North American plastics sector holds steady, while riding a roller-coaster of uncertainty
08.07.2022
The pandemic. Supply chain ruptures. The Great Resignation. China trade tensions. Climate change and extreme weather events. Soaring inflation. Stock market volatility. The war in Ukraine. Seldom in our lifetimes have we experienced such an extended period of disruption and uncertainty.
North America's plastics industry has not been spared from these issues, but it has held up reasonably well, given the crucial role that plastic products play in our everyday lives, and especially in vital healthcare applications. If anything, the pandemic only helped to reinforce the value of plastics in helping to keep us all safe and healthy.
"During the 2020 COVID-19 recession, stimulated by federal relief dollars, U.S. plastics consumption held up at a time when employment was down and capacity was constrained," noted the Washington, D.C.-based Plastics Industry Association (aka PLASTICS) in its "2021 Global Trends" report. The result was higher imports and a trade deficit."
The association's "2021 Size & Impact Report," published last year, estimated the total value of U.S. plastics industry shipments in 2020 to be $394.7 billion. The industry directly employed 945,300 workers, which was down almost 6 percent from pre-pandemic 2019. Despite all the challenges, U.S. plastic products manufacturing rose 4.9 percent in 2021 from the prior year, according to U.S. Federal Reserve data, in line with the association's late-year projection.
That number could have been higher, but resin production continued to lag, said Perc Pineda, noting that materials shortages weighed down plastic products output. Pineda, the group's chief economist, cited Federal Reserve data showing 2021 plastic materials and resin production down by 0.4 percent.
Plastics machinery production last year rose by a robust 16.8 percent compared with the pandemic-ravaged 2020, and plastics mold manufacturing grew by a solid 9.7 percent in 2021.
"While the outlook for 2022 remains positive, unresolved challenges in 2021 spilling over into 2022 will cause plastics industry growth to slow," PLASTICS projected in its latest quarterly outlook, published in December.
Even so, the latest federal data for March 2022 indicate that U.S. plastics product manufacturing and resin production were up 7.6 percent and 14.1 percent, respectively, from March last year, according to Pineda.
The U.S. plastics machinery market continues to see healthy demand while continuing to experience supply-chain bottlenecks, as well as high metal costs, due in part to Russian sanctions. Business investment spending on industrial machinery in the U.S. increased by 19 percent in the first quarter of 2022, compared with the same year-ago period, according to Pineda. However, low parts inventories are extending production times and slowing deliveries.
Harbour Results Inc. (HRI), meanwhile, reported in April that the U.S. tooling industry rebounded in 2021, with companies seeing year-over-year revenue growth. HRI, a Southfield, Mich.-based manufacturing industry consulting and benchmarking company, published the insights in its "Q1 2022 Harbour IQ Manufacturing Pulse Study."
Although 2022's first quarter started out slowly, HRI reports that shops are predicting utilization will reach 90 percent for molds and 82 percent for dies by this year's fourth quarter. "Despite all the chaos in the manufacturing marketplace, we are feeling positive about the opportunities for the tool and die industry in 2022," stated HRI President and CEO Laurie Harbour, noting projections for a sharp increase in automotive tooling orders this year.
The pandemic spurred a notable boost in home shopping and e-commerce, to include food and grocery delivery services. This helped to accelerate interest in safe, durable, clear, lightweight and thin-wall plastic packaging options.
Sustainability continues to command the attention of brands and packaging companies. But the Packaging Machinery Manufacturers Institute (PMMI) in May warned that innovation in the sector is not keeping pace with sustainability demands. Companies are under massive pressure to reduce packaging waste, but the PMMI study says that packaging operators recognize they are behind the curve in this regard and need to catch up.
The construction sector is an entirely different beast and faces different challenges. Supply-chain disruptions have played havoc with builders. For the past couple years, the U.S. housing demand has been red-hot, and prices sky-high, with homebuilders struggling to keep pace.
"Despite all of the turbulence reflected in some other sectors, total U.S. construction spending increased by a robust 12 percent in the first quarter when compared with the same period in 2021," according to Plastics News. "Total spending for residential projects jumped almost 19 percent, while spending in the nonresidential segment increased a very respectable 6 percent." Higher interest rates are likely to start cooling this sector somewhat.
The Consumer Technology Association (CTA), which organizes the huge CES consumer electronics show in Las Vegas each year, projected in January that U.S. consumer technology revenue would increase by 2.8 percent in 2022. It predicted that the industry's retail sales revenue this year would exceed $505 billion, marking the first time ever it will top the half-trillion-dollar mark. This increase is over and above the 2021's year-on-year growth of 9.6 percent.
CTA reported that some of the fastest-growing products include many "smart" products – from smart appliances to smart TVs, as well as connected products such as sports and fitness equipment. Digital health devices also continue to grow in popularity, to include connected devices that monitor mental and physical health and manage chronic disease, as well as telemedicine and all types of wearables.
The U.S. vehicle industry has taken a beating, for all the above-noted reasons, compounded by a critical shortage of the semiconductor chips needed in every vehicle. Analysts predict semiconductor inventories may not return to pre-pandemic levels until at least 2023.
The National Automobile Dealers Association said new light-vehicle sales in the United States increased to 14.3 million units on a seasonally adjusted annual rate (SAAR) in April 2022, but it's still a far cry from the April 2021's annual rate of 18.6 million units.
Technology, inflation and supply-chain challenges aside, the U.S. plastics industry (and broader manufacturing sector) has a potentially more intractable problem – a shortage of skilled workers to keep its plants humming. The pandemic caused many to re-evaluate their lives and careers, leading some to quit their jobs and others to pursue different paths.
In addition to the U.S. having an aging population, it has proven difficult to attract, train and retain talent. Many of the new entrants to the labor market lack skills for, and/or are averse to pursuing a career in manufacturing, notes Pineda.
"In a tight labor market, even economic incentives such as higher wages and benefits are not guarantees of attracting and retaining skilled workers. Increasing skilled labor supply would require serious commitment from the industry to implement an apprenticeship program that's consistent throughout the country and accredited by the U.S. Bureau of Labor," he said.