Wednesday, January 14 2015
By K. John Gutshaw & David S. Laszlo, Wadley Donovan Gutshaw Consulting
Plastics production is essentially a two-phased process that begins with the raw material preparation and manufacturing of polymer resins. This product, typically in the form of pellets or beads, is then shipped to fabrication sites where the material is formed into final plastic products. Several processing methods are utilized depending on the type of product, i.e. extrusion (film), injection molding (containers), blow molding (bottles) or rotational molding (hollow plastic items).
The industry’s significant global economic influence is undeniable – with annual plastics production reaching 288 million metric tons. The same holds true in the U.S., where we see an extraordinary impact on the economy. Consider: Plastics is the third largest industry within the manufacturing sector, employing 892,000 people (or 6.7 of every 1,000 non-farm jobs); reported annual shipments of $373 billion and capital investment expenditures of $9.6 billion; and, 15,949 manufacturing facilities spread across all 50 states.
Fabrication – the second phase – is the critical workforce driver, claiming 91 percent of the U.S. plastics employment and creating 33,446 net new jobs over the past four years (resin production employment gained just 3,344 workers in that period). As the industry grows, a wave of new technology is changing the traditional manufacturing process and the requisite workforce skills. The new age of plastics includes:
Geographic Concentration and Location Trends
Resin producers locate close to the raw material extraction and feedstock. Initially the location focus was on the Texas and Louisiana crude oil fields. Until 2008 little new capacity was programmed; however, the emergence of shale-based natural gas has shifted the U.S. industry into a new production era, the effects of which are just beginning. Shale gas can be processed into ethylene, a key feedstock for many plastics and resin manufacturers are swiftly deploying new steam cracker plants to capture this resource. Dow Chemical alone has a capital budget of $80 billion for new plant construction. Industry-wide activity includes:
Fabrication Processors prefer close proximity to their primary markets to avoid extended shipping costs. Customers, moreover, prefer processors to be nearby for shorter service and delivery, collaboration on product design, and greater flexibility in adjusting production output. The more visible end users include transportation (auto/aerospace), packaging, construction, electrical/electronic, and appliance manufacturers. Where these industry clusters exist, so do the plastics fabricators.
As feed stock production grows outside of the Gulf Coast region, trends will support a narrowing distance between plastic suppliers and fabricators. The location attraction of resin producers to the Marcellus basin (Ohio, Pennsylvania, and West Virginia) will bring production closer to the north central fabrication markets; moreover, fabricators are now seeking co-location with the resin produced by recycling processors and bioplastics production favors the nation’s agricultural heartland.
For the entire industry, a trained and ready workforce is critical. Growing employment, innovation, and emerging rural resin production areas support the need for a larger workforce having sophisticated skills – ranging from polymer chemists and engineers, to machinists, molders, and technicians. The accompanying map confirms a close correlation between the nation’s plastics employment concentration and the supporting universities/technical schools that offer related programs. Those areas that can best serve the training needs will have the edge in capturing the Industry’s next generation of new jobs. In the southeast, North Carolina ranks among the best prepared.
U.S. Market Will Emerge as a Global Industry Leader
The Industry Upside will be Challenged
As the industry enters a new era of expansion perhaps the most unsettling challenge relates to the public health and environmental implications. Current U.S. plastics production could increase by 50 percent, creating 42 billion pounds of polyethylene plastic annually. At current production levels estimates reveal 10 to 20 million metric tons of plastic are discarded into the oceans annually, costing $13 billion in environmental damage to marine ecosystems. Moreover, the optimism for greener, renewable biobased plastics is diminishing with the prospects of lower cost oil and gas feedstocks.
Both increasing production and plastic use support the critical and timely need for reducing waste. Proposed initiatives by the United Nations include corporate targets and deadlines for greater resource efficiency and recycling, along with more aggressive awareness campaigns to reduce littering and ocean discharge. Recycling potentials are exhibited in Mexico where successful conservation efforts result in 60 percent recovery and recycling of PET plastic bottles. This compares to only 31 percent in the U.S. Much can and needs be done to improve the industry’s environmental footprint. The future will hold a stronger commitment and continuing investment in the nation’s recycling infrastructure.