The Society of the Plastics Industry Inc. expects plastics industry exports to be strong at least through 2008, but whether they will be as strong in 2009 is not clear.
The industry's trade surplus at the end of September was $11.2 billion, already ``on track to exceed'' the total trade surplus of $10.9 billion at the end of 2007, noted SPI senior director of international trade Neil Pratt.
That 2007 surplus, however, came from resin — which had a trade surplus of $16.6 billion, up nearly 37 percent from 2006, Pratt pointed out. But plastics products, machinery and mold-making segments continued to show deficits in 2007, albeit slightly lower than in 2006.
``It is uncertain whether export strength can continue in 2009,'' Pratt said in a Nov. 21 SPI webcast that discussed global business trends and the size and impact of the plastics industry on the U.S. economy. The reason for that uncertainty, he said, is the rise in the value of the dollar and the drop in oil prices, negating any feedstock advantage the U.S. had in 2007 — since its primary feedstock is natural gas, he said.
``But we remain confident that the plastics industry can weather this economic crisis,'' Pratt said. ``The question is how long this economic crisis will last.''
In releasing its trade data for 2007, Washington-based SPI said exports rose 11.5 percent in 2007 to $48.4 billion — that's on top of a 12.3 increase in 2006. At the same time, imports declined less than a quarter of a percentage point to roughly $37.6 billion.
``A bright spot in the industry was the strong exports,'' said Bill Carteaux, SPI's president and chief executive officer.
The trade surplus of $11.2 billion at the end of September is almost two times higher than the $5.8 billion trade surplus at the end of 2006, and three times higher than the trade surplus of $3.7 billion for 2005.
But the overall trade surplus masks high trade deficits with China, and in plastics products, which accounts for nearly two-thirds of the industry's employment and companies.
The U.S. trade deficit with China in plastics products rose 11.9 percent in 2007 to $7.3 billion. Because China imports U.S. resins, the overall trade deficit with the country was lower, at $4.75 billion. But that figure was more than three times the U.S. deficit with any other country.
The U.S trade deficit in plastic products decreased by $400 million in 2007, but still was a lofty $4.3 billion. U.S. trade deficits also decreased in mold-making and in the machinery sector. The mold-making trade deficit declined from $721 million to $657 million, and the trade deficit in the machinery sector declined from $896 million to $781 million.
``The encouraging news is that the deficits in [plastic products, molds and machinery] all decreased in 2007,'' the report said. Exports in plastics products, machinery and resins all increased. Exports accounted for 17.8 percent of the estimated value of domestic shipments, up two percentage points from 2006.
The report did strike a note of caution, however, pointing out that the condition of the industry does not look as good when the amount of resins and plastics products contained in the import and export of other goods is taken into consideration.
According to the study, the value of imported plastic products contained in imports exceeded the value of those contained in exports by $23.9 billion. One reason is that during the past 10 years, processors have moved contained-trade processing operations overseas.
``As freight costs increase, producers will have to ultimately decide whether to move contained-trade production back to the United States, or to move resin and plastics production overseas,'' the report said.
Noting that U.S. resin producers are making virtually all of their capacity investments in other countries, the report said the analysis of contained trade ``reveals an unseen or stealth deterioration of the industry's international trade position. In the event that the offshoring pattern continues,'' there will be ``a deteriorating regular trade balance even in resins,'' the report said.
Canada and Mexico remained the U.S. industry's largest plastics export markets, with 22 percent each; China is third with 8 percent, up two percentage points from 2006. Canada is the leading import market at 31 percent, followed by China at 22 percent.
Carteaux said: ``In addition to the slowing economy, the global competitiveness of the U.S. industry continues to be hampered by external challenges, including high energy prices, the second-highest corporate tax rate and the China currency situation. Consolidation and offshoring continued to drive down the number of employees and establishments.''
The U.S. plastics industry remained flat at 1.1 million workers in 2007, but the number of facilities nationwide declined from 18,585 to 17,648, and the value of shipments declined slightly from $379 billion to $374 billion — an amount that is still 10 percent higher than in 2005, when shipments were valued at $341 billion.
Plastics industry employment has declined 30 percent since 2002, with a 13 percent drop in establishments. Likewise, new capital expenditures have declined 20 percent since 2002, to $10.2 billion. Annual apparent consumption of plastics (U.S. shipments plus imports, minus exports) stayed flat at $271 billion.