow to a limited extent due to relatively weak demand.
As to the individual sectors:
Pharmaceutical packaging, packaging material production is close to 100% capacity utilization.
Agricultural production was not affected by the COVID-19 epidemic.
In construction, it is usually not bad, but the real boom is yet to be seen. Large size is still a disadvantage, but the medium-sized companies are doing very well.
Production of flexible packaging for food remains slow after the big April jump. Uncertainty is exacerbated by the forthcoming EU regulation on mandatory packaging.
The production of thermoformed and thin-walled food packaging materials is hardest hit by the decline in Western Europe. Central European producers are waiting for a real restart in Western Europe.
The houseware area has had a peak over the past week. Probably because of the store reopening. Everyone is trying to replenish their stock.
The production of packaging materials for cosmetics and household chemicals has reached an average of 65-70%.
The automotive industry has restarted in Central Europe. Production is between 25-35% compared to March data. Instead of the usual three shifts, one usually goes. There is no significant overall change compared to the previous week. The good news is that the second shift has started at AUDI’s engine plant. This means that with a 2-3 week delay, the second shift in car production will start at VW's plants as well.
In both the “white goods” and “appliance” areas, production levels vary from company to company, ranging from 50-70%.
Source: myCEPPI
