In the Global Free Zones of the Year 2024 report, Klaipėda FEZ was commended fo its focus on leveraging disruptive forces and trends.

“The judging panel recognised the zone’s focus on leveraging disruptive forces and trends, including energy security, the buildout of more defence capabilities in Europe, and nearshoring. In late 2023, Lithuania approved defence investments in its free zones. The judges also acknowledged Klaipėda FEZ’s efforts to improve transparency and uphold good governance standards, which include the private operator’s decision to publish its annual results,” the report states.

This year, the top spot among European industrial zones went to the Katowice Special Economic Zone. Thus, the “Highly Commended” award places Klaipėda FEZ effectively in second place in Europe, with no other free zones in the region receiving this distinction.

Additionally, Klaipėda FEZ earned an “Honourable Mention” in the non-financial incentives category, recognizing its quick launch strategy and a focus on vibrant investor community.

“Going beyond the ‘typical’ incentives, Klaipeda emphasised its ‘speed of launch’ package, combining multiple factors. In combination with the emphasis on its active business community, I recommend Klaipeda FEZ for a special mention.” Andreas Baumgartner from the Jury writes.

According to Klaipėda FEZ CEO Eimantas Kiudulas, competition among global free zones – and between nations and regions – has intensified in recent years, making this recognition from the Financial Times group significant for Lithuania.

“Lithuania’s competitive advantage has always been its speed and flexibility. In recent years, both Klaipėda FEZ and Lithuania as a whole have made significant strides in green energy and are prepared to welcome investors looking to reshore production to the home region or grow the defense sector. It’s gratifying to see these efforts acknowledged globally, but we must continue to make decisions every day that simplify the investment process,” said Kiudulas.

He added that despite the resilience of Lithuania’s economy, investor perceptions of the region remain cautious, necessitating ongoing efforts to enhance its investment appeal.

“Every new investor, even if subsidized in some form, creates stable and well-paid jobs for decades and strengthens the country’s overall security. On the other hand, recent developments in Lithuania  highlight significant untapped potential in non-financial areas, such as reducing bureaucracy, leveraging international marketing and networking opportunities, and engaging high-level political leadership,” said Kiudulas.

Klaipėda FEZ has previously been recognized by fDi Intelligence for its achievements in quick launch, sustainability, innovation and contributions to the economy.

Currently, approximately 2,800 people are employed by companies operating within Klaipėda FEZ, with the broader territory providing jobs for around 5,000 individuals.

In 2023, the total turnover of the 46 companies holding Klaipėda FEZ investor status reached €1.34 billion. Over the past decade, FEZ investors have paid €78 million in personal income tax, the majority of which has directly supported the city of Klaipėda’s budget. During the same period, these investors have also contributed €558 million in VAT and social security taxes, benefiting national and social security budgets.

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The objective of the SDG Model Zone list and initiative is to raise awareness of the contributions of special economic zones to sustainable development, recognize the efforts of zones that are leading the way in this space and to share best practices which can serve as an inspiration for other zones.

The United Nation’s SDG Summit in September 2023 called for immediate measuresto scale up efforts to achieve the 2030 Agenda, including through SDG investments. In line with this aspiration and GASEZ objectives, the Alliance launched its SDG Model Zone initiative on 18 October 2023 during the UNCTAD World Investment Forum in Abu Dhabi. The GASEZ founding members have jointly identified 50 SEZs from across the world that are SDG model zone partners for sustainable development.

The criteria used to select the SEZs nominees for SDG Model Zones were derived from UNCTAD’s World Investment Report 2019. These criteria are: (i) Commitment to sustainable development; (ii) promotion of investment in the SDGs; (iii) levels of social, environmental and governance standards and compliance; and linkages and spillovers. Only 10 free zones from the EU made it to the top fifty, with a considerable number of nominations going to special economic territories in South America and the UAE.

Eimantas Kiudulas, the CEO of Klaipėda FEZ, states that this recognition reaffirms the relevance of the strategy the management company pursued for some years. And for Klaipėda, it will create additional advantages in negotiating with new investors.

“Over a decade ago, we realized that high-value-added investments require harmony with residents and the environment, integration into the city, as well as an active and transparent business community with which everyone would like to work, exchange ideas, or collaborate. In order to the best talents, businesses must be interesting, innovative, modern, and respectful- this soon begins to attract new investors willing to work together with like-minded companies and individuals. For us, this approach is primarily important for competitive advantages, but it is gratifying that it also aligns with the UN’s SDGs and helps Klaipėda become more visible,” says Kiudulas.

Previously, Klaipėda FEZ has earned awards for sustainability, innovation implementation, contribution to regional and national economic development, renewable energy development, and other areas from FDI Intelligence, Investment Monitor and other international organizations.

Currently, approximately 2,800 employees work in investor companies in Klaipėda FEZ, and about 5,000 across the entire territory. More than 45 foreign investors operating in Klaipėda FEZ paid over EUR 107 million in personal income, VAT, and social security taxes. They also procured goods and services worth more than EUR 500 million in 2022.

Since its inception in 2002, Lithuanian and foreign capital companies in Klaipėda FEZ have implemented or planned investments totaling EUR 778 million. The total tax contribution of all Klaipėda FEZ companies to the city, state, and social security budgets over the past 10 years amounted to almost EUR 567 million.

The average salaries in investor companies in Klaipėda FEZ exceed the overall average of the Klaipėda region and the local manufacturing sector by 20-30%. At the end of 2023, according to survey data from the consulting firm Smart Continent LT, 94.3% of investors recommended Klaipėda FEZ.

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Today the Klaipeda FEZ is a thriving business ecosystem with more than 45 local and international investors that employ around 3000 colleagues. In 2022, the investors operating in the Klaipeda FEZ generated a total turnover of 1.76 billion Euros, while their exports amounted to 780 million Euros – this makes it the largest business hub in Western Lithuania.

Historically, the free zone has been specializing in plastics, metal constructions, electric components, energy and food processing. But its latest additions feature new generation companies from areas such as electric vehicles (including the makers of Dancer – Lithuania’s first electric bus) and biotechnology (including, but not limited to, Memel Biotech, the maker of advanced therapy products).

According to Eimantas Kiudulas, the CEO of the Klaipeda FEZ, even traditional manufacturers that had been working at the zone many years, opened new R&D centers, laboratories and product design capacities during the last decade. Some of them, including major PET manufacturer NEO GROUP or packaging manufacturer Retal Baltic Films, have either secured or seek international patents for their Klaipeda-born products and technologies. Companies such as architecture glass manufacturer Glassbel have been constantly innovating too with their facades that include solar modules or solutions that help prevent bird strikes. While biodiesel manufacturer Mestilla and many other companies have state-of-the-art laboratories and also significantly contribute to local and national economies via product and service purchases or paid taxes.

“This transformation didn’t come as a surprise given Klaipeda’s strong academic ecosystem. Great companies always look beyond tax and cost benefits – they seek to capitalize on talents and our city has been delivering in this regard. However, the world is increasingly competitive, good infrastructure is becoming a standard, and our free zone also had important decisions to make to stay ahead. This is how our quick launch, sustainability and high tech strategies were born,” says Kiudulas.

Smooth launch and expansion

Klaipeda FEZ investors always have benefited from a hands-on approach and tailored solutions provided by the free zone management company, resulting in quick business launch and willingness to expand operations. But in the mid-2010s, this natural distinction was cemented as the core quick launch strategy.

“We were living in a very competitive global environment back then, as Lithuania was becoming increasingly expensive after its EU and NATO accession. We realized, that time is a rare commodity that money can’t always buy. If you can shave off months, if not years, from your business launch estimate, you become very interesting to investors as that’s how they win precious time in truly competitive markets,” says Kiudulas.

The Klaipeda FEZ quick launch strategy manifests itself in a broad array of solutions. One of them is FlexStart – the family of segmented buildings for manufacturing companies that can be adapted to individual needs in less than a month. The first FlexStart building was launched in 2017 and was fully rented out even before its official completion. The second building repeated the success story in 2021-2022 and now the Klaipeda FEZ management company is developing the third FlexStart facility.

Even though the FlexStart buildings were designed with booming markets and new entries in mind, they proved themselves to be of value also during the pandemic and the turbulent times of 2022-2023 as numerous current Klaipeda FEZ investors used the facilities for speedy expansion. For instance, long-time Klaipeda FEZ investors such as packaging manufacturer Retal Baltic Films or electric component manufacturer Albright chose FlexStart to expand their current production lines instead of developing their own real estate.

Another display of the quick launch strategy at the Klaipeda FEZ is the hands-on approach of the management company. You could hear countless stories in the Klaipeda business community about how the FEZ team went the extra mile to facilitate smooth entry and expansions, strike meaningful partnerships and open various doors. One case, though, truly stands out – the way the German polymer giant REHAU entered Klaipeda.

REHAU officially opened its polymer pipe plant in December 2021. The 19000 sq m plant is the company’s first facility in Northern Europe. The factory, which was built in just one year, currently employs about 100 people, and the number is expected to grow.

“The REHAU plant project was implemented using extraordinary methods – Klaipeda FEZ and our partners did a lot of preparatory homework, including various permits even before the actual deal was made. We also announced an international tender for the development of the facility, which was won by an international development and construction giant YIT, and the plant was built according to the company’s needs. For the first time in the corporation’s history, REHAU outsourced the development and management of real estate to third parties. All this shaved months, if not years, from the launch deadline, demonstrated remarkable flexibility and won Klaipeda a prime investor that initially considered other countries for its facility,” Kiudulas recalls.

Recognition and community

The Klaipeda FEZ speed strategy won a special Quick Launch award – the first of its kind at the time – in the Free Zones of the Year Rankings by FDI Intelligence, a member of the Financial Times group. In fact, the Klaipeda FEZ won numerous other main awards, special prizes and honorable mentions in this publication over its history, including for customers’ expansions, new technologies, green energy, sustainability, non-fiscal incentives and contributions to local and national economies.

One area, though, really stands out in spite of official awards, Kiudulas states. That’s both the sense and the fact of community – within and beyond the free zone.

“We are not simply a territory – the Klaipeda FEZ is an actual, knowledge-sharing ecosystem where companies have regular meetings and events for finance, HR, project management and other professionals. Many Klaipeda FEZ companies provide commercial services to each other and share expertise, resulting in a strong ecosystem where one never feels alone,” says Kiudulas.

Over the past 20 years, the Klaipeda FEZ has established solid relationships with the key players of the city ecosystem: universities, schools, the municipality and its Klaipeda ID investment promotion agency, the Port of Klaipeda, various associations and NGOs. All of this is highly regarded by new and existing investors as these partnerships open doors to faster decision-making and various collaborations.

Perhaps unsurprisingly, this is felt by the residents of the city who are very often the employees of the Klaipeda FEZ investors. In early 2021, the Klaipeda FEZ carried out a reputation survey amongst 500 residents together with CIVITTA, a renowned Lithuanian business consultancy. Eighty per cent of respondents were fully or partially in agreement with the statement that the Klaipeda FEZ has a good reputation, and 78 per cent of respondents indicated they view the Klaipeda FEZ business community positively, while 70 per cent indicated they trusted the community. The local population mostly likes job opportunities, good management practices, innovation and sustainability and the free zone.

At the same time, as many as 9 out of 10 existing investors would recommend their experience in the Klaipeda free zone. According to Kiudulas, although reputation might seem as a “soft” metric, it actually results in smoother and faster operations.

“I think that our investor community showed Klaipeda that businesses can be a source of pride, knowledge and inspiration. When you are being supported in the city, your business is simply easier to run and to expand. This is another commodity money can’t buy and we’re extremely proud to have it here in Klaipeda,” the FEZ CEO says.

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In this year’s FDI Intelligence’s Free Zones of the Year rankings, non-fiscal incentives were given special attention. The publication estimates that, although final decisions have not yet been taken, the OECD’s proposed global minimum corporate tax may soon deprive free zones of the crucial argument for lower taxes. 

Therefore, when awarding the prize, FDI Intelligence evaluated the non-fiscal measures of the Klaipėda FEZ in recent years – the quick launch strategy, an active and cooperative business community, established relationships with key local and national partners, talent development, infrastructure development and other advantages that determine investors’ willingness to set up and expand. FDI Intelligene also pointed to recent surveys conducted by the Klaipėda FEZ and its partners, according to which 80% of the city’s residents have a positive opinion of the reputation of the FEZ, and as many as 9 out of 10 existing investors would recommend their experience in the Klaipėda free zone.

According to Eimantas Kiudulas, the CEO of Klaipėda FEZ Manager, this year’s focus on non-tax benefits illustrates a marked change in investor thinking and behaviour.

“The award from FDI Intelligence is clearly encouraging, but it is also a reminder that businesses, especially those that Lithuania wants the most, are becoming less and less interested in costs – taxes or labour. The most common questions we hear from stakeholders are about the quantity and quality of talent, the fluidity of processes, community and infrastructure. Some of these issues we can address ourselves, but local and national government can also play a role – Klaipėda, for example, is one of the few Lithuanian cities with a green corridor for larger investors. However, having already lost its status as a cheap labour country and the argument of tax incentives disappearing, Lithuania simply has to pay maximum attention to developing, attracting and retaining talent,” comments E. Kiudulas.

In this year’s FDI Intelligence’s rankings, Klaipėda FEZ also received an honourable mention for its green energy solutions – solar power plants on company roofs and even fences, and other energy independence measures that have been in place for many years. Last year alone, the total installed capacity of solar power plants in the Klaipėda FEZ doubled to 4MW, and most of the development decisions were taken before the electricity price crisis hit last year. Also, the majority of Klaipėda FEZ companies are buying green electricity from the grid and investing in a variety of other energy efficiency or generation solutions.

In the past, the Klaipėda FEZ has won main and special awards in FDI Intelligence rankings in areas such as quick launch, sustainability, new technologies or investor expansions.

Last year, more than 45 Lithuanian and foreign investors operating in the Klaipėda FEZ achieved a total turnover of EUR 1.76 billion and exports of EUR 780 million. Purchases of goods and services by Klaipėda FEZ investors in Lithuania in 2022 exceeded EUR 500 million, and VAT, GPM and social taxes paid last year reached EUR 107.3 million. In comparison, state aid granted to Klaipėda FEZ investors in 2022 amounted to only EUR 8.2 million.

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Klaipėda FEZ was awarded the EU Compliance Award largely due to its decisions which are in line with the European Union’s Environmental, Social and Governance (ESG) objectives: the airflow and odour monitoring project implemented together with residents and scientific communities; the investments made by the management company and the individual companies in sustainable mobility and green energy; as well as the tens and hundreds of millions in taxes and purchases in Lithuania each year, contributing to a more sustainable economy in the region and the whole country.

Klaipėda FEZ was awarded the 5G Special Prize as one of the first industrial areas in Lithuania and the world to introduce this new generation of connectivity at the end of last year. At the same time, the FEZ management company is implementing Internet of Things (IoT) network technology. Both of these networks are of particular interest to businesses that can develop next-generation robotics and automation solutions.

According to Eimantas Kiudulas, the head of Klaipėda FEZ, these evaluations by fDi Intelligence consistently prove that the strategic directions have been correctly chosen and that they are unique in the global context of free zones.

“Sustainability, innovation and social empowerment are very popular concepts today, so it is nice to be able to speak in deeds, to be visible in these areas, and to have local and foreign investors contributing to these achievements. At the same time, it is an important recognition for Klaipėda as a whole, which strives to be visible as a regional leader in innovation and wants to develop, retain and attract talent,” says E. Kiudulas.

The 5G connectivity in the Klaipėda FEZ territory was installed by Telia, which has been testing this technology in Lithuania for almost three years. According to the company’s head of corporate clients, Danielius Karpovičius, it is predicted that 5G connectivity will bring changes that will encourage companies around the world to improve their existing services and create new services or even new businesses which will create clear added value. In addition, operators will reap the benefits of 5G by offering new services, including closed 5G networks for enterprises or connecting millions of IoT sensors.

“Together with Klaipėda FEZ, we have taken another strong step towards the future, and over the next few years, we will show Europe that Lithuania can lead the way in the development of 5G communication technology,” says D. Karpovičius.

In previous years, Klaipėda FEZ won other significant, major fDi Intelligence free zone awards, including in the Quick Launch (2017) and Sustainability (2020) categories.

At the beginning of October, the Klaipėda FEZ was also awarded another significant accolade – the main titles in the Investment Monitor’s Economic Zone Sustainable Recovery Strategies Awards in the categories of digitalisation and reduction of red tape, as well as additional awards in the areas of Industry 4.0 and positive impact on the city.

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Klaipėda FEZ earned the overall award in the digitisation category thanks to its constant progress toward digitising the territory while developing the model of a sustainable, smart and green industrial zone as per the general EU vision. The FEZ is currently implementing or has completed projects in spheres such as smart car parking, traffic volume monitoring, the internet of things for manufacturing, green energy and others.

The other main award was received in the category of red tape reduction, with the achievement being the result of Klaipėda FEZ, the city’s municipality and Klaipėda ID working together. The ratings made note of the “green corridor”, which was completed last year and tested in practice with the new investor REHAU. This solution allows for faster issuing of construction documents for companies that invest more than 3 million euros and create at least 20 new jobs.

The awards also recognised Klaipėda FEZ’s connection to the city and its communities – the FEZ companies’ support and volunteering in the midst of the pandemic, the joint implementation alongside the city residents of an odour monitoring project and other projects. The organisers also took note of the FEZ’s initiatives in the industry 4.0 context.

According to the head of Klaipėda FEZ Eimantas Kiudulas, this recognition from Investment Monitor is a reflection of the FEZ’s persistent strategy to focus on high and higher added value operations and sustainability.

“We sometimes forget that in small countries and communities, we can more quickly and more flexibly make forward-looking decisions, which generate long-term value. This recognition should contribute to presenting Lithuania and Klaipėda to the world as being innovative, and business and innovation-friendly. We will certainly not stop in terms of promoting innovation and the reduction of bureaucracy and, together with the Klaipėda FEZ business and the city’s academic community, we will seek to further strengthen talent development, attraction and retention,” E. Kiudulas says.

Klaipėda ID head Eglė Songailienė states that the organisation is already improving and expanding the “green corridor” programme.

“Having been tested in practice, the “green corridor” has been met with growing interest from investors and intermediaries and it will continue being improved. Our next step is the optimisation of the full construction process across related institutions at the city and national levels. We are delighted to contribute to the increasingly smooth communication between business and the public sector, and even more delighted to see the results of this smooth cooperation in terms of new investors and jobs,” E. Songailienė states.

While Vida Staskonienė, the director at the Business Development department at Invest Lithuania, says that all Lithuanian free zones contribute to both investment attraction and country’s reputation.

“We are happy for the recognition Klaipeda FEZ received, as well as a modern example the zone displays. We hope that we will further showcase Lithuania as a modern and progressive country,” V. Staskonienė says.

The Investment Monitor awards were presented in a total of eight main categories this year: digitisation, COVID relief packages, local impact, new investment, red tape reduction and sustainability and environmental, social and corporate governance (ESG).

Klaipėda FEZ is the longest operating and leading free economic zone in Lithuania. Forty-five companies operate out of the 412-hectare territory, with a combined turnover of 927 million euro in 2020, with almost 478 million euro in exports.

Since Klaipėda FEZ began operating, 747 million euros have been invested in the zone with most of this sum being foreign direct investment. Over a hundred companies and almost 6,000 employees work in the territory. Investors at Klaipėda FEZ predominantly specialise in PET, electrical transport and components, food industry, industrial equipment and other spheres. Some of the companies at Klaipėda FEZ perform not only manufacturing, but also intensive scientific, research and innovation activities.

You can learn more about this year’s winners on Investment Monitor’s website.

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This year the fDi’s Free Zones of the Year rankings included a bespoke award given to Klaipeda FEZ for successful implementation of solutions which helped improve and promote sustainable business. Download the full report here.

Some of the Zone’s initiatives commended by fDi Intelligence included the investment in research and innovative solutions for chemical recycling, improved re-use of secondary raw materials and the development of circular economy, as demonstrated by companies operating in the PET and plastics production sector such as NEO GROUP, Retal Baltic Films and Orion Global PET. The sustainability policies of businesses such as Be-Ge Baltic and Espersen Lithuania were also recognised. In addition, the fDi Intelligence accolade was achieved thanks to the contribution from Pack Klaipeda, the manufacturer of single-use food packaging and their innovative sustainable products, the Lithuanian electric bus Dancer with its reduced impact on the environment as well as the use of recycled materials in manufacturing, as well as a number of other initiatives by the businesses operating within Klaipeda FEZ.

The organisers of the global Free Zones of the Year rankings also recognised the Blue Economy strategy by the Klaipeda City Municipality, Klaipeda University, Klaipeda ID, Klaipeda Science and Technology park as well as a number of other partners representing both the private and the public sectors. A significant part of this strategy will be focused on the development and promotion of clean and sustainable technologies.

Importance to investors and R&D

Eimantas Kiudulas, CEO of Klaipeda FEZ, says that sustainability is becoming an increasingly important topic not only for the residents and consumers but for the investors themselves. According to the head of the Zone, over the last few years companies operating here have significantly increased their investment into the scientific research on sustainability issues, energy efficiency, education and processes which help reduce the environmental impact. Potential investors are also very keen to learn about the sustainability of the Zone itself.

“Although the biggest contribution to Klaipeda FEZ being acknowledged in this way came from the sustainable activities of our investors, the Zone’s management company has also been promoting the sustainability of the territory over the last few years. This includes initiatives such as expanding the infrastructure of public transport and cycling, developing various IT projects, planting around the territory, other solutions and educational strategies. We will continue our efforts and are planning further projects in areas such as monitoring the air pollution and traffic, smart water meters, modernising of the lighting across the territory, the Internet of Things and other initiatives which will contribute to a more sustainable, more balanced, more environmentally- and people-friendly functioning of our businesses,” says Kiudulas.

Gediminas Koryzna, director of business development at Invest Lithuania, believes that conducting their business in a sustainable way is of great importance to the companies themselves, so the award achieved by Klaipeda FEZ for its sustainability solutions will help boost the image of Klaipeda as a place worth investing in.

“In addition to the various sustainability solutions implemented by the companies and within the territory, Klaipeda FEZ plays an important role in creating sustainable ecosystems together with the local universities, suppliers and partners. This becomes the basis for setting up various regional competency centres which in turn strengthen the position of the whole region of Klaipeda and significantly contribute to attracting new investment,” says Koryzna.

Prof. dr. Artūras Razbadauskas, Rector of Klaipeda University, expands on this idea further and says that the relationship between higher education and business is one of the most important factors when looking for sustainable solutions and the economy of the future. The academic population is in turn motivated by the fact that their ideas find their way into the business and benefit the wider society.

“Klaipeda FEZ is one of the strongest partners of Klaipeda University, actively searching for solutions to the scientific challenges of the current time. The best example of this productive and environmentally-friendly collaboration is the electric bus Dancer, the idea for which was born at the University and which subsequently made its first physical journey out of the territory of the Zone. We can only congratulate our partners, the management company at Klaipeda FEZ, on this prestigious award and wish them best of luck for the future in consistently pursuing the course of progress,” says dr. Razbadauskas.

This year Klaipeda FEZ was also recognised for its achievements in local transport, with newly expanded bus routes spreading across the entire city and bringing passengers to the Zone. The infrastructure for cyclists and pedestrians is also being constantly improved.

The Free Zones of the Year ranking, conducted by fDi Intelligence, is considered one of the most significant accolades for the free zones in the world. Klaipeda FEZ has previously been recognised in the “quick launch” category as well as noted for its investor expansion, its contribution to the local and national economy and other achievements.

Further information on Klaipeda FEZ and the sustainability projects by the companies operating in the Zone can be found on our Sustainability page.

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Plastics companies operating in the Klaipeda Free Economic Zone (FEZ) have been fortunate. The impact of the COVID-19 outbreak has so far been limited. In fact, they report increasing demand, the opening up of new product and sales segments, and a renewed sense of worth in the eyes of society.

The flip side, to date, has been the impact on turnover of falling raw materials and oil prices.

Klaipeda FEZ is the largest plastics hub in the Baltics. It is home to 5 companies active in the plastics industry, who together generated a total turnover of €890m in 2018, or nearly half of Lithuania’s total for this industry.

The preliminary data moreover indicate that the 2019 figures are at around the same level: while production output was higher, the 2019 fall in oil prices impacted both other raw materials and, consequently, the pricing of end products.

For these reasons, Klaipeda’s plastics companies are reluctant to forecast their 2020 results at this point: while the demand for some current and new segments has increased over the past few weeks, it is still unclear how oil prices and the state of the global economy will develop.

Growing need for safety and hygiene

Pack Klaipeda, a manufacturer of egg trays and disposable polystyrene foam dishes, probably has the most positive outlook in today’s situation. Curiously, only a year ago the company was uncertain about its future, as the European Parliament approved the single-use plastics (SUP) directive. Today, Pack Klaipeda already has a new polypropylene packaging production line in place that doesn’t fall under limitations set by the EP.

The company also has a record number of employees and estimates that it has achieved a 30% annual revenue increase in the first quarter of this year. Last year, according to preliminary data, Pack Klaipeda posted a 3.4% revenue increase, up to €9.2m. The company expects 17% growth this year.

“I believe the COVID-19 outbreak, lockdowns, and quarantines have brought the consumers back to reality when it comes to safety and hygiene that disposable packaging brings to the food industry,” says Vytautas Butvilas, the CEO of Pack Klaipeda.

“At the same time, the restrictions for the restaurant segment and full hospitals have led to a major jump in demand for PS packaging for takeaway food. We are also seeing some of the customers from the catering industry, who were previously exploring paper laminate packaging and other alternatives, massively returning back to the safe and proved PS solutions. All these factors have contributed to at least a 30% increase in demand in our main markets – Lithuania, Scandinavia, Germany, and Poland.”

He believes that this may even impact the sentiments towards the plastics industry by both the society and European institutions.

“I think it’s naive to believe that we will all return to using ceramic cups and dishes as before the outbreak,” said Butvilas. “Even today, some European associations believe that the new priorities will be hygiene, safety, circular economy, recycling and only then bans or restrictions.”

He does not wish to speculate on whether the EU will review its SUP directive or implementation timelines, instead preferring to prepare for the future. In addition to the new production line that manufactures environmentally friendly and easily recyclable PP packaging, the company has also developed products for new segments such as molten packaging for fresh meat, salads, pastries, food assortments, and healthy takeaway foods.

The company also plans to deliver other hygiene-oriented, environmentally-friendly, and recyclable novelties. Currently, takeaway food packaging (both hot and cold) amounts to around 80% of Pack Klaipeda’s portfolio, 10% are egg trays and 10% – other categories. Among the latter, packaging with caps for liquid foods has been growing the most.

Limited only by physical factors

The Retal Industries group sees the recent developments from a quite positive perspective. In Klaipeda FEZ, it owns one of the largest European PET producers – NEO GROUP- and an HDPE caps and APET film manufacturer, Retal Baltic.

The initial data indicate that Retal Baltic generated some €46m in revenue last year, a 4.2% decrease compared to the year before. However, the company’s output at 22,400 tons was only 2.6% below 2018. Retal suggests that a major part of revenue decrease can be attributed to plummeting PET prices. This notwithstanding, company, also saw its profit rise 6% last year.

This year, Retal Baltic plans to fully employ the expansion projects of 2019 and to increase output to 28,000 tons. Consequently, it expects revenue to grow by 20% to €54.5m.

“Both of our core products – HDPE caps for drinks packaging and food-grade APET film – remain strategically important, even under the circumstances of business and societal restrictions,” says Viktorija Jurevičiūtė, the CEO of Retal Baltic.

“Since the COVID-19 outbreak, we have witnessed a slight increase in demand from our existing customers; however, some projects with our new and prospective customers have temporarily stalled. That is because some testing, equipment set up, auditing, aligning, and other processes are always needed when onboarding new customers.”

As Retal Baltic increased its production capacity of caps by 15% and 35% for film, the company expects the revenue from these segments to grow in line with these numbers. While the numbers from March and early April look good, prolonged lockdowns and quarantines may impact projects with new customers. “We aren’t concerned too much, as we have been paving long term relations with our customers,” said Jurevičiūtė. “However, we are aware that the pandemic impacts various processes for both us and our partners. For instance, we were planning to upgrade some of our equipment, but our suppliers from Northern Italy aren’t operating currently. We expect to be late with this particular project, but by a few months, not more. Another challenge is the decrease of deposit PET bottle collection and recycling: consequently, there are less materials in the secondary PET market and the prices are growing. However, oil, as the primary material for PET, is getting less expensive.”

The company also admits that decisions for future investment and expansion projects are currently on hold at both Retal Baltic and its international partners. However, the company is eager to resume its investment considerations once the situation becomes more stable. In March, Retal Baltic provided more than 3 tons of special APET film to Lithuanian makers’ community, manufacturing protective shields for medics. The company has even modified some of its production processes to pursue this initiative. Jurevičiūtė says that this contribution was pro bono, however, the company sees demand for such materials from the commercial segment. In the short run, such materials for protective shields may account for 2-3% of Retal Baltic’s portfolio; however, this demand should significantly decrease or disappear after the pandemic goes away.

“Speaking of the long run though, it’s obvious that product safety, sterility and long shelf life have now become incredibly important factors in society,” Jurevičiūtė notes.

“But only plastics industry insiders have been talking about this and were rarely heard. The current situation has shown that we should split the features of packaging materials from the questions of their use, collection, and recycling. I’m certain that the ‘safety first’ principle will stick around for a long time among the consumers. Of course, we do support the efforts in the circular economy, recycling and environmental fields, but it now becomes clear that the market and its regulators won’t be able to ignore the basic need for safety.”

Full speed

NEO GROUP, one of the largest European PET producers, says it is currently working to full capacity, although the first days of the lockdown were followed by some minor challenges in the logistics chain.

“The food industry and related activities were pronounced strategic during the pandemic, and so our production is in full swing,” says Paulius Ambrazaitis, the chairman of NEO GROUP.

“The demand for packaged food currently grows, it is both fuelled by safety and longer shelf life that decreases the number of shopping trips. We are also seeing an increase in demand for segments such as bottles for disinfection liquids and the medical sector – the market needs more test containers, medicine packaging, and other products that use PET.”

Production increased 15% last year at NEO GROUP according to the preliminary figures, while turnover dropped 6% to €508m. The decrease is attributed to the drop in raw material prices. Currently, NEO GROUP is fulfilling its first-quarter plans and expects at least ‘stable’ sales for the rest of the year. “We’ve been hearing negative feedback from the public regarding the plastics. It looked like the plastics industry was Public Enemy No. 1. Now, as the world faces a major pandemic, we see an increasing understanding that plastics packaging is probably the safest one, it has great barrier properties and prolongs the shelf life of products. Plastics are also needed everywhere – for the production of medical masks, shields, and disposable clothing. This is all made of polyethylene, polyester, PET. Safety is the main priority now. However, as consumers, we should remain responsible by recycling and not littering,” commented Ambrazaitis who also highlighted NEO GROUP’s commitment to circular economy efforts, as well as research and investment in this field.

Another Klaipeda PET giant – Orion Global PET, a member of Indorama Ventures family – is a little more reserved, but still very confident today. The company says its production, planning, and payments in the supply chain have all been steady, but logistics and supply processes now require a bit more effort from the company.

“I’m certain that once the pandemic is gone, the markets will need some time to strengthen,” says Jitendra Kumar Malik, the CEO of Orion Global PET. “I believe the negative impact of COVID-19 will take some time to heal. Nevertheless, by taking into account the globality of the pandemic and plans by governments to allocate finances, we believe we shall handle the situation well. We believe that our experience and capital will allow us to make the right decisions to secure our continuity and to stabilize the demand of our products used in the food and medical industries.”

He says that the Klaipeda company maintained a “stable result” last year, but he doesn’t want to speculate on this year’s result because of unstable oil prices. He also stresses that society is interested in COVID-19-related information, but the protection of society and the health system is not possible without special fibres and plastics.

“I’d like to believe that eventually, the focus of the society will return to the areas of environment and packaging, but consumers will not be manipulated by selective facts,” Malik said.

”After the pandemic is gone, we will further strive to introduce society to our operations, deepen its understanding of PET during our educative meetings with school and university students, meetings with other industry players and in conferences.”

He also added that the company has tested remote work during the lockdown and it worked very well.

“We needed to review our operations management processes and to find new, better collaboration and information management measures,” Orion’s manager said. “It worked well and we plan to continue after the outbreak.”

Helping to fight COVID-19

Eimantas Kiudulas, the CEO of Klaipeda FEZ management company, says he’s happy about the resilience of the plastics sector, as well as its ability to quickly react to this unprecedented situation. He believes the current situation will also increase the interest of the youth to study the plastics and polymer sectors and to contribute to research and novelties in both circular economy and new product creation fields. In the long run, the number of qualified specialists will be a crucial factor when companies consider new investment and high-value-added production.

“I am also very proud that our plastics companies have helped medics and other people who are now relentlessly fighting for our health and safety,” said Kiudulas.

“On top of Retal Baltic’s contribution that helped to manufacture tens of thousands of protective shields, ORION GLOBAL PET delivered generous financial and equipment contributions to Klaipeda’s hospitals. NEO GROUP delivered disinfecting liquids to the Gargždai hospital, Baltijos high school, as well as financial help and other measures for other hospitals in the Klaipeda region. Finally, Pack Klaipeda were kind enough to provide three Klaipeda hospitals with their takeaway food packages for free, even though it is their core business and they are now seeing a massive increase in demand.”

The post Pandemic brought new customers and opportunities for plastics companies first appeared on Klaipėdos Laisvoji Ekonominė Zona | Klaipėdos LEZ | FEZ.LT.

Over the past decade and a half, the plastics industry in Lithuania has experienced a period of stellar growth. As the country exports nearly three-quarters of all production, its plastics industry must also meet the strict European regulatory and societal challenges prevailing across Europe. This translates into broad R&D efforts in sustainable technology and the circular economy, with the country seeking to inspire a new generation of creators and innovators.(…)

The article also features quotes and comments from our community member Retal Industries, that owns NEO GROUP and Retal Baltic in Klaipeda, we well as from our CEO Eimantas Kiudulas.

Explore the full article here.

The post Lithuania: business, but not as usual [Sustainable Plastics feature] first appeared on Klaipėdos Laisvoji Ekonominė Zona | Klaipėdos LEZ | FEZ.LT.

RETAL – How the circular economy is revolutionising the plastics packaging industry from Business Reporter Film and Video on Vimeo.

But plastic packaging has a terrible public perception. Hashtags like #plasticfree and #noplastic abound on social media. The plastic industry is facing both the emotional issue of consumers influencing brands to move away from plastic, and the technical issue of insufficient infrastructure to collect, sort and recycle plastic waste.

Yet while alternative packaging materials may be more socially acceptable, are they really “better”? Will the current popularity of alternatives to plastic be short-lived, thanks to their depletion of natural resources and negative environmental impact, including larger greenhouse gas emissions?

Global Forest Watch reports that “40 per cent of global deforestation is commodity driven”, with paper packaging a contributing factor. From 2001 to 2018, 361 million hectares of trees were destroyed, equivalent to a 9 per cent reduction of the world’s forests. Over the same period, paper consumption increased by 26 per cent, with 55 per cent of its volume attributed to packaging.

Glass packaging production also negatively impacts on the environment. The proportion of silica – the mineral known as quartz sand – in the manufacture of glass is about 70 per cent. Studies on the natural reserves of silica indicate that extraction and high consumption of this mineral damages the environment and leads to the depletion of its reserves. Moreover, the high melting point of the material in glass packaging production is a source of significant CO₂ emissions, and impacts negatively on climate change.

PET packaging is the most popular choice for mineral water, still and carbonated drinks, beer, dairy products, and vegetable oils. PET is also widely used in medicine as well as cosmetics and household chemicals. It is cheap, light, easily moulded and branded, non-breakable, has high barrier properties and does not impair the product’s quality. Thanks to these advantages, the consumption of plastic packaging continues to grow. According to a Smithers report, global plastic packaging consumption was projected at 58.6 million tonnes in 2019 and is forecast to grow during 2019-24 at an annual rate of 3.5 per cent, to 69.8 million tonnes^[3]. According to Euromonitor International research, the total share of plastic packaging is about 60 per cent of the entire packaging market.

While studies show that consumers prefer this type of packaging, it is necessary to find multifaceted solutions to show that plastic can be both convenient and sustainable. In most European countries, PET is already widely recyclable in standard collections, giving it a valuable second life as recycled PET, or rPET.

Global PET and rPET packaging producer RETAL* has more than 20-years of expertise in plastics manufacturing, and is increasingly active in circular economy initiatives and the promotion of public awareness of used PET packaging. Anatoly Martynov, President of RETAL, asserts that how we manage plastic packaging beyond its first use underpins everything and impacts everyone. Insufficient understanding by consumers of their responsibilities for the disposal of used packaging and poor collection infrastructure can both lead to serious problems of environmental pollution. In addition, the long-term payback period of recycling projects is the reason for the insufficient development of the recycling industry.

The goal for every PET packaging company is to minimise its negative environmental impact. RETAL works closely with its global customers to ensure that its packaging meets the strictest criteria. The company is also active in various sustainability-driven plastic packaging value chain organisations, including PETcore, the Circular Plastics Alliance and Waste Free Oceans.

On the technical side, RETAL has developed the capacity and expertise to produce preforms from up to 100 per cent recycled PET, and continuously works towards creating innovative, patented “design to recycle” solutions that use lightweighting and tethered closures.

NEO GROUP, part of RETAL Industries, is also actively involved in the implementation of the circular economy. One of its main projects is the launch of a production line that will produce PET resin containing rPET. The first phase is planned to be completed in 2020. With consistent investment in additional lines planned over the next five years, the recycling of used PET bottles at NEO Group is expected to reach 4.5 billion units per year. Thanks to the new lines, a significant share of the European market’s demand for recycled content will be produced by NEO.

Since 2015, NEO GROUP** has participated in the Horizon 2020 program, which promotes greater resource efficiency and reduced environmental impact for waste by developing beneficial workflow for recycled materials, industrial by-products and by using rPET. Since 2018, programme participants, including NEO GROUP, have been actively working on chemical recycling. This technology will boost the ability to recycle “contaminated” PET, which cannot currently be recycled using mechanical methods. Practically 100 per cent of used PET can be chemically recycled, and it can be recycled unlimited times. This is a revolutionary technology that truly supports the circular economy.

All these factors come together to illustrate how RETAL is active in closing the loop, contributing to environmentally responsible solutions and meeting the requirements of the EU Single-Use Plastics Directive.

While no single business can effectively tackle climate change or solve the problem of environmental pollution by itself, a joined-up approach to plastics circular economy that takes into consideration all the relevant stakeholders will allow PET packaging to realise its true value, and change its negative perception to a positive potential.

For more information, visit Retal’s website here.

* RETAL develops and manufactures high-quality polyethylene terephthalate (PET) packaging solutions, including preforms, closures, containers and films. Globally active, RETAL supplies customers in over 60 countries worldwide. Strongly focused on quality management standards, RETAL is ISO 9001, ISO 14001 and ISO 22000 accredited.  Parent company RETAL Industries Ltd is headquartered in Limassol, Cyprus. 

** NEO Group is a PET manufacturer for food and beverage packaging. With the introduction of its third production line in 2018, the company has become one of the largest PET manufacturers in Europe. NEO GROUP expanded into the chemical recycling of PET waste in 2011 in order to provide a complete, responsible service to its clients, with NEOPOLYOL also popular for use in the construction industry. NEO GROUP serves around 300 companies in over 30 countries. 

The post How The Circular Economy Is Revolutionising The Plastics Packaging Industry first appeared on Klaipėdos Laisvoji Ekonominė Zona | Klaipėdos LEZ | FEZ.LT.