Washington — Plastics industry production will likely drop a whopping 10 to 12 percent this year, with a modest rebound next year, according to the top economist with the Plastics Industry Association.
The impact of the coronavirus pandemic will vary quite a bit within the industry, though, with machinery companies and mold makers feeling the most pain while those in end markets like packaging poised to do better, according to Perc Pineda, chief economist with the Washington-based association.
He spoke during an April 22 webinar hosted by information provider ICIS.
Pineda noted that the unprecedented nature of the crisis makes forecasting very tricky but estimated that production volumes in the U.S. plastics machinery sector will drop 12.2 percent this year, and molds will see an 11.2 percent slump.
Production volumes for plastic products will fall 10.2 percent and resins 9.8 percent in the U.S. for 2020, he said.
"We had weak Q1 plastics production and I think that's going to continue for the rest of the year," Pineda said, arguing that the slowdown is being felt the most for plastics firms serving durable goods industries like automotive and housing.
Auto sales for the U.S. could drop to around 13 million this year, after staying close to 17 million annually in recent years, he said, which will impact mold makers in particular.
Pineda cautioned that there's huge uncertainty around business forecasting now, however.
"Given the nature of the crisis, and it continues to evolve, it's really difficult to come up with definitive forecasts," he said. "This is unprecedented and my forecast continues to evolve as we get more data."
Even before the pandemic, Pineda said business investment in capital goods was softer because of uncertainty around global trade, while consumer spending had been driving the U.S. economy.
"It's really the household sector that was keeping the economy above its zero growth rate, they were doing the heavy lifting," Pineda said.
"At the same time, the business sector was kind of on the sideline, there was so much uncertainty related to trade and the weak euro area that they were not really engaged as much as they wanted to in terms of investment spending," he said.
That helps to explain why the machinery sector could face the sharpest cuts in production volume this year, and is only projected to rebound 5.2 percent in 2021, he said.
"The biggest decline in the plastics industry would be in machinery, these are capital intensive investments," he said. "Even if you have interest rates that are low, if demand is not really there to support or justify a huge investment, that will be postponed until there are strong market signals that it's worth doing them."
Current data suggests that all the sectors will see a rebound next year, Pineda said.
Mold making companies will see a 3.2 percent increase in production volumes in 2021, while plastics products will increase 8.3 percent next year and resin production volume will rise 9.8 percent, matching its decline this year, the association projected.
Consumer spending on essentials is doing well, he said, pointing to packaging in grocery stores and on health and personal care goods for the home, along with sales into health care and coronavirus-related recovery markets.
But with durable goods looking weaker, he pointed to both consumer spending and finding a way to effectively reopen the economy as the keys for the industry's economic picture to improve.
"If we're successful in opening the economy in a gradual basis and the consumer sector starts getting engaged, then we'd probably see the adverse effect of the coronavirus pandemic actually start to diminish," he said.