ICAP: The domestic plastic pipe market decreased in 2020

The domestic market of plastic pipes decreased in 2020, according to a sector study prepared by the Directorate of Economic Studies of ICAP SA, which presents the latest changes and the development prospects of this sector.

The construction activity, the implementation of public works, as well as the agricultural sector influence the size and the evolution of the demand for plastic pipes.

The domestic market is characterized by intense competition, as its largest volume is covered by a few companies. The demand for these products was negatively affected by the economic situation of our country (recession period), as it significantly affected the construction projects and other branches of activity that are directly related to the plastic pipe sector (eg agricultural sector).

Stamatina Panteleiou, Director of Economic Sector Studies of ICAP points out that the total domestic production of plastic pipes decreased by a cumulative 60%, around 2020 compared to 2008. The significant reduction of construction activity, the shrinkage and non-implementation of investments Due to the economic situation of the country, especially in the period 2009-2013 (recession period) it negatively affected the production of the examined products. Regarding 2020, production decreased by 3.3% compared to 2019.

According to the research, the reasons that helped reduce the effects of the Covid-19 pandemic and “restrained” the volume of total domestic production were the continued recovery of construction activity in 2020, the implementation of some small projects, mainly related to water supply. but also the shift of some companies abroad in order to mitigate the reduction of their revenues. In addition, the weather conditions that prevailed in 2020 increased the need for artificial irrigation of crops. The total construction activity increased in 2020 both in the building permits (+ 9.2%) and in area (9.2%) and in volume (+ 6.2%) in relation to 2019. The construction activity moved accordingly and in the first seven months of 2021. Specifically, it increased by 31.0% in the number of building permits, increased by 56.9% in area and increased by 49.7% in volume, compared to the corresponding seven months of 2020.

Regarding the participation of each category in the total production for 2020, the polyethylene pipes participated with a percentage of 55%, the rigid pipes (mainly made of PVC) are estimated to have covered 31%, while the PVC hoses are estimated to have occupied a share of the order of 14%.

Domestic demand for plastic pipes is mainly covered by manufactured products, and import penetration is low. In particular, in the last three years the share of imports in the total market has ranged between 16% -20%. In terms of imports, rigid pipes are the category that covers the largest percentage of all imports over time.

According to Maria Flotsiou, Senior Analyst of Economic Studies of ICAP, who edited this study, the size of the domestic market (apparent consumption) of plastic pipes in our country was maintained at quite high levels during the period 2000-2008. In the period that followed (2009-2015) consumption recorded a sharp downward trend. The domestic market of plastic pipes showed a recovery in the period 2016-2019, on the contrary in 2020 it decreased by about 4% compared to 2019.

The outlook at the beginning of 2020 was considered positive for the general business environment. However, the unprecedented pandemic conditions that have hit Greece since March 2020 have negatively affected almost all sectors of the economy.

The non-implementation or even the restriction of large public works is an important factor and negatively affects the evolution of the demand for plastic pipes. On the other hand, the agricultural sector and the development of new crops are estimated to be able to “contain” the losses in the domestic plastic pipe market.

Industry players estimate that in 2021 the domestic market (consumption) of plastic pipes will show a small decrease of 1.9% compared to 2020, provided the effective response to the health crisis and the normalization of the market, while the next two years 2022-2023 is projected to grow at an average annual rate of 3% – 3.5%. As part of the study, a financial analysis of the industry was performed based on selected ratios and a grouped balance sheet was prepared based on a sample of companies.

From the analysis of the grouped balance sheet of six representative productive plastic pipe companies for which data are available for the period 2016-2020, it appears that total assets showed a cumulative increase of 18.6% in 2020/16. Equity moved up in the same period (increase of 8.1% compared to 2016). Total medium-term liabilities and provisions recorded a significant increase (cumulative increase of 46.7% in 2020/2016) over the same period. Short-term liabilities fluctuated in the period 2016-2020, but appear increased by 37.2% compared to 2016. The total sales of the 6 companies showed fluctuations in the five years under review (increase by 22.8% 2016/20). Gross profits increased in the same period (2020/2016: 47.1%). Both the operating result and the net (before tax) result were positive throughout the five years, except 2016.

Source: ΑΠΕ-ΜΠΕ