The U.S. plastics industry is in the middle of a major shift in goals, going from a strategy of growth via replacing traditional materials to one of holding on to a manufacturing position that took 50 years to build.
This shift was highlighted Jan. 27, when the Society of the Plastics Industry Inc. - the industry's Washington-based trade group - released two major studies of issues facing the region. The industry remained the fourth-largest manufacturing business in the country - with 2004 shipments of $345 billion - but a recent three-year period saw more than 500 plastics facilities close and almost 70,000 jobs lost.
``I think our members understand the reality of the situation,'' SPI President and Chief Executive Officer William Carteaux said in a Jan. 27 conference call. ``I don't think they'll be disappointed or surprised either way by this data. But they're going to realize we're able to take this data and do something with it.''
Calls for legislative action could result from the mountain of information SPI gathered. This could take the shape of urging Congress to keep pressure on China to revalue its currency, or imposing tariffs on products affected by unfair trade, said Karen Bland Toliver, SPI's senior director of international trade and industry statistics.
One big unknown heading into 2006 will be the longer-term effect of disruption caused by the hurricanes of 2005. The SPI data ends in 2004, since 2005 information was unavailable.
Some highlights of the SPI research effort include:
* A trade surplus of almost $3 billion in 2004, mainly the result of a $9 billion surplus in resin. The 2004 deficit in plastic products was almost $4.7 billion. Deficits in plastics machinery totaled $830 million and in mold making reached $691 million.
* The 2004 plastic products trade deficit with China and Hong Kong was almost $5.1 billion - an increase of almost 19 percent from 2003.
* The 2004 plastics machinery trade deficit was greatest with Germany, amounting to $409 million. That total increased almost 16 percent from the prior year.
* South Carolina was the state making the biggest move in plastics jobs. The state jumped from 20th in 2002 to 14th in 2004, when it employed about 32,100.
* California still topped the list of employees, with almost 122,000 - representing more than 9 percent of the U.S. total. In value of shipments, California came in second behind Texas. Plastic shipments from the Lone Star State - a major producer of resin - were valued at more than $38 billion, more than 11 percent of the total.
And while the industry retains its position in the upper rank of manufacturing, a number of market watchers - including industry consultant Peter Mooney - have deep concerns.
``The industry still has this `Fortress America' concept where they think everything is going to be OK,'' said Mooney, who is president of Plastics Custom Research Services in Advance, N.C. ``But we're in a new economy, and the industry has to adapt to that.''
As an example, Mooney cited plastic pipe makers, which - in his view - haven't made enough investments in newer, more energy-efficient machinery in recent years.
Bill Ridenour, president of Newbury, Ohio-based Polymer Transaction Advisors Inc., said the challenges facing the U.S. plastics industry are extreme, but he added that they can be overcome.
``The industry is hurting, especially in automotive and high-volume commodity products and materials,'' said Ridenour, whose firm is working on eight deals involving plastics companies. ``But I think the worst of the weeding out has taken place. We're not going to see ongoing outsourcing loss to China at the same pace.''
Resin pricing and shipping costs will continue to be issues, with Ridenour expecting processors to find success in niches.
``Everyone would like to pursue a higher value-added strategy with less physical processing so you don't have to compete with low-priced labor,'' he said. ``If you're in the medical market, for instance, making parts for heart pumps, with not a lot of subassembly and a lot of quality control, you're in good shape.''
In the bigger picture, Mooney pointed out that the growth seen by U.S. plastics from the 1970s through the 1990s would have slowed naturally in the 2000s. But this slower-growth model worsened into loss by economic and environmental issues ranging from low-priced imports to international terrorism.
Mooney, who has worked with the industry since 1980, also made note of the difference in how SPI alters its message, from a position of strength to a position of need, to suit its audience.
``To Congress, they're whining,'' he said. ``But to the public, they're winning.''