32521 Plastic & Resin Manufacturing in the US Industry Report.pdf

8/18/2019 32521 Plastic & Resin Manufacturing in the US Industry Report.pdf

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WWW.IBISWORLD.COM Plastic & Resin Manufacturing in the US February 2016 2

This industry manufactures resins, plasticmaterials (i.e. polymers) and syntheticrubber. This includes thermosettingresins, thermoplastic resins and synthetic

rubber. Raw material inputs are sourcedfrom chemical industries and industriesinvolved in the production of petroleum-

based feedstock.

The primary activities of this industry are

Thermoset resin manufacturing

Thermoplastic resin manufacturing

Synthetic rubber manufacturing

Polyethylene resin manufacturing

Polypropylene resin manufacturing

32552 Adhesive Manufacturing in the US

Companies in this industry manufacture resin adhesives.

32599 Chemical Product Manufacturing in the US

Enterprises in this industry manufacture custom compounds of resins.

32611 Plastic Film, Sheet & Bag Manufacturing in the US

Companies in this industry manufacture plastics resins and convert resins into plastics products.

32621 Tire Manufacturing in the US

Companies in this industry process natural, synthetic or reclaimed rubber into intermediate or final products.

Industry Definition

Main Activities

Similar Industries

Additional Resources

About this Industry

For additional information on this industry

plastics.americanchemistry.comAmerican Chemistry Council

www.ihs.comIHS Inc.

www.plasticsindustry.orgThe Plastics Industry Trade Association

The major products and services in this industry are

Synthetic rubber

Thermoplastics - polyethylene

Thermosetting resins and plastic materials

Other thermoplastics

Other


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Demand from manufacturing

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Revenue vs. employment growth

Products and services segmentation (2016)

36.2%Other thermoplastics

34.8%Thermoplastics - polyethylene

13.6%Thermosetting resinsand plastic materials

13.1%Synthetic rubber

2.3%Other


Key StatisticsSnapshot

Industry at a GlancePlastic & Resin Manufacturing in 2016

Industry Structure Life Cycle Stage MatureRevenue Volatility Medium

Capital Intensity High

Industry Assistance Medium

Concentration Level Low

Regulation Level Heavy

Technology Change Medium

Barriers to Entry Medium

Industry Globalization High

Competition Level Medium

Revenue

$103.5bnProfit

$6.5bnExports

$34.6bnBusinesses

1,053

Annual Growth 16-21

2.3%Annual Growth 11-16

0.1%

Key External DriversDemand frommanufacturing

Value of construction

Trade-weighted index

World price of crude oil

Price of natural gas

Market Share

The Dow ChemicalCompany

10.4%

p. 25

p. 4

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 32



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Key External DriversDemand from manufacturingIndustry products are used as inputs fora wide variety of manufacturingindustries, including automobile,electronics and packagingmanufacturers. Therefore, higherdemand for nished products created bythe manufacturing sector boosts demandfor synthetic resins and plasticmaterials. Demand from manufacturingis expected to increase in 2016.

Value of constructionIndustry products such as PVC pipes,

windows, moldings and ooring areused as inputs in a wide variety ofmaterials that are used by theconstruction sector, most notably inhome building. Consequently, demandfor synthetic resins and plastic materialsis inuenced by the level of constructionactivity. The value of construction isexpected to increase in 2016,

ExecutiveSummaryFollowing a volatile period, the Plastic andResin Manufacturing industry experiencedsolid demand over the ve years to 2016.The industry, which relies on demand fromdownstream manufacturers and theconstruction sector, rapidly recovered afterthe recession, beneting from increasedconstruction and manufacturing activity.Consequently, revenue is expected to rise atan annualized rate of 0.1% to $103.5 billionin the ve years to 2016, including a 2.2%rise in 2016.

The prices of raw materials, such as

crude oil, were also volatile over the ve

years to 2016. Crude oil prices quicklyrecovered from recessionary lows,reaching record levels in 2012. However,the price has dropped dramatically since,including a 47.0% fall over 2015 resulting

from supply increases and depresseddemand. Overall, the world price of crudeoil dropped an estimated annualized14.4% over the ve years to 2016. Asinput prices rose, industry operatorsadjusted, reducing employment andadopting lower-cost, automatedprocesses to restore protability.However, as downstream activity

recovered and prices fell, employmentincreased to meet higher demandrequirements. Consequently, prot isexpected to be strong in 2016 as industryplayers reap the benets of lower inputprices and automation.

Exports account for a signicantpercentage of industry revenue, butexport growth has been hampered by astrengthening dollar. The trade-weightedindex, measuring the relative strength ofthe US dollar to foreign currencies, isexpected to grow an annualized 6.2% in

the ve years to 2016. Relatively moreexpensive to foreign buyers, US exportsare anticipated to drop an annualized2.6% over the period. Conversely, foreignimports will likely become cheaper fordomestic producers, increasing industryimports an estimated annualized 1.1%over the ve-year period.

Much like the current period,increasing downstream markets areexpected to support industry demand inthe ve years to 2021, although risinginput prices and a strengthening US

dollar will constrain growth to anannualized 2.3% to $116.2 billion.

Alternatively, the prices of crude oil andnatural gas, two key inputs, are expectedto grow at annualized rates of 7.0% and5.7%, respectively, in the next ve years,tightening prot margins andconstricting growth as producers attemptto pass costs along to consumers.

Industry PerformanceExecutive Summary | Key External Drivers | Current Performance

Industry Outlook | Life Cycle Stage

As input prices rose, operators adjusted,reducing employment and adopting lower-costprocesses to restore protability


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Industry Performance

Key External Driverscontinuedrepresenting a potential opportunity forthis industry.

Trade-weighted indexThe trade-weighted index (TWI)measures the value of the US dollarrelative to other currencies. When theTWI shifts, demand for domesticplastic and synthetic rubbermanufacturing is affected. A weaker USdollar increases foreign purchases ofUS industry products; conversely, anappreciating dollar reduces demand for

domestic industry products andrenders imports more affordable. Thetrade-weighted index is expected toincrease in 2016, representing apotential threat to the industry.

World price of crude oilHydrocarbons, which are derived fromcrude oil, are a main ingredient in resinand synthetic rubber manufacturing.

When the price of crude oil increases,manufacturing input costs also rise,hurting prot margins. Somemanufacturers will pass the higher inputcosts on to consumers in the form ofhigher prices. Higher prices often detercustomers from purchases, therebydecreasing industry revenue. The worldprice of crude oil is expected to decreasein 2016.

Price of natural gasEthylene, which is derived from natural

gas, is a key raw material input forpolyethylene, a type of plastic produced

by this industry. As the price of naturalgas increases, the price of ethylene rises,driving up material costs for plastic andresin manufacturers. To cope with risingcosts, operators are likely to pass on costincreases to consumers, which couldlower demand. The world price of naturalgas is expected to increase in 2016.

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Volatile demand The manufacturing and construction

sectors account for more than half ofindustry revenue. Key manufacturingindustries include automobile making,in which plastic and resin are inputs forautomotive parts and interiorcomponents, and packaging materialproduction, which uses industryproducts to manufacture plastic bags,lms, sheets and bottles. In theconstruction sector, several materialsare produced using plastic and resininputs, including piping, wallpaper,ooring and window applications.

Consumer spending plays a key rolein determining the level of demand for

both markets. After high unemploymentand declining income levels during therecession drastically reduced demandfor manufactured consumer goods andnew construction, the industry hasrebounded nicely over the past ve

years. According to the US Bureau ofEconomic Analysis, consumer spendingincreased an annualized 2.4% over the

ve years to 2016, supporting higherdemand for plastic and resin materials.

As consumers purchased more goods,manufacturing activity increased. Inaddition, the number of newlyconstructed homes increased every yeardue to growth in consumer spending,rst-time homebuyer credits and other

government housing programs. As a result of increased consumer

spending, industrial production, whichincludes manufacturing, grew at anannualized rate of 2.4% in the ve yearsto 2016. Similarly, the number of housingstarts, a key statistic in assessing theperformance of the residentialconstruction industry, is expected togrow at an annualized rate of 13.5% overthe ve years to 2016.

The pervasiveness of plastics andplastic-based products helped the Plasticand Resin Manufacturing industryexpand over the past ve years. Aftersectors, including manufacturers,construction and other key buyingmarkets, experienced sizable drops indemand and quick recoveries as theeconomy struggled, the industry

experienced steady demand. Over theve years to 2016, industry revenue isexpected to grow at an annualized rateof 0.1% to $103.5 billion. This has beendriven by steady growth in demand forindustry products by downstreammarkets. Revenue is expected to increase2.2% in 2016, as demand for industryproducts continues to grow.

CurrentPerformance

Consumer spending plays akey role in determining thelevel of demand

Plastic resin, the primary component ofplastic, is made from petrochemical andnatural gas feedstocks. Consequently, thecost of manufacturing plastics rises andfalls in accordance with oil and naturalgas prices. As oil prices climbed from2011 to 2013, industry players wereforced to raise prices and reduce costs tomaintain protability. While price

increases and a low-demandenvironment are detrimental to thisindustry’s average prot margin, plasticand resin manufacturers made necessarylabor cuts to oset rising materialexpenses, which helped keep their ownprices relatively competitive.

Recently, however, input prices havedropped, with the world price of crude

Cost and profit


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Exports have been a source of consistentdemand for plastic and resinmanufacturers, despite volatility in otherdownstream markets. Not only didexports help mitigate some declines indomestic demand that occurred duringthe economic downturn, they also helpedfuel the industry’s recovery. In addition,emerging economies, such as Mexico andChina, demanded more plastic and resin

materials to serve an expanding middleclass. Recently, however, a strengtheningUS dollar has decreased the relativepurchasing power of foreign buyers,

while Chinese growth is slowing,resulting in them purchasing fewerdomestically manufactured goods.Exports are anticipated to fall an average

of 2.6% per year to reach $34.6 billionover the ve years to 2016, accounting for

an estimated 33.5% of industry revenue.Domestic operators also face

increasing competition foreignproducers. Relatively lower-cost importsare expected to rise at an annualized rateof 1.1% to an estimated $16.0 billion overthe ve years to 2016, accounting for18.9% of domestic demand in 2016.

Trade limits growth Exports have been a sourceof consistent demandfor plastic and resinmanufacturers

oil expected to fall at an annualizedrate of 14.4%, including a staggering47.0% drop in 2015 alone.

Additionally, the price of natural gas isexpected to decrease at an annualizedrate of 6.8% over the same period,maintaining its position nearhistorically low levels. Industryoperators have been forced to lowerprices to reflect these lower costs.

Increased demand for lower-pricedgoods has induced industry players toincrease employment. Over the ve years

to 2016, employment is expected to growat an annualized rate of 1.5% to 77,584 workers. Furthermore, technologicaladvancements enabled workers to

become more productive. As a result, theaverage industry prot margin isexpected to rise to an estimated 6.5% in2016. Increased prot margins spurredmore domestic manufacturers to enterthis industry. The number of industryenterprises is expected to increase at anannualized rate of 3.4% to 1,053 over theve years to 2016.

Cost and profitcontinued


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Sustained demand The industry’s two largest buyers ofindustry products, downstreammanufacturers and the constructionsector, are set to experience growth indemand and revenue over the next f ive

years, following a period of recoveryfrom the recession over the past five

years. Over the f ive years to 2021, per

capita disposable income is anticipatedto grow at an average annual rate of2.4%, while unemployment is expectedto drop over the period. These twofactors will spur more consumerspending at the retail level, which willincrease demand for manufacturedgoods that use plastic and resin asinputs, thus increasing industrydemand. The industrial productionindex, a measurement that includesmanufacturing activity, is set to growat an annualized rate of 2.0% in thefive years to 2021. As manufacturingactivity improves, demand for plasticand resin inputs will rise.

Demand for plastic-basedconstruction materials is alsoanticipated to expand. Housing startsare expected to increase at anannualized rate of 5.4% over the five

years to 2021, and growth is expectedto be strongest in 2017 and 2018.Private nonresidential construction isalso set to increase over the five-yearperiod. As construction projectsadvance, demand for pipes, flooringand other plastic-based constructionmaterials will increase, thereby

stimulating demand for plastic andresin inputs.

Demand from foreign buyers willalso rise, with exports forecast toincrease at an annualized rate of 0.6%to $35.7 billion over the next five

years, or 30.7% of industry revenue.Much of this demand is expected tocome from neighboring Mexico andCanada, which, in addition to theirshared borders with the United States,also possess favorable US traderelations via the North American FreeTrade Agreement. As the US dollarstrengthens and foreign-producedgoods become relatively cheaper,imports are expected to grow at anannualized rate of 2.3% to $17.9

bil lion in the five years to 2021,accounting for a similar percentage ofdomestic demand.

IndustryOutlookThe importance of plastic and resinproducts in construction andmanufacturing industries is expectedto bolster industry revenue in the five

years to 2021. Stronger industrialproduction and construction activity

will underpin sustained revenuegrowth for operators. Consequently,in the five years to 2021, IBISWorldanticipates industry revenue to riseat an annualized rate of 2.3% to$116.2 billion, including growth of2.7% in 2017.

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Profit remains strong Raw material prices will increase overthe next five years. Specifically, theprice of crude oil is expected to increaseat an annualized rate of 7.0%, while theprice of natural gas is expected to riseat an annualized rate of 5.7% in the five

years to 2021. With demand from keydownstream buying markets set toincrease, plastic and resinmanufacturers are expected to pass onmost of these additional costs tocustomers. However, increaseddownstream demand is also expected to

lead to industry operators hiring moreemployees as their manufacturingcapacity expands. Wages are expectedto rise an annualized 2.1% to $6.4

billion over the five-year period. As aresult, profit margins are anticipated todecline, accounting for 5.8% of revenuein 2021.

Companies will likely invest moreresources in integration and researchand development, particularly inrelation to innovation and eciency inthe production process. Popular resins,

such as polypropylene and polyethylene, which together account for more thanhalf of all industry revenue, areproduced in bulk within large, highlycapital-intensive facilities. To lowerproduction costs, larger and moresuccessful companies integrate thesefacilities into oil reneries to more easilysource inputs and expand theirdistribution capabilities.

Manufacturers will also likely investresources into bioplastic technology, analternative to fossil fuel-based plastics,

which are derived from biomass sources,such as vegetable oil and cornstarch. In

addition to being biodegradable, theproduction process for bioplasticsgenerates less greenhouse gas emissions

when compared with petroleum-basedplastics. However, bioplastic issignicantly more expensive to producethan petroleum-based plastic, averaging

20.0% more in production costs. Still,plastic and resin manufacturers willcontinue to explore ways to use

bioplastics and reduce their productioncosts over the next ve years.

Several new players are forecast toenter the industry with the expectationof piggybacking on industry-widerevenue growth. Over the five years to2021, IBISWorld estimates the numberof enterprises will increase at anannualized rate of 1.5% to 1,133companies. Furthermore, employment

is expected to grow at an annualizedrate of 1.8% to 84,626 workers over thefive years to 2021. The difference

between enterprise growth andemployment growth highlights theindustry’s gradual shift towardautomation in the production process.The Plastic and Resin Manufacturingindustry is already highly capitalintensive and, while additional labor

will be needed to monitor productionprocesses and handle customer serviceinquires, the majority of new demand

will arise through investments in newproduction equipment.

Raw material prices willincrease over the next ve

years


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Industry PerformanceThe industry has fairly stable products, brands and ownership

Product groups and user industries are clearly dened

Revenue and value added have grownmoderately over the past decade

The industry faces increased mergerand acquisition activity

Life Cycle Stage

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DeclineShrinking economic

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Quality GrowthHigh growth in economicimportance; weaker companiesclose down; developedtechnology and markets

MaturityCompanyconsolidation;level of economicimportance stable

Quantity GrowthMany new companies;minor growth in economicimportance; substantialtechnology change

Key Features of a Mature Industry

Revenue grows at same pace as economy

Company numbers stabilize; M&A stage

Established technology & processes

Total market acceptance of product & brand

Rationalization of low margin products & brands

Adhesive ManufacturingPlastic Pipe & Parts Manufacturing

Electric Power Transmission

Chemical Product Manufacturing

Laminated PlasticsManufacturing Plastic & Resin Manufacturing


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Industry Life Cycle The Plastic and Resin Manufacturingindustry is in the mature phase of its lifecycle because of its moderate growth rate,product saturation, market acceptanceand increased merger and acquisitionactivity. Industry value added (IVA),

which measures the industry’scontribution to the overall economy, isexpected to increase at an average annualrate of 2.0% in the 10 years to 2021, whichis above the expected US GDP growth rateof 2.3% per year over the same period.

Other indications that the industry is

in the mature phase of its life cycleinclude clearly dened, segmentedproduct groups and industry users. Inaddition, its key buying sectors,manufacturing and construction, aremade up of many industries that areeither maturing or declining themselves.Product development has also been

largely stagnant, with no newtechnological innovations boosting theindustry to a new growth stage. Forexample, bioplastics, while lucrativeniche products, are not growingsignicantly enough to alter theindustry’s life cycle.

Merger and acquisition activity hasalso been steady, which is yet anothersign of a mature industry. In the ve

years to 2016, larger operators acquiredsmaller ones to increase market shareand reach higher economies of scale. A

notable merger is Hexion SpecialtyChemical’s merger with MomentivePerformance Materials in 2010. In aprominent acquisition involving theindustry’s largest player, Dow ChemicalCompany purchased specialty chemicaland materials manufacturer Rohm andHaas Company in 2009.

This industryis Mature


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Products & Services The industry’s products can be classiedinto ve main groups: thermoplasticpolyethylene, other thermoplastics,thermosetting resins and plasticmaterials, synthetic rubber and otherresins and materials.

Thermoplastics - polyethylene At an estimated 34.8% of total industryrevenue, polyethylene makes up asignicant share of the Plastic & ResinManufacturing industry. Its primary useis for packaging goods such as plastic

bags, plastic lms and bottles, and it isthe most common plastic manufactured

by the industry. It is also a popular choicefor pressure pipe systems due to itsinertness, strength and ease of assembly.

Polyethylene is a thermoplastic, or agroup of plastics that can be heated andre-formed several times. It is classiedinto categories based on its density and

branching, as these two factors have asignicant impact on its mechanicalproperties and applications. “Branching”refers to polymer chains with branchpoints that can connect additional chainsegments. In general, the more branchinga polymer has, the less dense and hard it

will be. High-density polyethylene, whichhas a low degree of branching, iscommonly used in items like milk jugs,detergent bottles, garbage containers anda large number of toys. In contrast,low-density polyethylene has a high

volume of branching is a popular choice

Products & MarketsSupply Chain | Products & Services | Demand Determinants

Major Markets | International Trade | Business Locations

KEY BUYING INDUSTRIES32611 Plastic Film, Sheet & Bag Manufacturing in the US

This industry uses various polyethylene products, which are by industry used to produce plasticbags and sheets.

32612 Plastic Pipe & Parts Manufacturing in the USThis industry demands resins to manufacture plastic pipes.

32613 Laminated Plastics Manufacturing in the USThese operators demand resin and synthetic rubber for their laminate flooring production.

32614 Polystyrene Foam Manufacturing in the USThis industry demands polystyrene resins.

32615 Urethane Foam Manufacturing in the USThis industry demands resins for its production of urethane foam.

32616 Plastic Bottle Manufacturing in the US

Various plastic materials and synthetic resins produced by this industry are used to produceplastic bottles and containers.

KEY SELLING INDUSTRIES

22112 Electric Power Transmission in the USElectricity is a significant cost for the Plastic, Resin and Rubber Manufacturing industry.

22121 Natural Gas Distribution in the USNatural gas is a key energy source used by the industry.

23712 Oil & Gas Pipeline Construction in the USNew construction and plant expansions are important for the industry to satisfy demand.

32411 Petroleum Refining in the USPlastic, resin and rubber manufacturers use feedstock derived from petroleum.

32511 Petrochemical Manufacturing in the USPetrochemical inputs represent a significant cost for cost for the industry.

Supply Chain


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Products & Markets

Products & Servicescontinued

for plastic bags and lm wrap. Whiledemand for polyethylene fell slightlyduring the recession, it remained mostlystable over the past ve years thanks toits broad array of applications.

Other thermoplasticsThis segment includes polypropylene, athermoplastic polymer noted for its

ruggedness and resistance to heat andchemical solvents. Due to its durability, it isused in an array of applications, includingcarpets, food storage, textiles andautomotive components. Also included inthis segment is polyvinyl chloride (PVC),

which is the third-most widely-producedplastic, after polyethylene andpolypropylene. PVC is a favorite choiceamong the construction industry because itis less expensive than ductile iron and othermore durable alternatives. In addition, itcan be made softer and more elastic byadding plasticizers, which increase theplastic’s uidity.

The most common use of PVC is theproduction of pipes for household,municipal and industrial applications.Naturally, the downturn in residential andcommercial construction that took placeduring the recession caused a signicantdecline in demand for PVC. However,demand has recovered as the construction

sector, especially residential, has grown.In the ve years to 2016, the number ofhousing starts expected to grow at anannualized rate of 13.5%. Collectively,other thermoplastics are expected toaccount for 36.2% of industry revenue in2016, an increase from 2011.

Thermosetting resins and

plastic materialsThis segment is expected to account foran estimated 13.6% of industry revenuein 2016. Whereas thermoplastics can bereheated and reformed, thermosettingmaterials are permanent. The mostcommon thermosetting plastic is phenolresins, which were the rst commercialsynthetic resin and are mainly used tomanufacture circuit boards and otherelectronics. Phenol resins are also apopular choice for pool balls, laboratorycountertops and a myriad of coatings,adhesives and laminates. Otherthermosetting resins are commonly usedin construction materials and consumergoods like electronics. Therefore, as theconstruction market tumbled andconsumers reduced their spending duringthe recession, demand for thermosettingresins declined. Since 2011, however,demand for these products has increasedas these threats have been reversed.

Products and services segmentation (2016)

Total $103.5bn

36.2%Other thermoplastics

34.8%Thermoplastics - polyethylene

13.6%Thermosetting resinsand plastic materials

13.1%Synthetic rubber

2.3%Other



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Products & Markets

DemandDeterminants

Manufacturing is the central driver ofdemand in the Plastic and ResinManufacturing industry, as a myriad ofmanufacturing industries incorporateplastic inputs into their products.Industrial production in the UnitedStates, which includes manufacturing,

fell sharply during the recession.However, beginning in 2010, industrialproduction has been on the rise, and isexpected to grow 1.5% in 2016, thanks inpart to a revitalized US auto industry. Asmanufacturing continues to gain steam,demand for plastic inputs will increase.

In addition, a large portion of plasticchemicals are used in packaging productsfrom downstream manufacturers. Demandfor packaging materials is linked toconsumer spending, which declined for therst time in over two decades during therecession, but has grown since 2010, and isset to grow steadily during 2016. Consumershave purchased more manufactured goodsand consequently, demand for plasticpackaging has increased.

Construction A range of plastic inputs are used inconstruction parts, like pipes that useplastic materials, valves, ttings, ooring,

insulation and windows. A major driver ofoverall construction is residentialdevelopment, which often spurssubsequent construction projects such asroads, bridges, schools and commercialdevelopment. In the ve years to 2016, the

value of residential construction has

increased at an average annual rate of8.4%, including an estimated 8.6% increasein 2016. This increase in construction hasincreased demand for plastic inputs used inthese building projects.

Demand for substitute goodsIndustry demand is aected by the priceand availability of substitute goods. Themain substitute good for plastic is rubber.Plastic products, such as toys and food-storage containers, often competedirectly with rubber counterparts.

Another substitute for plastic is glass, which is used as an alternative materialin dishware. In addition, unstable crudeoil prices are serving as a catalyst towardnding new plastic alternatives. As theprice of crude oil increases, as is expectedover the ve years to 2021, the price ofplastic, and subsequently the interest innding nonoil-based replacements, alsorises. The growing shift in consumer

Products & ServicescontinuedSynthetic rubberUnlike natural rubber, which comes fromtrees, synthetic rubber is man-made andderived from petroleum and otherminerals. Synthetic rubbers are classiedaccording to whether they are vulcanizedor non-vulcanized. Vulcanization is aprocess by which sulfur and otherchemicals are added to rubber in a curingprocess, typically involving acombination of high pressure and heat.The result is a mechanically-superiorproduct that is stronger and more

durable. Products made from vulcanizedrubber include tires, shoe soles andhockey pucks. Un-vulcanized rubber is

characterized by its stickiness andpropensity to deform when subjected to warm or cold temperatures. Un- vulcanized rubber is generally sold as araw material input for vulcanized rubber.

As with the other product segments,synthetic rubber chemical demand has

been volatile. When the US automotiveindustry ground to a halt during therecession, this segment’s demand fellsharply. However, it began to rebound as

American automotive manufacturersemerged from bankruptcy and consumers

spending increased. As a share ofindustry revenue, synthetic rubber isestimated to account for 13.1% in 2016.


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Products & Markets

Major Markets

Major market segments for the Plastic &Resin Manufacturing industry uctuate

with the performance of downstreamplastic and resin product buyers. Theseinclude a host of manufacturingindustries and construction buyers.

ManufacturingPlayers in the industry operate throughout a

broad spectrum of manufacturing andpackaging industries that use plastic to sealand transport produced goods, includingautomobile, electronic, home furnishing andplastic bottling production. Collectively,these downstream manufacturers make up

and estimated 33.9% of total industryrevenue. Demand from this segment has

been volatile over the past ve years. Also inthis period, industrial production in theUnited States, which includesmanufacturing, grew at an annualized rateof 2.4%. One of the strongest reboundingindustries during the past ve years wasautomobile manufacturing, a key buyer forplastic and resin producers. Othermanufacturing industries that demandplastic and resin products include furniture,machinery and electronic industries. As apercentage of revenue, manufacturing hasincreased in the ve years to 2016.

DemandDeterminantscontinued

preference toward moreenvironmentally-friendly productsfurther contributes to the trend ofdeveloping nonoil-based plastics. Oneexample that has emerged from thistrend is Arboform, a wood pulp-based,nontoxic alternative plastic that is beingtouted as a replacement material forproducts such as speaker boxes, golf teesand automotive parts.

Trade-weighted Index A weak US dollar makes domestic

producers more competitive with

foreign manufacturers because it givesforeign countries more purchasingpower in the United States. The dollar,however, has been strengthening, andthe trade weighted index is expected togrow an annualized 6.2% in the five

years to 2016, making US exportsrelatively more expensive. Emergingeconomies, such as China and India,have been hubs of manufacturinggrowth, and the more cost-competitivedomestic producers can be, the higherthe potential demand for the industry’s

products in foreign markets.

Major market segmentation (2016)

Total $103.5bn

33.9%Manufacturing

33.5%Exports

19.6%Construction

13.0%Other



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Products & Markets

International Trade While exports have contracted andimports have increased over the past ve

years, the sheer volume of exports issignicantly larger than that of imports.Over this period, the disparity betweenexports and imports has resulted in atrade surplus of $18.6 billion in 2016.

ExportsExports in the industry are expected tofall at an average annual rate of 2.6% to$34.6 billion in the ve years to 2016.Despite growing plastic and resindemand from emerging economies,

volatile feedstock prices and astrengthening US dollar haveconstrained exports. The most commonexport destinations for US plastic andresin manufacturers in 2016 are Mexico

and Canada, which represent 23.2% and17.0% of total industry exports,respectively. These countries benet

Major MarketscontinuedExportsExports make up the second largestmarket for US plastic and resinmanufacturers at 33.5% of total industryrevenue in 2016, down from 38.3% in2011. The total value of industry exportshas decline at 2.6% per year, on average.The dollar has strengthened over theperiod, making domestically producedgoods more expensive and constraininggrowth, a trend expected to continue.However, higher resin demand fromemerging economies, such as Mexico, has

supported export demand. Mexico hasincreased its manufacturing output;therefore, it is in need of more plasticsand resins for its produced goods. In theve years to 2021, exports are forecast toincrease at an annualized rate of 0.6%.

ConstructionThe construction market accounts for anestimated 19.6% of industry revenue.This industry primarily purchasesthermoplastic resins used in ooring and

window covering applications. When the

subprime mortgage crisis hit, plastic and

resin manufacturers experienced a sharpdecline in demand from constructionmaterial manufacturers that sustainedinto 2011 and nally turned the corner in2012. During the ve years to 2016, the

value of construction is expected to growat an annualized rate of 7.6% including6.8% growth in 2016. In the ve years to2021 the value of construction isanticipated to increase at an annualizedrate of 4.1%, which will likely bolster thissegment’s share of overall revenue. Theconstruction segment has increased as a

share of revenue in the ve years to 2016.

OtherThis segment accounts for an estimated13.0% of total industry revenue andencompasses a host of industries,including chemical processing, agricultureand wholesale buyers. Products includeethanolamine, ethyleneamines,isopropanolamines, chelants and otherchemical compounds that are commonlyfound in pesticides, detergents andcleaners. The size of this segment has

increased in the ve years to 2016.

Level & Trend

Exports in theindustry are Highand Decreasing

Imports in the

industry areMedium and Steady

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Products & Markets

International Tradecontinuedfrom their shared borders with theUnited States, as well as from favorabletrade conditions via the North AmericanFree Trade Agreement (NAFTA).Rounding out the remainder of the topexporting destinations are China (10.1%)and Belgium (5.7%).

ImportsIn the five years to 2016, the total valueof imports in the industry has risen atan average annual rate of 1.1% to $16.0

billion. As a share of domestic demand,

imports fell from 19.3% in 2011 to anestimated 18.9% in 2016. The largestsource of imports is Canada, expectedto account for about 34.8% of industryimports in 2016, which benefits from itsclose proximity to the United Statesand from trade-friendly provisions

within NAFTA. Germany is the second-largest importer and is expected toaccount for 10.0% of industry importsin 2016. Rounding out the remainder ofthe top importing countries are Japan(8.3%) and Mexico (7.8%).

Imports From...

Total $16.0bn

7.8%Mexico

8.3%Japan

10.0%Germany

34.8%Canada

39.1%All others

Exports To...

Total $34.6bn

44.0%All Others

23.2%Mexico

17.0%Canada

10.1%China

5.7%Belgium

Year: 2016SIZE OF CHARTS DOES NOT REPRESENT ACTUAL DATA SOURCE: USITC


18/35


Products & Markets

Business Locations 2016

MO1.4

VT0.1

MA3.4

RI1.1

NJ3.2

DE0.5

NH0.9

CT1.7

MD0.6

DC0.1

1

5

3

7

2

6

4

8 9

Additional States (as marked on map)

AZ1.1

CA10.1

NV0.5

OR1.3

WA0.8

MT0.2

NE0.3

MN1.9

IA0.8

OH7.6

VA1.0

FL2.8

KS0.7

CO0.8UT0.8

ID0.4

TX9.5

OK0.8

NC4.4

AK0.0

WY0.0

TN1.7

KY2.5

GA4.0

IL5.7

ME0.2

ND0.0

WI3.1 MI

5.3PA4.5

WV0.5

SD0.1

NM0.1

AR0.6

MS1.2

AL1.8

SC1.9

LA2.1

HI0.1

IN3.4

NY2.8 5

6

78

321

4

9


Establishments (%)

Less than 3%

3% to less than 10%

10% to less than 20%

20% or more


19/35


Products & Markets

Business Locations In 2016, The Plastic and ResinManufacturing industry is estimated to be composed of 1,311 establishments. Theindustry is reliant on demand fromdownstream manufacturers; therefore,

business locations are concentrated inregional manufacturing hubs. The GreatLakes and Southeast regions of theUnited States account for nearly half ofall establishment locations at 25.0% and24.4%, respectively. Additionally, thesetwo regions, especially the Southeast, arehome to a number of oil reneries. Their

close proximity to ports helps as well, with the Southeast region being fairlyclose to Mexico and the Great Lakesregion having easy access to Canada.

The Mid-Atlantic and Western regionsof the United States hold the next largestnumbers of establishments; collectively,these regions account for more than aquarter of industry plants. In addition to

being near ports and reneries, theseregions benet from having largerepresentative states. For example,Pennsylvania, which is in the Mid-

Atlantic region of the United States,accounts for 4.5% of industryestablishments alone. Similarly,California, which is the Western region ofthe United States, accounts for 10.1% ofindustry establishments.

%

30

0

10

20

S o u t h

w e s t

W e s t

G r e a t L a k e s

M i d - A t l a n t i c

N e w E n g

l a n d

P

l a i n s

R o c k y M o u n

t a i n s

S o u t h e a s t

Establishments

Population

Distribution of establishments vs. population



20/35


Cost StructureBenchmarks

The Plastic and Resin Manufacturingindustry is heavily inuenced by rawmaterial costs, demand and pricing levels.Raw material pricing is particularlyimportant, given the lag between rawmaterial price changes and the ability ofplastic and resin manufacturers toimplement product price changes.Furthermore, companies that locate nearthe distribution centers of key inputs,most notably natural gas and crude oil,can reduce transportation costs.

Profit reboundsProt will vary between individualoperators depending on the size of theiroperations and on their ability to establish

eciencies in raw material purchases andoperations. However, IBISWorldestimates prot, as measured by earnings

before income and taxes, will amount to6.3% of total industry revenue in 2016.This increase in industry protability, upfrom 4.9% in 2011, is primarily due tostrong recovery from downstream marketsand the sharp drop in crude oil prices in2014. However, rising input prices areexpected to constrain prot growth in theve years to 2021. The price of natural gasis expected to rise at an annualized rate of5.7% in the ve years to 2021.Consequently, IBISWorld expectsprotability to decrease slightly over thesame period.

Key Success Factors Guaranteed supply of key inputs Access to a consistent supply ofcompetitively priced raw material inputs,

including feedstock, is essential toremaining competitive.

Optimum capacity utilizationIn an industry where supply anddemand imbalances can createconsiderable volatility, the abilityto use existing capacity to itsoptimum eciency is essential.

Upstream vertical integration(ownership links)Plastic and resin manufacturers that

control feedstock, raw materials,distribution and other operationscan control costs more eectively

and are more likely to outperformmanufacturers that are not integrated.

Concentration on core businessFor optimum eciency andcompetitiveness, operators should divestof low-prot or smaller plants and insteadconcentrate on their core product(s).

Economies of scaleThe need for low-cost, world-scalemanufacturing facilities operating on alarge scale is essential in this intenselycompetitive industry.

Provision of superior after-sales service

With little dierence between products,operators should dierentiate themselves

by providing better-quality service.

Market ShareConcentrationThe Plastic and Resin Manufacturingindustry has a low level of concentration,reecting the fragmented nature of theindustry. There are an estimated 1,311establishments operating in the industry,producing a variety of products. Thus,despite the existence of prominent global

chemical groups, only one company has amarket share greater than 10.0%. Anotherindicator of the low level of concentrationis the fact that more than 40.0% of allindustry operators employ fewer than 20

workers. IBISWorld anticipates thesetrends to persist in the next ve years.

Competitive LandscapeMarket Share Concentration | Key Success Factors | Cost Structure Benchmarks

Basis of Competition | Barriers to Entry | Industry Globalization

Level

Concentration inthis industry is Low

IBISWorld identifies250 Key SuccessFactors for abusiness. The mostimportant for thisindustry are:


21/35


Competitive Landscape

Cost StructureBenchmarkscontinued

Raw material costs on the rise Accounting for an estimated 66.0% ofindustry revenue in 2016, raw materialcosts are the largest expense for plasticand resin manufacturers. Key rawmaterials include propylene, ethylene,phenol, acetone, chlorine, benzene andnaphtha. The majority of these materialsare made from petroleum or natural gas.In recent years, the cost of many of theseraw materials has uctuated signicantly,reecting the volatile nature of crude oiland natural gas prices. In the ve years to

2016, the prices of crude oil and naturalgas have experienced signicant declinesand increases. In addition to being

volatile, raw material costs tend to becyclical, so industry participants with theability to use a wide range of rawmaterials typically benet from lower

variable costs.Fuel costs associated with transportation

are also included in the purchase segments.

Smaller industry manufacturers are usuallynot integrated with a renery orpetrochemical complex; therefore, theyneed to transport raw materials and otherfeedstock for their production.

Labor and capital expenses Wages are the second-largest cost to theindustry and account for an estimated5.6% of total industry revenue in 2016. Inthe ve years to 2016, the total number ofemployees in the industry has increasedat an average annual rate of 1.5%.

Depreciation expenses decreased slightlyoverall, from 2.3% of industry revenue in2011 to 2.0% in 2016, however, sincefalling to a low 1.7% in 2012, this sharehas been on the rise. Depreciable assetsinclude buildings, storage equipment andmachinery used in the manufacturingprocess. The small and increasing shareof depreciation relative to revenue isillustrative of this industry’s aging

Sector vs. Industry Costs

n Profit

n Wages

n Purchases

n Depreciation

n Marketing

n Rent & Utilities

n Other

Average Costs of

all Industries in

sector (2016)

Industry Costs

(2016)

0

20

40

60

P e r c e n t a g e

o f r e v e n u e

80

100


7.1 6.3

16.4

3.6 0.12.0

66.0

5.6

20.0

2.6 0.92.4

56.0

11.0


22/35



Barriers to Entry Barriers to entry are substantial, thoughnot insurmountable. The highly capital-intensive nature of the industry isparticularly important. Hundreds ofmillions of dollars are required toconstruct a complex with the capability toproduce high-performance products,processes and applications. In addition,many of the plants tend to be highlyintegrated complexes, requiring special

technical equipment, machinery andexpertise. Economies of scale and theability to produce at a high capacity arenecessary to operate eciently andachieve low unit costs.

The industry’s maturity combined withits limited size poses another signicant

barrier. It is often dicult to enter amature industry dominated by a numberof established manufacturers who have

Basis of Competition Internal competitionPrice is the key basis for competition in

the Plastic and Resin Manufacturingindustry. However, given the fact thatplastic materials, resin and syntheticrubber are global commodities, prices arelargely determined by those of globalchemicals like ethylene, which is a keyinput for polyethylene and otherthermoplastics. Price is also dependentupon other variables like the prices ofraw materials such as crude oil andnatural gas, as well as the degree orintegration and scale of production. Alarger plastic and resin manufacturer

may own its own supplier anddistributor; therefore, the rm canreduce costs and price its products morecompetitively than other operators.

Product performance attributes, suchas strength-to-weight ratios, waterproofability, malleability, safety, installationcosts and the ability to be recycled arealso major factors for competition.Research and development (R&D) is the

basis for improving product performanceand establishing a higher degree of

dierentiation between competitors;therefore, plastic and resinmanufacturers devote signicantnancial resources to R&D.

External competitionThe industry often competes againstmanufacturers of similar productscomposed of substitute materials, such asrubber, wood and tile. Plastic and resinmanufacturers generally compete withrubber and other substitute materialmanufacturers on price, product

performance, technological innovation,quality and service. Much like therelationship between competing domesticplastic and resin manufacturers, theadvantage over foreign competition oftenstems from a company’s cost structure,

which is primarily aected by raw materialprices. In 2016, imports are expected tomeet 18.9% of domestic demand, and thislevel has risen over the past ve years.

Cost StructureBenchmarkscontinued

equipment stock. Industry players have been increasingly investing inautomation, contributing todepreciation’s rising share.

Other expensesRent and utilities are estimated toaccount for 3.6% of industry revenue in

2016. Marketing and advertising costsare expected to amount to 0.1% ofindustry revenue. Other costs, whichinclude freight and insurance premiums,research and development investmentsand licensing and legal fees, areestimated to account for 16.4% ofindustry revenue in 2016.

Level & Trend

Competition inthis industry isMedium and thetrend is Increasing

Level & Trend

Barriers to Entryin this industry areMedium and Steady


23/35



IndustryGlobalization

The Plastic and Resin Manufacturingindustry has a high level of globalexposure, which is evident by theaccelerated growth of imports. In the ve

years to 2016, imports are expected to

increase at an annualized rate of 1.1% to$16.0 billion. This is primarily due to astrengthening US dollar over the past ve

years, making foreign goods relativelycheaper than their domesticcounterparts. Countries such as Mexico

and Canada account for the majority ofindustry trade due to their closeproximity and limited trade barriers fromagreements like the North American FreeTrade Agreement. In 2016, imports are

expected to account for 18.9% ofdomestic demand, down slightly from19.3% in 2011. Exports are anticipated todecline as domestically produced goodscost relatively more due to thestrengthening US dollar. In the ve years

Barriers to Entrycontinueddeveloped close, integrated relationships with their customers. These existingplayers are also often integrated into rawmaterial supplies and distribution, whichfurther strengthens their position.Though no industry player generates over10.0% of industry revenue, IBISWorldexpects that the other operators aretypically well funded companies that canaord to invest heavily in both capitalequipment and research anddevelopment activities.

Moreover, a signicant nancial

investment is required to acquire,maintain and update plants andequipment. This cost may deter someoperators from entering the industry.Research and development is necessary

for product innovation, which expands

the uses of plastic products, increasingtheir demand. To eectively compete, anentrant should be committed to spendinga signicant amount of capital onresearch and development.

Barriers to Entry checklist

Competition Medium

Concentration Low

Life Cycle Stage Mature

Capital Intensity High

Technology Change Medium

Regulation & Policy Heavy

Industry Assistance Medium



Trade Globalization Going Global: Plastic & Resin Manufacturing2003-2016

E x p o r t s / R e v e n u

e

E x p o r t s / R e v e n u

e

200

150

100

50

0

200

150

100

50

0

Imports/Domestic Demand Imports/Domestic Demand

0 040 4080 80120 120160 160

International trade is amajor determinant ofan industry’s level ofglobalization.

Exports offer growth

opportunities for firms.However there are legal,economic and political risksassociated with dealing inforeign countries.

Import competition canbring a greater risk forcompanies as foreignproducers satisfy domesticdemand that local firmswould otherwise supply.

Export ExportGlobal Global

ImportLocal ImportLocal

Plastic & Resin

Manufacturing

2003 2016

Level & Trend

Globalization inthis industry isHigh and the trendis Increasing


24/35



IndustryGlobalizationcontinued

to 2016, exports are expected to fall anannualized 2.6% to $34.6 billion.Plastic and resin manufacturers are

also increasing their footprints abroadthrough foreign partnerships. Forexample, industry player Dow Chemicalmaintains ownership interests in severalforeign aliates, including a 28.0%interest in MEGA S.A., an Argentine

company that provides natural gas andother feedstock to Dow’s petrochemicalplant in Argentina. Other Dow ownershipinterests include a 42.5% stake in TheKuwait Olens Company K.S.C., aKuwait-based manufacturer of ethyleneand a 50.0% ownership in MEGlobal, aDubai-based manufacturer ofpolyethylene and other resins.


25/35


Player Performance As one of the largest chemical companies inthe United States, The Dow ChemicalCompany (Dow) produces more than

5,000 products in 197 manufacturingfacilities in 36 countries. Dow, based inMidland, MI, employs about 52,000 peopleglobally. The company provides chemicals,plastic materials and other products tocustomers in sectors that includeelectronics, water, energy, coatings andagriculture. Key product segments includeelectronic and specialty materials, coatingsand infrastructure, health and agriculturalsciences, performance systems,performance products, basic plastics, basicchemicals and hydrocarbons and energy.

In 2015, Dow earned $48.8 billion in totalcompany revenue.

In 2007, Dow announced a 50/50 joint venture with Chevron PhillipsChemical Company to combine thecompanies’ respective styrene

businesses in the Americas. The deal was designed to give Dow access toinexpensive natural gas. The company’s

current strategy of focusing on specialtychemical production to reduce itsdemand for ethylene has also beenessential to the industry. To this end,Dow closed three ethylene-related plantsin Louisiana in the mid-2000s. Thecompany’s joint venture with ChevronPhilips is one of the primary reasons itcontinues to experience above-averageprot margins. This strategy is becomingincreasingly popular in the industry, asnatural gas is a key input for thecompany’s operations.

Dow also acquired Rohm and HaasCompany as a wholly owned subsidiaryin 2009. Rohm and Haas focuses onmanufacturing specialty chemicals,electronic materials and salts. Thecompany’s primary concentration is on

Major CompaniesThe Dow Chemical Company | Other Companies

89.6%Other

The Dow Chemical Company 10.4% SOURCE: WWW.IBISWORLD.COM

Major players(Market share)

The Dow ChemicalCompanyMarket share: 10.4%Industry Brand NamesDow Chemical

The Dow Chemical Company (US industry-specific operations) - Financialperformance*

YearRevenue

($ million) (% change)Operating Income

($ million) (% change)

2011 12,306.9 N/C 738.8 N/C

2012 11,330.4 -7.9 332.2 -55.0

2013 11,536.7 1.8 1,375.2 314.0

2014 12,875.1 11.6 1,165.4 -15.3

2015 11,093.0 -13.8 1,642.6 40.9

2016 10,361.2 -6.6 1,384.6 -15.7

*EstimatesSOURCE: ANNUAL REPORT AND IBISWORLD


26/35


Major Companies

Other Companies While the Dow Chemical Companymakes up a sizeable share of the Plasticand Resin Manufacturing industry, theremaining companies are mostly small-to medium-sized manufacturers. Still,some large global corporations are alsoinvolved in the industry. However,IBISWorld anticipates many of theselarger companies operate their plasticand resin manufacturing facilities outsideof the United States.

ExxonMobil Chemical Company Estimated market share: 3.1%

A subsidiary of ExxonMobil, ExxonMobilChemical Company is an integratedmanufacturer of olens (ethylene andpropylene), aromatics (benzene andtoluene), polyolens (polypropylene andpolyethylene) and synthetic rubber. The

company operates in more than 20countries and markets its products inmore than 150 countries. Key productsinclude aromatics, additives for fuels andlubricants, uids, oriented polypropyleneand packaging lm.

ExxonMobil Chemical is expected to be the largest North American producerof linear low-density polyethylene(LLDPE) and the second-largestproducer of high-density polyethylene(HDPE) and polypropylene. It is alsoexpected to be one of the world’s leadingproducers of ethylene propylenemonomer (EPM) rubber, copolymers andEDPM terpolymers. To obtain the mosteconomic feedstock, its majorpetrochemical plants are integrated withits oil reneries. IBISWorld estimates$3.1 billion will be generated from the

Player Performancecontinuedcoatings for paints and variousconsumer goods.

In 2011, Thomson Reuters addedDow to its list of the top 100 mostinnovative companies in the world,citing the company’s $1.65 billioninvestment in research anddevelopment (R&D) that year. Along

with its R&D spending, Dow divesteditself of several nonstrategic plastics

businesses, including its styrene andpolypropylene production arms. In2011, Dow announced the merger of all

of its plastic businesses into onesegment called performance plastics.This new division specifically focuseson innovative and high-growthproducts for large sectors, such aspackaging, lassoers, hygiene andmedical and electrical communications.In late 2015, Dow announced plans fora merger and spin-off with DuPont.This merger, pending regulatoryapproval that could take upwards oftwo years, would create one of the

world’s largest chemical companies.

Financial performanceThe company operates in the industry viaits performance plastics, coating andinfrastructure solutions and performancematerials segments. Over the ve years to2016, IBISWorld estimates that Dow’sindustry-specic revenue will decrease atan annualized rate of 3.4% to $10.4 billion.Improving downstream demand bolsteredcompany revenue and protability at timesover the past ve years. However, in 2015,IBISWorld estimated a decrease inrevenue of 13.8%, as input prices fell

signicantly, lowering the sales prices ofindustry goods. Conversely, lower pricesare expected to bolster the company’sprotability as sales prices fall at a rateslower than natural gas and crude oilprices. During 2012, Dow implementedtwo restructuring plans designed toadvance the company and addressmacroeconomic concerns. As a result,$357.0 million in restructuring charges

were booked, constraining company prot.These new, leaner operations havetranslated to improved margins.


27/35


Major Companies

Other Companiescontinuedcompany’s US resin and synthetic rubbermanufacturing segment in 2016,representing a 3.1% market share.

Hexion Inc. Estimated market share: 1.2%Formerly Momentive SpecialtyChemicals, Hexion Inc. is a largeproducer of binder, adhesive, coatingand ink resins for industrialapplications. The company is consideredthe global leader in the production ofepoxy resins. Hexion is divided into four

operating segments and its epoxy andphenolic resins division operates withinthe Plastic and Resin Manufacturingindustry. The other three businesssegments include formaldehyde andforest product resins, coatings and inksand performance products. Its globalscale and breadth of products enable thecompany to deliver signicantadvantages to its customers. Keycustomers include 3M, AshlandChemical, BASF, Bayer and DuPont.

In October 2010, MomentivePerformance Materials and HexionSpecialty Chemicals merged into 117production facilities with more than10,000 employees. The company initiallyoperated as Momentive SpecialtyChemicals; however, managementdecided to change the name to Hexion,eective January 2015. Prior to themerger, Momentive specialized insilicones and advance materials. Before

joining up with Momentive, Hexionundertook a number of additional

acquisitions, including the global ink andadhesive resins business of Akzo Nobelin November 2005, the decorativecoatings and adhesives business unit ofthe Rhodia Group in January 2006 andthe global wax compounds business ofRohm and Hass in March 2006.IBISWorld estimates that the company

will generate $1.2 billion from its epoxyand phenolic resins division in the UniteStates in 2016, representing a 1.2%market share.


28/35


Capital Intensity The Plastic and Resin Manufacturingindustry requires a substantial amount ofcapital investment. The cost of a newmanufacturing plant complete withmachinery and equipment is signicant,and constant product innovationnecessitates regular investment in newtechnology. Due to the wide range of theproducts oered by this industry,manufacturing equipment can range inprice from a few thousand dollars to manymillions of dollars. Typical processes plasticmay undergo during the manufacturing

process include extrusion, molding,thermoforming, coating and recycling.

In addition to the equipment itself,tooling is generally required to make aparticular shape. Most tooling processesinvolve melting or softening the resin and

then forcing it into the desired shape.Other processes force a monomer orpre-polymer mixture into a specic shape,

Operating ConditionsCapital Intensity | Technology & Systems | Revenue Volatility

Regulation & Policy | Industry Assistance

Tools of the Trade: Growth Strategies for Success


L a b o r I n t e n s i v e

C a pi t al I n t en s i v e

Change in Share of the Economy

New Age Economy

Recreation, Personal Services,Health and Education. Firmsbenefit from personal wealth sostable macroeconomic conditionsare imperative. Brand awarenessand niche labor skills are key toproduct differentiation.

Traditional Service Economy

Wholesale and Retail. Relianton labor rather than capital tosell goods. Functions cannotbe outsourced therefore firmsmust use new technologyor improve staff training toincrease revenue growth.

Old Economy

Agriculture and Manufacturing.Traded goods can be producedusing cheap labor abroad.To expand firms must mergeor acquire others to exploiteconomies of scale, or specializein niche, high-value products.

Investment Economy

Information, Communications,Mining, Finance and RealEstate. To increase revenuefirms need superior debtmanagement, a stablemacroeconomic environmentand a sound investment plan.

Adhesive Manufacturing

Plastic Pipe & Parts Manufacturing

Electric PowerTransmission

Chemical ProductManufacturing

Laminated Plastics Manufacturing

Plastic & ResinManufacturing

Capital intensity

0.5

0.0

0.1

0.2

0.3

0.4


Dotted line shows a high level of capital intensity

Capital units per labor unit


ManufacturingEconomy

Level

The level of capitalintensity is High


29/35


Operating Conditions

Revenue Volatility Demand for this industry’s products issensitive to demand primarily fromdownstream manufacturing industriesand construction, which were hit hard bythe recession, and which both tend toexhibit medium to high volatility. Plasticand resin prices tend to exhibit volatility,since they are heavily inuenced by theprice of raw materials like crude oil andnatural gas, which both exhibit highlevels of price volatility. Therefore, in theve years to 2016, IBISWorld expectsthat industry revenue volatility, or theaverage absolute change in revenue, forthe industry has been high, at anestimated 5.8%.

The wide range of end-uses for theindustry’s products helps mitigate thereliance on any single area of demand,

but the Great Recession proved thatthe industry is still sensitive toeconomic downturns, especiallycompanies that manufacture only oneproduct or sell to only one industry.Over the past five years, industryrevenue fluctuated significantly, rising

by 6.9% in 2011 and falling 0.3% in2013. The high revenue fluctuationsdemonstrate the industry’s reliance ondemand from downstreammanufacturers and construction, which

both exhibit significant volatility.

Technology & Systems The Plastic and Resin Manufacturingindustry exhibits a moderate level oftechnological change. High volumeresins, such as polypropylene and

polyethylene, which together account formore than half of all plasticsmanufactured in the industry, aremanufactured in large-scale, highlycapital-intensive facilities that are oftenintegrated with oil reneries, and whichgenerally operate on a continuous basis.Most technological development is aimedtoward increasing the eciency of theproduction process within thesecomplexes and increasing themanufacturing assets of the operators.

In addition, some manufacturingplants have been exploring the use of

bioplastic, a form of plastic that isderived from vegetable oil, cornstarch

and other biomass sources. However, bioplastic is signicantly more expensiveto produce than petroleum-basedplastic, and production costs canaverage upwards of 20.0% or more thantheir traditional counterparts. The highcosts associated with bioplastic haveslowed associated research anddevelopment investments, as manyplastic and resin manufacturers opt tofocus their attention on more aordable,petroleum-based products.

Capital Intensitycontinuedand then polymerize it in place. The moreprocesses required in the manufacturingprocess, the higher the investment andreplacement costs for industry equipment.

IBISWorld estimates that for everydollar spent on wages, plastic and resin

manufacturers spend an estimated$0.36 on machinery and equipment. Inthe five years to 2016, this level hasfluctuated from a high in 2011 of $0.42,to a low of $0.32 in 2012 as operatorsautomate processes at different times.

Level

The level ofTechnology Changeis Medium

Level

The level ofVolatility is Medium


30/35



Industry Assistance Tariffs have a long-standingsignificance in the Plastic and ResinManufacturing industry. They exist toprotect domestic manufacturers andthe domestic industry from foreign-produced goods. This is especiallysalient with the growing volume of

inexpensive, imported plastic goodsfrom Mexico, China and otheremerging economies. Tariffs in thisindustry also exist to some extent as apunitive reaction to the tariffs

American exporters are charged byother countries.

Regulation & Policy Like all manufacturers, industryoperators are required to comply withfederal, state and local air emissionlegislation. Most plastic compositemanufacturing operations generatehazardous air pollutants (HAPs) duringthe application and curing of thermoset

resins. In particular, the manufacturingof composite products with polyesterand vinylester resins and gel coats canrelease signicant amounts of styrene,

which is a HAP. State and federalagencies regulate these emissions, andmost manufacturing facilities arerequired to obtain a registration orpermit. Although plastic manufacturingequipment and the production process isdesigned to comply with thesestandards, the regulations havenonetheless increased the price of the

equipment and the cost of production.The higher costs associated with theseenvironmental regulations are one of thereasons that companies are now lookingto partner with or manufacture incountries with fewer environmentalregulations, such as China.

Recycling legislation requiring that acertain percentage of recycled plastic beincluded in a specied number of newplastic containers has been enacted inseveral states. Since the price of recycledresin is currently lower than the price of

virgin resin, it is unclear how theseregulations will aect the cost ofproduction. Depending on the plasticproduct being produced, theseregulations could pose a problem formanufacturers due to the higher level ofimpurities present in recycled plastic.

Revenue Volatilitycontinued


Volatility vs Growth

R e v e n u e v o l a t i l i t y * ( % )

1000

100

10

1

0.1

Five year annualized revenue growth (%)

–30 –10 10 30 50 70

Hazardous

Stagnant

Rollercoaster

Blue Chip

* Axis is in logarithmic scale

A higher level of revenuevolatility implies greaterindustry risk. Volatility cannegatively affect long-termstrategic decisions, such asthe time frame for capitalinvestment.

When a firm makes poorinvestment decisions itmay face underutilizedcapacity if demandsuddenly falls, or capacityconstraints if it risesquickly.


Level & Trend

The level ofRegulation is Heavyand the trendis Increasing


31/35



Industry AssistancecontinuedImports of plastic products madefrom polyvinyl chloride, polypropylene

and polyethylene are currently subject toa 3.1% tari if they derive from countriesthat have normal trade relations (NTR)

with the United States, while imports ofthese products from non-NTR countriesare subject to a 25.0% tari. In addition,imports of polyethylene terephthalateproducts, such as plastic jars, arecurrently subject to a 7.1% tari if theyderive from NTR countries, with a tariof 43.0% if they come from non-NTR

countries. Imports of both high-densitypolyethylene and low-densitypolyethylene products, such as plastic

buckets and watering cans, are alsosubject to a 6.8% tari if they derive

from NTR countries, with a 45.0% tariif they derive from non-NTR countries.The Plastic and Resin Manufacturing

industry also benets from tradeassociations, such as the Society of thePlastics Industry (SPI), which wasestablished in 1937 and is the largesttrade association that represents plasticproduct manufacturers in the UnitedStates. SPI represents 1,300 membersacross the entire plastics industry supplychain, including processors, machineryand equipment manufacturers and raw

material suppliers. Assistance provided by SPI includes the provision of workplace development programs,compliance assistance, tradeshows,industry information and statistics.

Level & Trend

The level of IndustryAssistance isMedium and thetrend is Increasing


32/35


Key StatisticsRevenue

($m)

IndustryValue Added

($m)Establish-

ments Enterprises EmploymentExports

($m)Imports

($m)Wages($m)

DomesticDemand

World Priceof Crude Oil($ per barrel)

2007 106,590.5 12,110.6 949 675 69,654 33,411.2 13,669.2 5,395.4 86,848.5 71.1

2008 103,087.0 9,809.0 1,217 907 82,516 35,317.8 14,485.5 5,788.6 82,254.7 97.0

2009 75,610.7 9,405.5 1,176 893 72,858 27,662.7 9,507.8 5,171.3 57,455.8 61.8

2010 96,309.1 12,267.3 1,156 882 70,608 35,704.3 12,892.6 5,333.0 73,497.4 79.6

2011 102,956.7 12,630.1 1,171 892 71,958 39,437.7 15,180.0 5,629.0 78,699.0 104.0

2012 106,705.3 13,730.3 1,310 1,014 77,668 37,504.0 15,379.0 5,940.9 84,580.3 105.0

2013 106,395.5 13,408.2 1,283 1,029 78,166 36,996.0 15,410.6 5,854.1 84,810.1 104.1

2014 107,511.3 14,321.4 1,312 1,052 79,218 36,762.8 16,979.3 5,935.5 87,727.8 96.2

2015 101,224.7 13,984.2 1,287 1,034 76,082 33,500.7 15,506.4 5,643.5 83,230.4 51.0

2016 103,479.1 14,512.6 1,311 1,053 77,584 34,632.7 16,023.1 5,770.2 84,869.5 47.7

2017 106,256.2 14,513.8 1,326 1,066 78,904 34,645.1 16,408.1 5,895.2 88,019.2 54.8

2018 109,328.6 14,766.0 1,355 1,089 80,833 35,069.2 16,776.6 6,061.7 91,036.0 59.6

2019 111,856.7 14,943.8 1,371 1,100 82,062 35,253.7 17,308.3 6,177.4 93,911.3 63.7

2020 114,131.1 15,175.1 1,400 1,125 83,661 35,515.2 17,408.1 6,311.4 96,024.0 66.0

2021 116,153.2 15,436.3 1,410 1,133 84,626 35,671.2 17,939.0 6,403.2 98,421.0 70.2

Sector Rank 10/193 13/193 61/193 64/193 41/193 7/180 40/180 33/193 15/180 N/A

Economy Rank 107/1370 202/1370 809/1370 780/1370 440/1370 8/432 46/432 295/1370 20/432 N/A

IVA/Revenue(%)

Imports/Demand

(%)

Exports/Revenue

(%)

Revenue perEmployee

($’000)Wages/Revenue

(%)Employees

per Est.Average Wage

($)

Share of theEconomy

(%)

2007 11.36 15.74 31.35 1,530.29 5.06 73.40 77,460.02 0.08

2008 9.52 17.61 34.26 1,249.30 5.62 67.80 70,151.24 0.07

2009 12.44 16.55 36.59 1,037.78 6.84 61.95 70,977.79 0.072010 12.74 17.54 37.07 1,364.00 5.54 61.08 75,529.69 0.08

2011 12.27 19.29 38.31 1,430.79 5.47 61.45 78,226.19 0.08

2012 12.87 18.18 35.15 1,373.86 5.57 59.29 76,490.96 0.09

2013 12.60 18.17 34.77 1,361.15 5.50 60.92 74,893.18 0.09

2014 13.32 19.35 34.19 1,357.16 5.52 60.38 74,926.15 0.09

2015 13.82 18.63 33.10 1,330.47 5.58 59.12 74,176.55 0.09

2016 14.02 18.88 33.47 1,333.77 5.58 59.18 74,373.58 0.09

2017 13.66 18.64 32.61 1,346.65 5.55 59.51 74,713.58 0.08

2018 13.51 18.43 32.08 1,352.52 5.54 59.66 74,990.41 0.08

2019 13.36 18.43 31.52 1,363.08 5.52 59.86 75,277.23 0.08

2020 13.30 18.13 31.12 1,364.21 5.53 59.76 75,440.17 0.08

2021 13.29 18.23 30.71 1,372.55 5.51 60.02 75,664.69 0.08

Sector Rank 180/193 109/180 37/180 12/193 174/193 70/193 27/193 13/193Economy Rank 1247/1370 237/432 83/432 69/1370 1264/1370 200/1370 254/1370 202/1370

Revenue(%)

IndustryValue Added

(%)

Establish-ments

(%)Enterprises

(%)Employment

(%)Exports

(%)Imports

(%)Wages

(%)

DomesticDemand

(%)

World Priceof Crude Oil

(%)

2008 -3.3 -19.0 28.2 34.4 18.5 5.7 6.0 7.3 -5.3 36.4

2009 -26.7 -4.1 -3.4 -1.5 -11.7 -21.7 -34.4 -10.7 -30.1 -36.3

2010 27.4 30.4 -1.7 -1.2 -3.1 29.1 35.6 3.1 27.9 28.9

2011 6.9 3.0 1.3 1.1 1.9 10.5 17.7 5.6 7.1 30.6

2012 3.6 8.7 11.9 13.7 7.9 -4.9 1.3 5.5 7.5 1.0

2013 -0.3 -2.3 -2.1 1.5 0.6 -1.4 0.2 -1.5 0.3 -0.9

2014 1.0 6.8 2.3 2.2 1.3 -0.6 10.2 1.4 3.4 -7.5

2015 -5.8 -2.4 -1.9 -1.7 -4.0 -8.9 -8.7 -4.9 -5.1 -47.0

2016 2.2 3.8 1.9 1.8 2.0 3.4 3.3 2.2 2.0 -6.5

2017 2.7 0.0 1.1 1.2 1.7 0.0 2.4 2.2 3.7 14.9

2018 2.9 1.7 2.2 2.2 2.4 1.2 2.2 2.8 3.4 8.9

2019 2.3 1.2 1.2 1.0 1.5 0.5 3.2 1.9 3.2 6.8

2020 2.0 1.5 2.1 2.3 1.9 0.7 0.6 2.2 2.2 3.6

2021 1.8 1.7 0.7 0.7 1.2 0.4 3.0 1.5 2.5 6.4

Sector Rank 104/193 125/193 42/193 35/193 68/193 23/180 78/180 79/193 158/180 N/A

Economy Rank 1024/1370 1117/1370 652/1370 580/1370 828/1370 93/432 221/432 886/1370 386/432 N/A

Annual Change

Key Ratios

Industry Data


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Jargon & Glossary

BARRIERS TO ENTRY High barriers to entry mean thatnew companies struggle to enter an industry, while lowbarriers mean it is easy for new companies to enter anindustry.

CAPITAL INTENSITY Compares the amount of moneyspent on capital (plant, machinery and equipment) withthat spent on labor. IBISWorld uses the ratio ofdepreciation to wages as a proxy for capital intensity.High capital intensity is more than $0.333 of capital to$1 of labor; medium is $0.125 to $0.333 of capital to $1of labor; low is less than $0.125 of capital for every $1 oflabor.

CONSTANT PRICES The dollar figures in the KeyStatistics table, including forecasts, are adjusted forinflation using the current year (i.e. year published) asthe base year. This removes the impact of changes inthe purchasing power of the dollar, leaving only the

“real” growth or decline in industry metrics. The inflationadjustments in IBISWorld’s reports are made using theUS Bureau of Economic Analysis’ implicit GDP pricedeflator.

DOMESTIC DEMAND Spending on industry goods andservices within the United States, regardless of theircountry of origin. It is derived by adding imports toindustry revenue, and then subtracting exports.

EMPLOYMENT The number of permanent, part-time,temporary and seasonal employees, working proprietors,partners, managers and executives within the industry.

ENTERPRISE A division that is separately managedand keeps management accounts. Each enterpriseconsists of one or more establishments that are undercommon ownership or control.

ESTABLISHMENT The smallest type of accounting unitwithin an enterprise, an establishment is a singlephysical location where business is conducted or whereservices or industrial operations are performed. Multipleestablishments under common control make up anenterprise.

EXPORTS Total value of industry goods and services soldby US companies to customers abroad.

IMPORTS Total value of industry goods and servicesbrought in from foreign countries to be sold in theUnited States.

INDUSTRY CONCENTRATION An indicator of thedominance of the top four players in an industry.Concentration is considered high if the top playersaccount for more than 70% of industry revenue.Medium is 40% to 70% of industry revenue. Low is lessthan 40%.

INDUSTRY REVENUE The total sales of industry goodsand services (exclusive of excise and sales tax); subsidieson production; all other operating income from outsidethe firm (such as commission income, repair and serviceincome, and rent, leasing and hiring income); andcapital work done by rental or lease. Receipts frominterest royalties, dividends and the sale of fixedtangible assets are excluded.

INDUSTRY VALUE ADDED (IVA) The market value ofgoods and services produced by the industry minus thecost of goods and services used in production. IVA is

also described as the industry’s contribution to GDP, orprofit plus wages and depreciation.

INTERNATIONAL TRADE The level of internationaltrade is determined by ratios of exports to revenue andimports to domestic demand. For exports/revenue: low isless than 5%, medium is 5% to 20%, and high is morethan 20%. Imports/domestic demand: low is less than5%, medium is 5% to 35%, and high is more than35%.

LIFE CYCLE All industries go through periods of growth,maturity and decline. IBISWorld determines anindustry’s life cycle by considering its growth rate(measured by IVA) compared with GDP; the growth rateof the number of establishments; the amount of changethe industry’s products are undergoing; the rate of

technological change; and the level of customeracceptance of industry products and services.

NONEMPLOYING ESTABLISHMENT Businesses withno paid employment or payroll, also known asnonemployers. These are mostly set up by self-employedindividuals.

PROFIT IBISWorld uses earnings before interest and tax(EBIT) as an indicator of a company’s profitability. It iscalculated as revenue minus expenses, excludinginterest and tax.

Industry Jargon

IBISWorld Glossary

POLYETHYLENE Any partially crystalline, lightweightthermoplastic that is resistant to chemicals andmoisture, has good insulating properties and is usedprimarily in packaging and insulation.

POLYMER A chemical compound or mixture ofcompounds that consists essentially of repeatingstructural units.

POLYPROPYLENEAny of the various thermoplastics orfibers that are polymers of propylene.

RESINS A large class of synthetic products that havesome of the physical properties of natural resins, but aredifferent chemically, and are used chiefly in plastics.

THERMOPLASTIC A synthetic resin that is capable ofsoftening or fusing when heated and then hardeningagain when cooled.

THERMOSET A product that is relatively incapable ofsoftening or fusing when heated.


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Jargon & Glossary

VOLATILITY The level of volatility is determined byaveraging the absolute change in revenue in each of thepast five years. Volatility levels: very high is more than±20%; high volatility is ±10% to ±20%; moderatevolatility is ±3% to ±10%; and low volatility is less than±3%.

WAGES The gross total wages and salaries of allemployees in the industry. The cost of benefits is alsoincluded in this figure.

IBISWorld Glossarycontinued


35/35

Disclaimer

This product has been supplied by IBISWorld Inc. (‘IBISWorld’) solely for use

by its authorized licenses strictly in accordance with their license agreements

with IBISWorld. IBISWorld makes no representati

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