A 'New Normal' for Plastics? Let's Be Realistic.

Lately I have seen a lot of discussion about the future of plastics demand, with the prevailing view that some “fundamental change” has occurred in the last few years which means that we need to rethink where our industry is positioned.

I agree that the industry faces some significant challenges; however, we run the risk of repeating historical errors if we fail to step back and realistically assess the current situation that we find ourselves in.

I'm not sold on the idea of a "new normal" (whatever that means) – the fundamentals of the business are the same as they have been for many years but, as an industry, we have just failed to grasp the reality of our position.

This ‘fundamental shift’ narrative is being driven by a combination of unrealistic optimism, political manoeuvring and denial of reality. Having always focused on downstream end-use applications for polymers and the health of customer industries, my position is that it is the attitudes of consumer goods customers and us as individuals which shape demand for plastics. It is not about how many polyethylene or polypropylene plants are being built around the world (that shapes the profitability of the chemical companies).

When developing future scenarios, large petrochemical producers (and the consultants who serve them) tend to obsess over supply-demand balances and feedstock availability. Their long-standing view is that if we build new and better plants then customers will beat a path to our door.

What they often fail to ask is, why does the customer want to use plastics and, more pertinently, how will they use them?

Unjustified Optimism and External Scaremongering

It's now apparent that demand hasn't met previously optimistic forecasts, seemingly catching many in our industry off guard. Making matters worse, lobby groups opposed to the use of plastics are using those wildly optimistic scenarios to project a future choked with plastics.

The OECD is predicting that global polymer demand will hit 1.231 billion tonnes by 2060 – an incredible amount that would require growth rates to accelerate over the next 40 years. This estimate goes against both history and the prevailing trends for recycling and circularity in plastics.

Seeking a more realistic assessment of future growth, I reviewed the data from my Global Plastics Industry Seminar since the year 2000 for each of the major world regions (Figure 1). As you might expect, the highest growth by tonnage has been seen in China, while India has had the highest percentage growth.

The other significant advances have occurred in Africa and the Middle East (MEAF). However, the traditional markets for Europe and North America have hardly grown at all since 2000.  It should be remembered (and we have probably already forgotten) that 2000 to 2010 was an especially tough period in the USA and Canada.

Figure 1

Over forty-two years ago – as a young consultant still relatively new to the industry – I gave a presentation at a major international petrochemical conference entitled “Plastics: the Challenges of Maturity”. Among the leading conclusions for Europe and North America were:

–       Slow growth within the main countries

–       Capacity build-up in traditional export markets

–       Imports of polymers from areas with feedstock advantages

–       Imports of finished products challenging local production

All those events happened and are continuing to happen. End-use markets have matured as plastics completed the successful replacement of traditional materials. Newer grades have also replaced more established polymers – as much as one third of polypropylene growth has come from replacing styrene resins, PVC and other polymer resins.

Over two years ago I used the term “peak plastics” to warn that growth in China, India and other evolving countries would not take up the excess polyolefin capacity coming on stream. I hypothesised that growth in the use of recycled resins would by 2030-2035 cause a decline in global virgin polymer use.

I have not changed this viewpoint, but the discussion has become a more subtle one in the face of significant regional variations in how plastics are being used. The picture is not necessarily negative: there will certainly be opportunities for several polymer materials, although others may see a rapid decline.

If you want to join the conversation, then this year’s Global Plastics Industry Seminar series (see globalplasticsreport.com for details) will be the forum where this discussion and insight around these issues will be developed in an informal setting with leading industry executives. I hope to see you there.