Double-digit growth in plastics exports and a dip in imports propelled the U.S. plastics industry trade surplus for the first eight months of 2007 to $6.9 billion and past the full-year total for 2006, according to a new report from the Society of the Plastics Industry Inc.
Spurred by the weak U.S. dollar and increased manufacturing efficiency by American plastics companies, U.S. plastics exports in January through August jumped by 11.7 percent over the same period in 2006, while imports slipped 2.3 percent, said SPI President Bill Carteaux. Carteaux and SPI senior director of international trade Neil Pratt spoke in a Nov. 8 Webcast that discussed global business trends and the size and impact of the industry on the U.S. economy.
Washington-based SPI projected the overall trade surplus would top $10 billion in 2007.
By comparison, plastics exports in 2006 grew by 12.3 percent over 2005 to $43.4 billion, while imports last year increased by 7.5 percent to $37.6 billion, yielding a surplus of $5.8 billion. That was up nearly 58 percent from 2005's surplus of $3.7 billion.
But, by sectors, the numbers paint a different picture. There was a $12.2 billion trade surplus in resins in 2006 and a $4.7 billion trade deficit in plastics products - which is the sector that accounts for almost two-thirds of plastics industry employment and establishments. The deficit in that sector with China was even higher, at nearly $6.5 billion.
There was also a $721 million trade deficit in mold making and a $896 million trade deficit in the machinery sector.
SPI projects that the resin surplus will increase to $16 billion in 2007, because U.S. resins - largely natural-gas based - had a favorable market position compared to resins made from crude oil.
Of all the data, Carteaux said he was most encouraged that the trade deficit in plastics products - which plateaued between 2005 and 2006, is projected to decline to $4.3 billion when 2007 numbers are complete.
``The change wasn't a one-year anomaly,'' he said in an interview after the Webcast.
He also said higher energy costs, health-care costs, corporate taxes and raw material costs are still a significant problem for the industry. In 2006 alone, the raw material costs of plastics manufacturers increased 37 percent to $191.9 billion.
``The increase in the value of our goods is still being outstripped by the high cost of raw materials,'' Carteaux said. ``Despite that, more and more plastics companies are finding ways to compete and export. We are exporting more.'' He noted increases in 2006 in resin, plastic products and machinery exports.
However, SPI's ``Global Business Trends Report'' painted a potentially gloomier trade picture.
The analysis showed that plastic products exported from the U.S., especially resins, return ``as part of other goods.''
``Plastics processing operations are already moved to overseas locations. And U.S. resin producers are making virtually all of their capacity investments in other countries. If this offshoring pattern persists, and is accelerated by high U.S. natural gas prices, the industry will observe a deteriorating `regular' trade balance even in resin,'' the report said.
When this total picture is considered, the plastics trade balance in resins falls from a surplus to a $872 million deficit and the products deficit ``balloons'' to $29.4 billion, the report said.
Also based on the 2006 data, Canada and Mexico remained neck and neck as the U.S. industry's largest plastics markets for resins, products, machinery and molds, each accounting for 24 percent of U.S. exports, while China moved into third place at 6 percent. But China's position as the top exporter of plastic components and finished goods to the U.S. continued to widen the U.S. trade deficit in that sector, to about $5 billion last year.
China, at 20 percent, ranks as America's No. 2 import source overall, behind Canada at 33 percent. Canada is leading exporter to the U.S. of resin, machinery and molds.
Citing the 2006 statistics, Carteaux noted that the U.S. plastics industry employed 1.1 million workers in 18,585 facilities nationwide and shipped $379 billion worth of plastics goods last year, up from $341 billion in 2005. Though the number of plastics companies and employees has declined since 2000, the U.S. plastics industry since 1980 has continued to outperform the nation's manufacturing sector as a whole in terms of employment growth, real shipments, real value added, and productivity, he said.
Annual apparent consumption of plastics (U.S. shipments plus imports, minus exports) rose 7.6 percent last year to about $271 billion.
Plastic components and finished products accounted for slightly more than $200 billion of that total, with resins, machinery and molds making up the rest.
The currency and export situations with China remain the most discouraging notes, Carteaux said.
``We do not benefit in our trade with China when the dollar is weak,'' he said.
He added that he did not think China's Nov. 8 announcement that it plans to invest more of its future reserves in the euro will have much affect on the U.S.-China plastics industry trade deficit. That deficit increased from $4.4 billion to $4.8 billion in 2006 and is up 42 percent since 2004.
``The re-evaluation of the yuan is the No. 1 issue,'' said Pratt, who is also SPI's trade counsel. The yuan is devalued, in most estimates, by 40 percent, he said. ``How can you compete with that? We need to level that playing field.''