The U&ca Shale Play and it s Impact on the Plas&cs Industry Stan Glover U&ca Summit IV October 11, 2016

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1 The U&ca Shale Play and it s Impact on the Plas&cs Industry Stan Glover U&ca Summit IV October 11, 2016 Page 1

2 Zeiger Industries, Inc. Canton, Ohio Page 2

3 Zeiger Industries Facts and Figures Family Owned Business Don and Sandi Zeiger Owners, 17 total Employees, 85% of Sales are to the Plas&cs Industry, 15% to the Performance Boa&ng Industry, Global Leader of Injec&on Molding Plas&cizing Technologies. Page 3

4 Zeiger Industries Product PorVolio Mallard Z4 Non-Return Valves, GP and ZP Screws, Con&nuous Taper Front End (CTFE ) packages, Polycarbonate Op&mized Processing designs, Rigid PVC Op&mized components, Air or Hydraulically actuated pin-type Shut-Off Nozzles, LSR Plug-N-Play Conversion Kits, End Caps, Nozzles and Nozzle Tips, Page 4

5 Mallard Z4 Valve Assembly Page 5

6 Zeiger GP and ZP Screws Page 6

7 U.S. Plas&cs Processing Base Compounding Extrusion Blow Molding Thermoforming Injec&on Molding Page 7

8 Plas&c Processing - Compounding This process uses either single or twin screw extruders that range from mm in screw diameter, Super or Mega sized Compounders ( mm) are used to produce polyolefins following the reactor stage of pellet produc&on, Intermediate sized Compounders ( mm) are used for the produc&on of various polymers that posses various quali&es/characteris&cs/colors, Small and Lab size Extruders are used for trials and short run produc&on, It is generally recognized that Compounding is the beginning step in the produc&on of Plas&c Pellets. Page 8

9 Plas&c Processing - Extrusion Extrusion is by and far the largest plas&cs processing technology when looking at the tonnages produced annually, Both Twin and single screw extruders are used in the produc&on process, Common products produced on Extruders include: PVC Pipe, PVC Siding, PVC Window Profiles Film and Sheet products, Wire and Cable, Medical tubing Page 9

10 Plas&c Processing Blow Molding Blow Molding is the process to produce tradi&onally hollow parts, It uses either an extruder or an injec&on molding layout to accomplish the desired effect, Once a tube of molten plas&c is produced, it is clamped between two mold halves and air is introduced to fill the part and set it up, Typical applica&ons include: Milk Jugs Oil bolles 55 gallon drums Automo&ve fluid reservoirs and gas tanls. Page 10

11 Plas&c Processing - Thermoforming Thermoforming is a manufacturing process where a plas&c sheet or film is heated to a pliable forming temperature, formed to a specific shape in a mold, and trimmed to create a usable product, Tradi&onally a vacuum is used to pull the heated sheet/film over the mold/form to generate the desired geometry, Common thermoformed products include the following: Disposable cups, Containers and Tops, Clamshell packaging, Pick up Truck Liners, Refrigerator Liners. Page 11

12 Plas&c Processing Injec&on Molding Injec&on moulding is a manufacturing process for producing parts by injec&ng molten material into a cooled mold, Machines range in size from 5 tons per square inch of clamping force to over 6,500 tons, One remaining Injec&on Molding Machinery manufacturer lep in the USA Milacron, LLC of Batavia, Ohio, Typical products produced via the Injec&on Molding process include: Medical devices Football Helmets Appliances Automo&ve Components Cell Phones Page 12

13 What is Plas&c? Wikipedia has the following defini&on: Plas&c is a material consis&ng of any of a wide range of synthe&c or semi-synthe&c organic compounds that are malleable and can be molded into solid objects. Plas&cs are typically organic polymers of high molecular mass, but they open contain other substances. They are usually synthe&c, most commonly derived from petrochemicals, There are two primary resin types, Thermoserng and Thermoplas&c, The vast majority, and the focus of this discussion, are the thermoplas&cs. Page 13

14 According to The American Chemistry Council report from May 2015 En&tled The Rising Compe&&ve Advantage of U.S. Plas&cs The surge of natural gas produc&on from shale has reversed the fortunes of the U.S. plas&cs industry. Because the compe&&veness of plas&c resins depends on energy costs in par&cular, the difference between oil and natural gas prices shale gas development has changed the compe&&ve landscape for U.S. plas&cs, Shale gas development and the abundance of natural gas liquids have shiped the compe&&ve advantage toward the U.S. even aper recent oil price declines, Since U.S. producers predominantly use natural gas-based feedstocks, and European and Asian producers generally use oil-based feedstocks, the spread (difference) between feedstock prices is key, Nearly three-quarters of U.S. plas&c resin feedstock is derived from natural gas and natural gas liquids (NGLs). Roughly a quarter of feedstock comes from petroleum-based feedstocks. Page 14

15 According to The American Chemistry Council report from May 2015 En&tled The Rising Compe&&ve Advantage of U.S. Plas&cs Con&nued There are several key building block chemicals that are used to produce plas&c resins. These building block chemicals are linked together to form long chains called polymers. Each polymer has its own porvolio of performance characteris&cs (i.e., strength, permeability, etc.). One of the most prevalent and largest-volume building block chemicals is ethylene. Ethylene is used to produce thousands of products, including plas&c resins such as polyethylene (PE), polyvinyl chloride (PVC), and polyethylene terephthalate (PET), Another important building block chemical for resin produc&on is propylene. Un&l recently, most propylene was produced in oil refineries as a byproduct of fuel produc&on. With shale gas, supplies of propane (a natural gas liquid) have become abundant. New technologies have emerged to convert propane into propylene which, like ethylene, has many uses, including the resin polypropylene (PP). Page 15

16 According to The American Chemistry Council report from May 2015 En&tled The Rising Compe&&ve Advantage of U.S. Plas&cs Con&nued The favorable rela&onship between oil and natural gas prices and the abundance of natural gas liquids has reshaped U.S. petrochemical compe&&veness and, ul&mately, the compe&&veness of U.S. plas&c resins within the global marketplace. As of early 2015, the U.S. remains the lowest cost ethylene producer aper the Middle East and Canada. To capitalize on the U.S. shale advantage, more than $130 billion dollars of new investment in chemical manufacturing capacity has been announced, including nearly $25 billion of investments in new plas&c resin capacity. For example, capacity to produce polyethylene, the most advantaged of the resins, is expected to grow by more than half over the next decade. Page 16

17 According to The American Chemistry Council report from May 2015 En&tled The Rising Compe&&ve Advantage of U.S. Plas&cs Con&nued Over the next decade, a total of $19.6 billion of plas&c processing capacity is expected to be built to increase the capacity to manufacture plas&c products from new supplies of domes&callysourced plas&c resin. This is on top of the $24.7 billion of investment to increase plas&c resin capacity. In addi&on, demand for plas&c compounding and other chemistry used in plas&c products manufacturing, such as plas&c addi&ves (e.g., plas&cizers, UV stabilizers) and colorants is expected to increase: nearly $2.5 billion in new capacity is expected from this expansion of ancillary plas&cs processing chemistry. All told, nearly $47 billion in investment is expected to be put in place over the next decade as resin producers and processors take advantage of renewed compe&&veness. Page 17

18 Zeiger Industries is an Ac&ve Member of SPI the Plas&cs Industry Trade Associa&on Member of the SPI Equipment Council Exhibitor at SPI s triennial NPE Show Stan Glover is incoming Equipment Council Chairman Board member of SPI s Board of Directors ANSI/SPI US TAG Chairman to ISO TC270 Chair of the NPE Rules and Regula&ons sub-commilee SPI Industry Liaison to MIOSHA Part 62 Safety Changes Page 18

19 About SPI Founded in 1937, SPI is the only U.S. Trade Associa&on represen&ng ALL segments of the plas&cs industry. Page 19

20 SPI s Mission Page 20

21 SPI s Three Strategic Pillars Page 21

22 The U.S. Plas&cs Industry In rd largest Industry in the U.S.A., Record-breaking Domes&c Demand of $295.4 billion, Shipped more than $427.3 billion in goods, Employed over 940,000 people, Operated 16,806 facili&es in every U.S. state Page 22

23 U.S. Plastics Industry Trade For 2015 In 2015, the U.S. Plastics Industry exported goods valued at $59.1 billion RESINS $32.4B 8.0% RESINS $14.3B 7.9% PRODUCTS $24.8B 0.7% MACHINERY $1.4B 9.7% Positive trade balance of $7.1 billion PRODUCTS MACHINERY $25.4B $3.0B 14.6% 10.7% $582.2M MOLDS 10.0% MOLDS $1.7B 8.2% Source: SPI Global Business Trends (2016)

24 Natural Gas Prices Have Decoupled From Oil Prices

25 Shale Energy: Economic Contribution To Manufacturing Employment Total Manufacturing 303, , , ,798 Aluminum 1,171 1,484 1,558 1,693 Steel 19,978 23,610 23,460 26,242 8,974 12,878 14,948 16, ,851 5,805 Value Added ($M) Total Manufacturing 36,750 48,776 62,035 71,080 Aluminum Steel 3,166 3,704 3,619 4, ,098 1,282 1, Labor Income ($M) Total Manufacturing 23,826 31,558 39,355 44,872 Aluminum Steel 2,105 2,455 2,389 2, Includes NAICS Code 3261 (plastics); does not include rubber (3262) or resins (3252). Source: IHS

Added Industrial Production As A Result Of Shale Energy Development 2012 2020 2025 Iron and Steel Products 2.2% 6.7% 7.

5% 4.1% 4.6% Fabricated Metal Products 1.4% 3.2% 4.8% Agricultural Metals 1.2% 6.9% 7.7% Nonmetalic Minerals 1.2% 3.5% 4.1% Petroleum and Coal Products 1.

26 Added Industrial Production As A Result Of Shale Energy Development Iron and Steel Products 2.2% 6.7% 7.4% Resins and Synthe@c Materials 1.7% 6.0% 8.1% Basic Organic Chemicals 1.5% 7.1% 9.5% Plas@cs and Rubber Products 1.5% 4.1% 4.6% Fabricated Metal Products 1.4% 3.2% 4.8% Agricultural Metals 1.2% 6.9% 7.7% Nonmetalic Minerals 1.2% 3.5% 4.1% Petroleum and Coal Products 1.0% 5.8% 6.5% Machinery 0.4% 3.3% 4.0% Total Manufacturing Average 1.3% 3.5% 3.9% Source: IHS

Dramatic Cost Shift Ethylene 1980-2010 2015 Old Normal:

Normal: Middle East and NA at parity Rest of the world at >2x

27 Dramatic Cost Shift Ethylene Old Normal: Middle East half the cost of the rest of the world New Normal: Middle East and NA at parity Rest of the world at >2x cost Middle East N America China W Europe NW Asia Source: TopLine Analy@cs

Ohio Plas&cs Sta&s&cs 2014 Plas&c ac&vi&es directly employ over 73,400, We are ranked 3 rd in plas&cs industry employment na&onally, Plas&cs and dependent industries, combined, employ 1.

29 Ohio Plas&cs Sta&s&cs 2014 Plas&c ac&vi&es directly employ over 73,400, We are ranked 3 rd in plas&cs industry employment na&onally, Plas&cs and dependent industries, combined, employ 1.5 million people, The Plas&cs Industry s direct payroll in Ohio is over $3.4 billion, Industry shipments totaled more than $33.6 billion and we are ranked 4 th na&onally for industry shipments. Page 29

30 In Closing Shale gas development and the abundance of natural gas liquids have shiped the compe&&ve advantage toward the U.S. The Plas&cs Industry con&nues to grow as a direct result of the U&ca Shale Play successes. Page 30

31 Ques&ons? Stan Glover Director of Sales Zeiger Industries, Inc Wiseland Avenue, SE Canton, Ohio Mobile: (216) Page 31

The Rising Competitive Advantage of U.S. Plastics. Economics & Statistics Department American Chemistry Council

The Rising Competitive Advantage of U.S. Plastics Economics & Statistics Department American Chemistry Council May 2015 Contents Contents... 1 Executive Summary... 2 Introduction... 3 Energy: The Foundation