Global Competitiveness, Market Demand and the US Plastics Processing Industry Platts Asian Petrochemicals Markets Conference 2016 Grand Hyatt Pudong Shanghai, China August 30-31, 2016 Presented By: Michael D. Taylor Vice President, International Affairs and Trade
Agenda Introduction to SPI Shale Gas A Game Changer Overview of the U.S. Plastics Industry Trade Flows in Plastics SPI Plastics Market Watch Key End Market Demand Global Manufacturing Competitiveness Q&A
SPI The Plastics Industry Trade Association
Source: World bank Pink Sheet Average natural gas prices $/MBtu North American Advantage
Natural Gas Prices Have Decoupled From Oil Prices
Shale Energy: Economic Contribution To Manufacturing Economic Contribution Summary 2012 2015 2020 2025 Employment Total Manufacturing 303,383 395,298 464,897 522,798 Aluminum 1,171 1,484 1,558 1,693 Steel 19,978 23,610 23,460 26,242 Plastics* 8,974 12,878 14,948 16,438 Fertilizers 506 899 4,851 5,805 Value Added ($M) Total Manufacturing 36,750 48,776 62,035 71,080 Aluminum 147 189 204 223 Steel 3,166 3,704 3,619 4,024 Plastics* 768 1,098 1,282 1,414 Fertilizers 75 131 688 822 Labor Income ($M) Total Manufacturing 23,826 31,558 39,355 44,872 Aluminum 101 130 140 153 Steel 2,105 2,455 2,389 2,658 Plastics* 523 739 868 961 Fertilizers 50 88 460 550 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% 7.4% Resins and Synthetic Materials 1.7% 6.0% 8.1% Basic Organic Chemicals 1.5% 7.1% 9.5% Plastics 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: 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 Analytics
Impacts On Polyethylene Economics Polyethylene Cost US China Natural Gas costs $/MMBTU 2.6 Crude Oil costs $/BBL 54 Ethylene cost $/ton 329 769 Ratio for one ton of HDPE 1.025 1.025 Ethylene cost $/ton 337 788 Utilities $/ton 10 13 Direct Cost $/ton 51 51 Other Costs $/ton 132 132 Total Costs $/ton 530 984 Typical polyethylene margin 3.00% Potential HDPE selling price $/ton 546 1013 Source: NYMEX Sep 2015, TopLine Analytics 1.9x Delta
Impacts On Polyethylene Processor Economics Polyethylene Part US China Natural Gas costs $/MMBTU 2.6 Crude Oil costs $/BBL 54 Polyethylene HDPE $/ton 546 1013 Utilities $/ton 38 59 Labor $/hour $/hour 31.79 6.50 Labor $ 95 19 Other Costs $ 102 75 Total Costs $ 781 1166 Typical polyethylene margin 12.00% Potential HDPE selling price $/ton 875 1306 1.5x Delta Source: NYMEX Sep 2015, TopLine Analytics
The U.S. Plastics Industry In 2015 3 rd largest industry in U.S. Record-breaking domestic demand of $295.4 billion Shipped $418.4 billion in goods Employed 954,000 people Operated 16,668 facilities in every U.S. state Source: SPI Size & Impact of the Plastic Industry on the U.S. Economy (2015)
U.S. $ billions U.S. Demand For Plastics Sets New High Level Apparent Consumption = Shipments + Imports Exports $350 $300 $250 $200 $150 $100 $50 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Machinery Molds Plastic Products Resin Source: SPI Global Business Trends (2016)
U.S. Plastics Industry Trade For 2015 In 2015, the U.S. plastics industry exported goods valued at $59.1 billion, down 5.0 percent from 2014 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)
U.S. Plastics Trade Balance By Segment 2000-2015 25 20 15 10 5 0-5 -10 2005 2007 2009 2011 2013 2015 Resins Plastic Products Molds Machinery Source: SPI Global Business Trends (2016)
U.S. Plastics Trade Balance With FTA Countries By Segment 2000-2015 12 10 8 6 4 2 0-2 In 2015, the U.S. plastics industry had almost a $14 billion surplus with our 20 FTA partners 2005 2007 2009 2011 2013 2015 Resins Plastic Products Molds Machinery Source: SPI Global Business Trends (2016)
SPI Plastics Market Watch PMW Reports Released: Automotive & Transportation, Healthcare & Medical Devices, Packaging, Building & Construction, Auto Recycling Scheduled Reports: Bioplastics, Bottling, Consumer Electronics To Get Your Complimentary Copies: www.plasticsindustry.org/marketwatch
Continued Growth In Housing Market Forecasted Housing Activity (000) 2012 2013 2014 2015 2016 2017 2018 Total Housing Starts 784 928 1,001 1,108 1,182 1,313 1,425 Single Family 537 620 647 713 806 930 1,057 Multifamily 247 308 355 395 376 383 368 New Single Family Sales 368 430 440 503 574 685 779 Existing Single Family Home Sales 4,125 4,475 4,338 4,627 4,816 4,923 4,965
Thousands of Vehicle Sales Estimated Light Vehicle Sales for North America 20,700 20,600 20,500 20,400 20,300 20,200 20,100 20,000 19,900 19,800 19,700 19,600 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Source: IHS
New Growth Opportunities In Asia-Pacific
Global Growth Continues In The Packaging Market
Source: Deloitte Touche Tohmatsu Limited, U.S. Council on Competitiveness 2016 Global Manufacturing Competitive Index
Shifting Dynamics Among Global Manufacturing Nations As the digital and physical worlds converge within manufacturing, executives indicate the path to manufacturing competitiveness is through advanced technologies. Shift to higher value, advanced manufacturing tilts the advantage to developed nations in the future. Two regional clusters of strength emerge. BRIC breaks down. The rise of the Mighty Five (Malaysia, India, Thailand, Indonesia and Vietnam or MITI-V).
Concluding Thoughts Manufacturing renaissance? Transformed global energy situation Reshoring Skilled labor shortage Advanced manufacturing, smart manufacturing, innovation, productivity Additive manufacturing Whither free trade? Risks Known Unknown
Thank You! 谢谢 Merci Vielen Dank Grazie ありがとうございました감사합니다 Obrigado Спасибо Gracias Teşekkürler Questions & Answers Michael Taylor Vice President, International Affairs & Trade mtaylor@plasticsindustry.org +1 202-974-5232