If you're looking for a way to identify the effects of globalization or to define a maturing market, look no further than the 2007 version of the American Chemistry Council's “Resin Review.”
Almost two-thirds of the 94-page report is full of charts detailing sales and production for major thermoplastic or thermoset resins — mostly in the U.S. and Canada — starting in 1973. Those of you familiar with the market both then and now already can visualize these charts and graphs in your head. There's the rocket-launch upward incline, and then some gently rolling hills.
The total mount of resin consumed over that period nearly quadrupled, going from 29.2 billion pounds in 1973 to 113.2 billion in 2006. But the market's compound growth rate shrinks the closer you get to the present day.
Impressive 4.2 compounded sales growth for the total 34-year stretch literally is cut in half when narrowed to the six years from 2001-06. That's a reflection of how the market slowed down after major conversions from materials like wood and metal took place in the 1970s and 1980s, but it's also a sign of how production moved from North America to parts of the world with lower labor and production costs.
The impact of high feedstock prices also is clear. Utilization rates for most major thermoplastics peaked in 2004, with most of them checking in above 92 percent. By 2005, most had tumbled below 90. What happened? Well, for starters, cash prices for natural gas — used as feedstock in most of the region's polyethylene — were above $8 per unit for a good portion of 2005. They had been that high only twice in the previous seven years.
Meanwhile, cash prices for crude oil, another major plastic feedstock, began 2005 around $52 but were near $70 by year's end. Price increases on both natural gas and crude oil then were passed along the chain to resin processors, who tried to do the same to their own customers. At that point, those customers either imported finished plastic products from outside the region, chose an alternate material (Welcome back, paperboard!) or — in the best-case scenario for processors — found ways to make the same product using less resin.
The most alarming page of the 2007 “Resin Review” comes toward the end of the statistics section, when the reader is confronted with a chart of production and sales for engineering thermoplastics. The chart includes totals for acetal, fluoropolymers, polycarbonate, polyphenylene sulfide, polysulfone and liquid crystal polymers, and other high-end materials. These are the ones that are supposed to hold the future for the North American market as the commodity segments mature and slow down.
Yet regional production of these products grew only about 10 percent in the 11-year period. And sales of these higher-priced, noncommodity resins actually fell 14 percent overall.
Again, increased imports and higher feedstock costs undoubtedly play a role. But makers of these materials need to find a way to overcome these obstacles — or the future might not be as bright as they and the rest of the industry had hoped.
Esposito is a Plastics News senior reporter based in Akron, Ohio, who covers plastic resins and chemicals.