U.S. Plastics Market Holds Steady During Turbulent Times
Publish date: 2023-05-12
The U.S. plastics industry continues to show resilience in the face of ongoing economic and geopolitical uncertainties. Make no mistake – the challenges have been many, to include a pandemic, a war in Europe, supply-chain disruptions, soaring inflation, extreme weather events, labor shortages and ongoing trade tensions.
Plastic product manufacturing projected to grow this year
U.S. plastic product manufacturing rose by 3.8% last year, up from 2.9% in 2021, according to government data. “The industry is returning to its normal growth rate” after this series of convulsions, says Perc Pineda, Chief Economist of the Washington, D.C.-based Plastics Industry Association (known as PLASTICS). Both represent a rebound from the 3% decline recorded in pandemic-impacted 2020, he said in an interview in February.

Pineda still sees plastic product manufacturing growing this year, though possibly at a pace slightly below the 3.8% rate recorded in 2022.

On Feb 23, PLASTICS released a statement quoting the U.S. Census Bureau as saying U.S. retail sales in January 2023 rose by 3% from December and by 6.4% from a year earlier.

“If the economy continues to stay strong and consumers remain engaged,” he said, “plastic product shipments could increase as plastics and plastic products are part of household consumption.”

“I think that the likelihood that the U.S. could end up with a soft landing has increased,” suggests Pineda. Still, “we could possibly be in a low-growth scenario for an extended period of time.” Various indices show there are some concerns on both the demand side and the supply side of the economy. “Inflation is moving down, but it’s not moving down as fast as we want it to. Supply chain issues remain but are not as bad as they used to be. ”
The U.S. plastics industry – the sixth largest in the nation – ended last year with a reported 615,800 employees.
Packaging remains strong
Pineda and others see demand for consumer non-durables (which includes the huge plastics end market of packaging) to continue to perform well and grow. Strong financial interest in the packaging sector is likely to translate into increased merger and acquisition activity, Vivek Singh, managing director with TD Securities, said in a presentation at The Packaging Conference in Florida recently.

“I think a lot of these buyers have noticed the attractiveness of the sector,” Singh stated. “The attractive margins, the above-average growth rates, the defensive nature of the industry and, in certain cases, the consolidation opportunities that exist within the industry."

Fast-moving consumer goods (FMCGs) tend to be shielded from slowing demand, as they don’t require financing to purchase. Significant money and effort will continue to be expended by brands, packaging producers and materials suppliers as they aim to make packaging more sustainable via various means. The approaches include lightweighting, increasing recyclability (e.g., via more monomaterial constructions), enhancing reusability, and adopting wider application of biopolymers.
Significant money and effort will continue to be expended by brands, packaging producers and materials suppliers as they aim to make packaging more sustainable via various means.
Construction in a slump
Building and construction is another end market that consumes massive amounts of plastics, accounting for 8.4% of final plastic products produced, according to PLASTICS’ latest Size & Impact report. But, unlike packaging, it is much more sensitive to interest rates and material supply costs.

A leap in mortgage rates, high inflation and serious supply-chain issues caused single-family housing starts to decline in the U.S. for the first time in 11 years. Permits to construct new houses dipped 12% to 990,000 units last year. Builders were hampered by high lumber costs and disruptions in deliveries for such key components as doors, windows, appliances and concrete.

The Washington-based National Association of Homebuilders trade group said it sees single-family home construction falling to 744,000 units this year before bouncing back in 2024 to an annual pace of 925,000 units.

One bright spot in the construction sector is remodeling, which the NAHB estimates grew by 7% last year, following a 13% increase in 2021.
Building and construction consumes a massive amount of plastics, accounting for 8.4% of final plastic products produced in the U.S.
Medical product demand stays healthy
Healthcare represents 16% of U.S. personal consumption expenditures, notes Pineda “and demand is price inelastic, so I don’t see that fluctuating at all.” People always need medical treatment, regardless of interest rates and inflation.

Plastics showcased their value during the pandemic, not least in the form of life-saving medical devices and pharmaceutical packaging. Even single-use, disposable plastic products proved highly popular as many consumers focused more on cleanliness and safety than on circularity and sustainability. Additive manufacturing (also known as 3D printing) rose to the occasion, as well, allowing for fast, localized manufacture of vital plastic components for key items such as ventilator parts and protective apparel.
Healthcare represents 16% of U.S. personal consumption expenditures, and demand is price inelastic.
The attractiveness of the U.S. medical sector was underscored recently by a Chinese medical device maker’s purchase of California injection molder Trademark Plastics Inc. for an estimated US$42 million. Zhejiang Gongdong Medical Technology Co. Ltd., a publicly traded producer of disposable plastic medical and laboratory products that is based in Huangyan, China, owns Duarte, Calif.-based GD Medical Inc., which handled the acquisition.
China-based Zhejiang Gongdong Medical Technology Co. Ltd. acquired Trademark Plastics Inc., a California-based medical device injection molder. (Photo: Gongdong Medical)
Automotive & tooling prospects
Laurie Harbour, President and CEO of Harbour Results Inc. (HRI), a manufacturing consulting firm, closely tracks the plastics moldmaking market, which depends heavily on the automotive industry. The firm recently released the results of its Harbour IQ in-depth study on the current state of the automotive vendor tooling industry.

Despite a drop in North American vehicle demand from 15.8 million to 13.7 million units, most automakers are experiencing record levels of profit per vehicle sold. This strong performance is funding investment in technology and new vehicles. HRI’s analysis indicates that automotive vendor tooling spend in North America will increase year-over-year at a rate of 13.4%, resulting in US$8.3 billion in spending in 2025 – a significant increase from 2022’s estimated spend of US$5.7 billion.

“Although our forecast is positive, there are a number of risk factors that could negatively impact tooling spend,” Harbour warned, “including a prolonged recession, increased supply chain issues or a drop in vehicle demand below 13 million units. Businesses need to continuously monitor the health of the industry and their customers to better understand how it will impact their bottom lines.”

One positive aspect for the automotive sector relates to the expected rise in the adoption of electric vehicles (EVs). EVs are major consumers of plastics – both for lightweighting benefits and for the safety and durability of the vehicle’s hefty batteries and powertrain components. So, with EV penetration in the U.S. still lagging at roughly 6% of all car sales, there is a potential huge upside in the coming years, according to Pineda. EV charging stations also use a lot of plastics, especially polycarbonate and PC blends, and it is projected that they will expand exponentially in numbers in the U.S. in the coming years.
Automotive vendor tooling spend in North America will increase to US$8.3 billion in 2025 – a significant increase from 2022’s estimated spend of US$5.7 billion.
China a key global plastics partner
Generally speaking, Pineda points out, “China remains an important partner for the U.S. in terms of plastics. It has stayed as its third-largest market (after Mexico and Canada).” The U.S. plastics industry exported US$18 billion worth of goods to Mexico in 2021, US$15 billion to Canada, and US$6.2 billion to China, according to PLASTICS’ latest Global Trends report. However, it notes, the U.S. industry, overall, had its largest trade deficit with China - US$18.2 billion in 2021.

“China has long been the number one player in overall plastics trade globally,” Pineda noted, “and I don’t think that is going to change, despite the fact that they’ve been on lockdown for an extended period of time.” The U.S. and Germany continued to rank numbers two and three, respectively, in global plastics trade in 2021.
China remains an important partner for the U.S. in terms of plastics and has stayed as its third-largest market after Mexico and Canada.
Additionally, statistics from China’s Customs department indicated that the U.S. in 2021 was the second largest market of China's plastic machinery export, accounting for 9.51% (US$358 million) of such sales, after only Vietnam 10.3% (US$388 million).

It’s clear that China continues to exhibit strong growth potential when it comes to plastics. The country consumed only US$86 of plastic and rubber products per capita in 2005 but saw that number soar to US$566 per capita in 2021. “That wasn’t all domestic consumption,” the PLASTICS report stated. “A lot of it went into the manufacture of goods that were exported.”

“China’s growth is slowing, but its dominance as a manufacturer, and therefore, as a consumer of plastic and rubber, is nearly unshakeable,” notes the report. This makes the huge, annual CHINAPLAS trade show an important marketplace for any internationally minded plastics companies.
CHINAPLAS 2024 will return to Shanghai National Exhibition & Convention Center, PR China, on April 23-26.

CHINAPLAS 2023, the flagship event of the plastics and rubber industries, showcased more than 3,900 exhibitors, and officially closed on April 20 with a record high of 248,222 visitors. Among them, 28,429 (or 11.45%) came from overseas. Next year, CHINAPLAS 2024 will return to Shanghai National Exhibition & Convention Center, PR China, on April 23-26, to create a new journey for the plastics and rubber industries as challenges linger.

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