North American plastics gain on reshoring of manufacturing

23:20 PM | November 11, 2013 | —Clay Boswell

The impact of North America’s shale gale was the prevailing theme at the Global Plastics Summit, held in Chicago by IHS Chemical in collaboration with the Society of the Plastics Industry on 5–6 November. Producers, convertors and equipment suppliers have agreed that the cheap energy and feedstocks supplied by shale-based oil and gas resources will drive steady growth in demand for North American plastics not only from abroad but also from the resurgent manufacturing sector.

Greg Jozwiak, North America commercial v.p./packaging and specialty plastics at Dow Chemical, says that reshoring, material substitution, and increased exports of finished goods are driving the growth for polyethylene (PE) in the North American packaging market.

Only a small amount of the glass, metal, or paper used in packaging needs to be substituted to make a big difference in demand, Jozwiak points out. A 1% increase in penetration would boost demand for PE by 200,000 m.t./year, requiring half of a world-scale processing plant and 28 processing lines. Jozwiak has assessed overall growth prospects for PE packaging: Core growth in the packaging market is 2.5%, he notes. Reshoring adds 1%, substitution 0.75%; and finished goods exports 0.25%, for total growth of 4.5%.

North America’s cost advantage is durable, says Bill Sanderson, v.p./downstream research and consulting at IHS Chemical. Shale outside the region will have no impact for the rest of the decade, he says, and the $12/million Btu differential between gas and oil in North America will not dissipate anytime soon because there is no easy way to arbitrage it.

Shale has been a challenge for North American producers of resins, such as nylon, whose cost is tied to benzene, observes Paul Blanchard, director/engineering plastics at IHS Chemical. However, he notes that these materials have gained in terms of demand, since shale has been a “revolution” for end markets.

Polypropylene (PP) producers who spoke highlighted competition among resins. Jost Laumeyer, head/global marketing at Borealis Polyolefine, says the company was finding growth in “niches of overspecification.” He points to certain applications in automotive in which PP was displacing nylon-6,6, which had, itself, replaced metal.

Catalyst improvements increasingly allow PP makers to achieve the properties necessary to take share in such applications, says Steve Davis, manager/catalyst application and technical support, Americas at LyondellBasell. More broadly, such capabilities allow producers to differentiate their offerings from low-cost alternatives supplied from emerging markets.