Challenges and Opportunities for the

Global Engineering Plastics Industry

Presented By:

Michael D. Taylor

Vice President, International Affairs and Trade

2015 China International Engineering-Plastics Industrial

Innovation Conference

Chongqing, China

September 23, 2015

Agenda Background on SPI

Overview of U.S. Plastics Industry

U.S.-China Plastics Trade

Focus on Engineering Plastics

Challenges

Opportunities

Q&A

Founded in 1937, SPI is the only U.S.

trade association representing ALL

segments of the plastics industry

The U.S. Plastics Industry

In 2014…

• 3rd largest industry in U.S.

• Record-breaking domestic demand

Up 6.0% to $298.3 billion

• Shipped more than $427.3 billion in goods

• Employed 940,000 people

• Operated 16,806 facilities in every U.S. state

U.S. Demand for Plastics Sets New

High Level

$0

$50

$100

$150

$200

$250

$300

$350

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

$ in b

illio

ns

Machinery Molds Plastic Products Resin

Apparent Consumption = Shipments + Imports – Exports

Source: SPI “Global Business Trends” (2015)

Plastics Have Historically Grown

Faster than all Manufacturing

Comparative Growth Rates 1980 - 2014

Plastics

Mfg All Mfg

Employment 0.3% -1.3%

Real Shipments 2.6% 0.8%

Real Value Added 2.3% 0.8%

Productivity Growth 2.3% 2.1%

• Plastics manufacturing

employment grew 0.3 percent

per year since 1980

• The value of manufactured

shipments grew by 2.6

percent per year since 1980

• Productivity grew by 2.3

percent per year since 1980

Source: SPI “Size and Impact of the U.S. Plastics Industry” (2015)

Positive

trade balance

of $12.6 billion

$49.5B PLASTICS 7.3%

2014 Trade Statistics

In 2014, the U.S. plastics industry exported goods valued at $62.1 billion, up 3.1

percent from 2013

$35.1B RESINS 1.8%

$25.0B PRODUCTS 5.1%

$528.3M MOLDS 10.1%

$1.7B MACHINERY 7.7%

Source: U.S. International Trade Commission

Top U.S. Plastics Industry Export

Markets

$0

$5

$10

$15

$20

$25

$30

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

U.S

. $

Bill

ion

s

Mexico Canada China Belgium Brazil All Others

Top Plastics Industry

Export Markets 2014

All Others $23.5 billion

Mexico $15.8 billion

Canada $13.2 billion

China $5.2 billion

Belgium $2.4 billion

Brazil $2.1 billion

Total $62.1 billion

U.S. Plastics Industry Exports to

China 2000-2014

0

1

2

3

4

5

62

000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

20

12

2013

2014

Industry Resin

U.S

. $

Bill

ions

U.S. Plastics Industry Exports to

China 2000-2014

0

200

400

600

800

1,000

1,200

1,4002

000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

20

12

2013

2014

Products Machinery Molds

U.S

. $

Mill

ions

Chinese Plastics Industry Imports

to the U.S. 2000-2014

0

2

4

6

8

10

12

142

000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

20

12

2013

2014

Industry Products

U.S

. $

Bill

ions

Chinese Plastics Industry Imports

to the U.S. 2000-2014

0

100

200

300

400

500

600

700

800

900

1,0002

000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

20

12

2013

2014

Resin Machinery Molds

U.S

. $

Mill

ions

Top U.S. Engineering Plastics

Export Markets 2000-2014

0

200

400

600

800

1,000

1,200

1,4002

000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

20

12

2013

2014

Mexico China Canada South Korea Japan

Belgium Netherlands Taiwan Brazil Hong Kong

U.S

. $

Mill

ions

U.S. Engineering Plastics Exports to

BRIC Countries 2000-2014

0

200

400

600

800

1,000

1,2002

000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

20

12

2013

2014

China Brazil India

U.S

. $

Mill

ions

Top U.S. Engineering Plastics

Exports to China 2000-2014

0

100

200

300

400

500

6002

000

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

POLYCARBONATESPOLYAMIDE-6,-11,-12,-6,6,-6,9,-6,10 OR -6,12 (NYLON TYPE)POLYAMIDES NESOIPOLYACETALSFLUORO-POLYMERS NESOI

U.S

. $

Mill

ions

Top Chinese Engineering Plastics

Imports to U.S. 2000-2014

0

20

40

60

80

100

120

140

1602

000

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

POLYETHYLENE TEREPHTHALATE (PET)POLYESTERS NESOI, SATURATEDPOLYTETRAFLUOROETHYLENE (PTFE)FLUORO-POLYMERS NESOIPOLYSULFIDES, POLYSULFONES, AND SYNTHETIC POLYMERS, ETC. NESOI

U.S

. $

Mill

ions

Challenges

Uncertainty and Risks

Image and Misinformation

Cost of Doing Business

17

The Impacts of Economic Policy

Uncertainty in the U.S.

The Impacts of Economic Policy

Uncertainty in China

Our Image Problem – A Source

of Many Challenges

• Extended producer

responsibility

• Foodservice packaging bans

• Marine debris initiatives

(Operation Clean Sweep)

• Product deselection based

on chemical content

• Bag bans or taxes

China – No Exception

• In practically all industrial countries, environmental management has become stricter over time largely as a response to vocal public demand for better protection from pollution.

• As incomes and access to information increase, public pressure on polluters directly and on governments charged with environmental management will continue to grow.

• Before 1994, China had no environmental non-governmental organizations (NGOs). As of 2005, the number exploded to approximately 2,000 NGOs that were officially registered.

• We are seeing a new form of environmental and health consciousness in China’s urban centers, especially in the eastern seaboard cities.

21

The Macroeconomic Impact of

Federal Regulations

• A new report by NAM finds that the

average U.S. company pays $9,991 per

employee per year to comply with

federal regulations.

• The average manufacturer in the

United States pays nearly double that

amount—$19,564 per employee per

year.

• Small manufacturers, or those with

fewer than 50 employees, incur

regulatory costs of $34,671 per

employee per year. This is more than

three times the cost borne by the

average U.S. company.

Some Key Findings

Total cost of federal regulations in

2012 was $2.028 trillion (in 2014

dollars).

The annual cost burden for an

average U.S. firm is $233,182, or

21 percent of average payroll.

Eighty-eight percent of those

surveyed say that federal

regulations are a top challenge for

their firm.

Regulatory Compliance Costs per

Employee per Year for

Manufacturers, 2012 (in 2014 Dollars)

$19,564

Average of All

Manufacturers*

$34,671

Small

Manufacturers

(< 50 Employees)

$18,243

Medium

Manufacturers

(50−99

Employees)

$13,750

Large

Manufacturers

(100+ Employees)

*The average compliance costs for manufacturers to comply with federal

regulations ($19,564 per employee per year) is nearly double the rate seen for

all U.S. businesses ($9,991 per employee per year).

For small manufacturers with fewer than 50 employees, compliance costs per

employee are more than three times the average of all firms.

Opportunities

Trade

Corporate Sustainability

Environmental Stewardship

24

Trans-Pacific Partnership Trans-Atlantic Trade &

Investment Partnership

Global Business Opportunities

• 2014: U.S. plastics

industry exports to the

11 TPP countries were

more than $34B

• Since 2000: plastics

exports to TPP

countries increased

more than 91%

• 2014: plastics industry

trade surplus with TPP

countries was $13.7B

• A high-standard TTIP

would advance trade

and investment

liberalization and

address regulatory and

other non-tariff barriers

• Based on 2011 trade

flows, the U.S. plastics

industry would be one

of the top benefiting

sectors with a total

potential tariff savings

of $465M

U.S. Plastics Trade Balance

by Segment 2000-2014

Source: U.S. International Trade Commission

-10

-5

0

5

10

15

20

25

Resin Products Machinery Molds

U.S. Plastics Trade Balance with

FTA Countries by Segment

2000-2014

Source: U.S. International Trade Commission

-2

0

2

4

6

8

10

12

Resin Products Machinery Molds

China and Free Trade

Agreements

• The Chinese Government sees FTAs as a new platform to further

opening up to the outside and speeding up domestic reforms and an

effective approach to integrate into global economy and strengthen

economic cooperation with other economies.

• Currently, China has 19 FTAs under construction, among which 14

Agreements have been signed and implemented already.

• Regional Comprehensive Economic Partnership (RCEP) is a

proposed FTA between the ten member states of the Association of

Southeast Asian Nations (ASEAN) and the six states with which

ASEAN has existing FTAs. RCEP negotiations were formally

launched in November 2012 at the ASEAN Summit in Cambodia.

28

Corporate Sustainability

Emerges in China

• The largely Western concept of “corporate social responsibility”

(CSR) is beginning to emerge in China.

• According to one study, 582 CSR reports of different forms were

released by Chinese companies in 2009, about three-and-a-half

times the number produced the year before.

• There is a strong movement by Chinese firms to implement CSR

and integrate aspects of CSR into their own operations, such as

making sure their supply chains are green.

29

A Proactive Approach to

Sustainability

• High number of activities pursued relative to sustainability

• Seek opportunities to invest in sustainability

• Integrate sustainability into business practices

• Shape regulation actively

• Communicate engagement in sustainability activities to external

audiences

• Seeks external views regarding its sustainability activities

Strong Performers Share Certain

Characteristics

• They set aggressive external targets or goals for their sustainability

initiatives.

• They have a unified sustainability strategy with clearly articulated

strategic priorities.

• They set aggressive internal targets or goals for their sustainability

initiatives.

• A broad leadership coalition is involved in shaping or co-creating the

sustainability strategy, goals, and milestones.

• The financial benefits of sustainability are clearly understood across

the company.

32

Program Components

• OCS Goal: Zero Plastic Pellet Loss! – Keep pellets where they belong

• OCS Principles: – Avoid spills and clean them up if they occur – Dispose of and handle pellets properly

• OCS program composed of: – Employee training tools – Housekeeping procedures for all aspects of the industry

Industry Efforts Can Show Results Trend: -33 ± 3 pellets km-2 year-1

r2 = 0.83, p<0.01

International Participation in OCS ABIPLAST (Brazil) ACIPLAST (Costa Rica) AIPMA (India) ANIPAC (Mexico) ASEPLAS (Ecuador) ASIPLA (Chile) British Plastics Federation Canadian Plastics Industry Association China Plastics Processing Industry Association COGUAPLAST (Guatemala) Danish Plastics Federation Dutch Federation of Rubber and Plastics Industry EPEMA (Egypt) Fédération de la Plasturgie (France) Malaysian Plastics Manufacturers Association Plastics and Chemicals Industries Association (Australia) + Tangaroa Blue Foundation PET Product & Closure Manufacturer Association (Nepal) Philippine Plastics Industry Association PlasticsEurope Plastics New Zealand Plastics SA (South Africa)

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

mtaylor@plasticsindustry.org

202-974-5232