COLUMBUS, OHIO (Aug. 30, 1 p.m. ET) — Worldwide demand for plastics will increase exponentially over the next five years, but with untapped oil and gas reserves and growing manufacturing capacity, the industry should be more than able to keep up, said Peter Davis, director general of the British Plastics Federation.
The world consumed 205 million metric tons of plastics in 2011. About 99 percent of that was derived from fossil fuels, though plastics production only accounts for about 4 percent of overall fossil fuel usage, Davis said in a seminar at the Global Polymer Innovation Expo in Columbus.
Even with increased demand, the world has plentiful reserves of oil and gas, Davis said. He cited several examples of fossil fuel supplies: shale gas discovered in North America, oil sands in Canada and Venezuela, the estimated billions of barrels of oil and gas reserves on U.S. federal lands, and unexploited reserves of oil in the Middle East and the United Kingdom.
“[There is] often talk about when oil will peak and how long have we got before we cannot have oil any longer,” he said. “I think the prognosis is that there's a great deal of time to go before that happens.”
The cost of crude oil will continue to rise steadily following a small dip in price next year, he said. He added that unexpected circumstances like natural disasters, as well as political turbulence and higher costs for extraction, could cause prices to jump.
Using data from global consulting firm IHS Inc. in Düsseldorf, Germany, Davis outlined future predictions for resin growth and capacity.
Polyethylene capacity will increase from 147 million tons in 2011 to more than 170 million tons in 2017, growing at a rate of 3.4 percent. At the same time, global demand will increase 4.7 percent.
“This combination could mean that market conditions in global ethylene might tighten over the next five years,” Davis said, adding that by 2020 global capacity should reach 200 million tons.
All regions will see an increase in demand over the next five years, but the biggest growth will be in Africa and the Indian Sub Continent.
Northeast Asia, particularly China, will see the largest gains in capacity, from 21.6 million tons in 2012 to 30.5 million tons in 2017. Other regions will have gains in capacity that are more modest. Capacity in Western Europe will decline from 13.6 million tons to 14.9 million tons, largely because of aging infrastructure and a move toward investing in the Middle East, Davis said.
Polypropylene has a similar forecast. Demand for the material reached 53.7 million metric tons in 2011 and will continue growing over the next five years. Like polyethylene, the largest increases in demand will be seen in emerging economies, like the Indian Subcontinent, Africa and the Middle East.
Capacity will also grow worldwide, except for a slight decline in Western Europe, and the largest gains will be in China where capacity will grow from 23 million tons in 2012 to 34.2 million tons in 2017. Capacity will be more than sufficient to meet demand, Davis said.
The demand for PET resin grew by nearly 1 million metric tons in 2010 and global markets should continue to grow steadily by a little more than 1 million metric tons per year over the next five years, with more than half of that demand coming from Asia.
However, unlike polyethylene and polypropylene, PET capacity will outstrip demand.
“The global PET market has seen tremendous capacity growth over the past 5 years that has pushed and will continue to push operating rates to really quite unsustainable levels,” Davis said.
Excess capacity will grow by nearly 7 million metric tons and that will push operating rates below 70 percent. Most of the excess capacity is coming from the Middle East, which is quickly becoming a sizeable player in the global PET market.
This will lead to the region becoming a net exporter – more than half of PET production will be for exports – but the region will need to find a market for the material, he said.
Unlike PET, PVC capacity should stay in balance with demand, Davis noted.
A growing plastics industry will become increasingly important as the earth's continues its population boom, Davis said, adding that the world's population was 3 billion in 1960, hit 7 billion last year and could rise to 11 billion by 2050.
“How many children a couple has has difficult political, religious and economic connotations, and politicians prefer to avoid it, but our rapidly growing population is a strain on our planet's resources, environment and species,” he said.
“There's no question about it, we face some real challenges in the future, probably beyond our lifetimes, but it is certainly coming,” he said.
Plastics can help meet some of those challenges. Plastic tanks and pipes can conserve and distribute fresh water, while films can be used to line irrigation trenches and protect crops, he said.
In the developing world, as much as 50 percent of fresh produce is wasted by improper harvesting and packing and a lack of refrigeration. Plastics packaging can keep food fresher longer, and portion packs reduce food waste by allowing consumers to only purchase as much as they need, he said.
Polymers are also an essential component of healthcare, from wound dressings, prostheses and medical devices, to isoprene condoms for birth control. When disaster strikes, plastics are used in shelters like tents and sheeting, and for delivering water and other supplies like portable toilets, he said.
Plastics can also help conserve energy and reduce greenhouse gas emissions — plastic components make lightweight vehicles and airplanes that burn less fuel, and PVC-U windows and EPS insulation that reduces energy needs, he said.
Plastics may also play a role in the far-off future, when the earth is so very densely populated we leave the earth to explore the universe.
“The future is positive for plastics,” he said.
The Global Polymer Innovation Expo was held Aug. 27-29 in Columbus.
