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May 01, 2020 02:02 PM

Markets open for plastics as virus changes the rules

Frank Esposito
Senior Staff Reporter
Plastics News Staff
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    Phil Karig speaks at a recent Plastics News event.

    As the COVID-19 crisis moves closer to the midpoint of 2020, some new ideas are opening up to the plastics market.

    "Even though plastics in the consumer packaging and medical areas have been leading the way, there are a number of areas that we may not immediately think of as 'essential' that are also seeing good demand for plastic products," market analyst Phil Karig said in an email to Plastics News.

    "With almost everyone staying at home, the amount of household garbage being generated is way up and cities and counties need to be sure that there are enough residential plastic garbage and recycling containers available to meet increased demand," added Karig, managing director of Mathelin Bay Associates in St. Louis.

    Anything related to sanitation such as cleaning buckets — and not just in hospital and health care settings — is also in demand, he said. With many states allowing large and small hardware stores and garden centers to remain open, there are also many plastic products for do-it-yourself and home improvement projects that are seeing good demand.

    Karig added that anything that can allow plastic products to reach the market more quickly "is showing life." 3D printing "is continuing to blossom" and thermoforming is in demand for plastic products that "can't wait six months for new injection molds to be produced and delivered," he said.

    At Chemical & Polymer Market Consultants in Houston, President Esteban Sagel said that resin demand during COVID-19 "is very different, depending on the segment that you are looking at."

    "I have witnessed firsthand the increase in interest in polymers by the medical industry," he said in an email to Plastics News. "Here in Houston … the MD Anderson Cancer Center is urgently working with the polymer industry to create innovative solutions for personal protective equipment [PPE] for its doctors. The need for protection is real, and these newly opened communication avenues between the polymer industry and the medical profession are opening new avenues of business."

    Sagel added that besides medical PPE, packaging "is also seeing its day in the sun."

    "We are also seeing how the misguided bans against plastic packaging and even plastic bags are getting (temporarily) rescinded," he said. "More than ever, we need to focus on the benefits our products provide and fight the bad science promoted by some of the conservancy actors."

    The resin demand picture is bleaker for other segments, like automotive, building and construction or appliances.

    "I don't believe their woes will end any time soon," Sagel said. "We are still far from a systemic solution against the virus that will allow the economy to come back full steam."

    On resin pricing, Sagel believes the market "will be in an environment of prolonged low prices, as a result of the demand shock and sustained and low oil prices."

    "I was expecting low prices before COVID and the oil price crisis; those two factors are solidifying my expectation," he added.

    The chemical industry "has been hit pretty hard" by the COVID-19 crisis, especially as so many automotive plants have shut down as part of the transportation sector, which accounts for about 17 percent of the value of total plastics sold in the U.S., according to Paul Bjacek, chemicals research lead for consulting firm Accenture in Houston.

    Even so, he said in an email to Plastics News, that "nimble chemical firms" can grab market share in active markets including medical supplies, which are 9 percent of plastics demand value, and food, which represents 13 percent.

    Bjacek added that all chemical companies will need to rethink their operations and supply chains to gain resiliency, lower cost structures and recalibrate operations. "They'll need to take these steps in order to accelerate speed to market, drive customization and create a smaller environmental footprint," he said.

    Another impact the chemical industry must grapple with, according to Bjacek, is the increased use of disposable plastics. That trend, however, is countered by constraints to collection and recycling of plastics, especially amid low oil prices, which reduce standard resin prices and remove the economic viability of recycling.

    "Now is the time for the plastics industry to step up with scaling circular integration at brownfield refinery/petrochemical sites," Bjacek said.

    Longer term, Bjacek added that chemicals and plastics producers will need to keep connected with customers, as supply chains and manufacturing locations will likely diversify and shift, not only for medical supplies, but all industries looking for reliable supply chains.

    "COVID-19 is adding to the trend of industrial recalibration — the reshoring of high-value industries, where speed and customization are most important," he said.

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