Trying to predict where plastics will be made and molded in 20 years is as much guesswork as hard analysis, but if present trends continue, then plastics seems headed east — toward low-cost labor hot spots.
In the case of the resin industry, analysts said most new investment is going to the Middle East, where there's cheap oil and gas feedstocks, and into Asia, where the new demand will be.
“Most of the new construction of base chemicals and plastics is occurring in the Middle East because of the low cost, and it's also occurring in Asia and India because of the strong demand and consumption,” said Howard Rappaport, global plastics business director for Chemical Market Associates Inc. in Houston.
Plastics consumption is growing rapidly in developing countries, much faster than in developed economies. Consider these figures:
* China, the single-largest plastics consumer, is expected to grow from 72 billion pounds of polyethylene, polypropylene and PVC in 2007 to 113.8 billion pounds in 2012.
* India's consumption will more than double during that period, from 11.9 billion pounds to 25.4 billion pounds, as it jumps from the word's fifth- to fourth-largest plastic market, according to data from petrochemicals firm Reliance Industries Ltd. of Mumbai.
* According to Reliance, the European Union, the United States and Japan, which round out the top five plastics markets, are expected to add between 1.3 billion and 6.6 billion pounds each. The EU will remain as the second-largest global market for plastics, consuming about 68.3 billion pounds in 2012.
New Zealand-based analyst Roger Young, vice president for Asia Pacific with Akron, Ohio-based Robert Eller Associates Inc., said the big names in resin 20 years ago were overwhelmingly American, European and Japanese. Today, the field includes entrants from China such as Sinopec and PetroChina Co. Ltd., along with India's Reliance, and Saudi Basic Industries Corp. of Saudi Arabia.
Plastics machinery is showing similar trends. The largest injection molding machine maker in the world today by number of units is China's Ningbo Haitian Group Ltd., which likely wasn't on anyone's list of companies to watch 20 years ago.
In plastics processing, Young suggests, Africa could be such an unlikely future prospect: “I would expect the Africa option to be active 15-20 years in the future. We are seeing companies already beginning to look at Africa as a future site.”
He said that Africa will be last in a long line of development areas, as costs rise in the relatively developed regions of coastal China, and as labor- and cost-sensitive manufacturing shifts to places like Eastern and Central Europe, central China, Vietnam and India.
Those spots will retain some advantages: Eastern Europe, for example, is favored over China for production of products with more sensitive intellectual property requirements, Young said.
Russia could emerge as a major resin producer in 15-20 years, the time it will take to make the massive investments needed to build petrochemical facilities and related infrastructure, Rappaport said Feb. 5 during the PlastIndia show in New Delhi. “[Russia has] a tremendous amount of oil and gas reserves,” he said.
Logistics issues could help the Middle East develop as a low-cost manufacturing center, and could cause Mexico's resurgence as a manufacturing locale for products geared toward North America. “A lot of it depends on the availability of the material, the price of the resin and the infrastructure and ability to ship the finished goods,” Rappaport said. “Not all finished goods travel well. It's limited to the finished goods you can stuff economically in a seagoing container.”
Helmar Franz, Haitian Group's executive vice president, said the prediction business is notoriously difficult. Understanding where plastics will be in 20 years requires putting the industry in the context of larger geopolitical issues.
In the past, the world talked a lot about overpopulation, but now it's focused on environmental and energy issues, which heavily influence industry's direction, Franz said. The top issues in 10-20 years, such as access to water supplies, may be tougher to spot now, he said.
Despite the changes, North America and Europe will remain big markets, and many products, for a variety of reasons, must be made locally, analysts said.
Young said that precision products with high-quality or regulatory requirements, such as medical devices, will continue to be made largely in places like North America, as will goods with high shipping costs such as appliances and foamed products — particularly as governments try to cut carbon emissions as they fight global warming.
Young said original equipment manufacturers will keep pushing into lower-cost countries, but increasingly will settle in China and India to serve those local markets with populations of more than 1 billion people.
Automotive and electronics will remain strong in China, because those industries upgrade and rely less on cheap labor, he said. But he mentioned the ABS resin industry as a segment where industry leadership is moving from the West to Asia.
“Western companies will arrogantly tell you that their resins are of much higher quality,” Young said.
“[That's] probably true, but if the market does not demand that quality, what good will it do them? As the Asian companies get more and more experience, they are improving their technology and products.”