Plastics and rubber - Industry Overview

Before reading this chapter, please see "Getting the Most Out of Outlook '94", on page 1. It will answer questions you may have concerning data collection procedures, forecasting methodology, and chapter references. For additional information concerning this topic, see chapter 5 (Construction), 7 (Construction Materials), 11 (Chemicals and Allied Products), and 35 (Motor Vehicles and Parts). This chapter covers prospects for both plastic and synthetic rubber materials, as well as products made from these materials.

PLASTIC MATERIALS

This category (SIC 2821) groups together various petroleum-derived monomeric and polymeric materials, whether used singly or in combination, to make a wide variety of molded plastic shapes. Production of plastics follows a well-defined sequence: three primary materials (petroleum, natural gas, and coal) are broken down by refining and fractionation processes into various light-to-heavy petrochemical feedstocks. These materials, also known as light, middle, and heavy oils, are then reacted with others to make more complex intermediates. These can be further reacted with accelerating agents to yield low molecular weight monomers and the heavier, more complex polymers.

General purpose, or commodity thermoplastics are usually manufactured in large quantities using well established technology. The bulk of total general purpose plastic goes to a relatively small number of large volume users. Among the general purpose materials are the simpler monomers, such as the polyethylenes, polystyrenes, and polyvinyls.

In contrast, specialty plastics are specifically developed to meet extreme environmental conditions and involve significant up-front research and development costs. These highly resistant materials are often produced on a customized basis to address the needs of individualized end uses. Typical specialty resins are the cellulosics, the polycarbonates, and the polyetheretherketones.

The final end use often determines how a given material may be classified. Thermoplastics differ from thermosets in that the former can be reheated and remolded repeatedly, while thermosets can be heated and molded to a final shape only one time. About three-quarters of total U.S. production of plastic materials covered by SIC 2821 is thermoplastics.

Total output of U.S. plastic materials producers in 1992 reached an estimated 66.6 billion pounds. Profit margins that had eroded in 1990 and 1991 were partially offset in 1992 as prices stabilized. In volume terms, demand in 1992 was highest for the low- and high-density polyethylenes, polypropylene, polyvinyl chloride, polystyrene, and acrylonitrile butadiene styrene. The fastest growing market segments in 1992, however, were the engineering resins, high-density polyethylene, polyvinyl chloride, and the polyolefins.

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INTERNATIONAL COMPETITIVENESS

The United States remains a major net exporter of plastics to the world. Trade with Canada and Mexico accounted for about one-third of total U.S. exports in 1992, followed by the Netherlands, Belgium, Japan, Hong Kong, and Taiwan.

Chronic worldwide overcapacity, particularly in Europe and Japan, however, continues to depress long-term prospects across most product areas. Plant closures and capacity cutbacks have been partially successful in preventing further price declines. Joint ventures between high volume firms have become more frequent as producers see the advantages of pooling resources to prosper in a sagging market.

Outlook for 1994

Constant dollar shipments of plastics will remain strong, exceeding an estimated 6 percent growth in 1994. Demand from certain end-use sectors, including packaging, medical devices, and automobiles, is expected to grow faster than the industry average.

Long-Term Prospects

Material substitution (e.g., plastic for metal, wood, or glass) as a major growth factor is expected to slow down considerably, reflecting the already high level of substitution of plastic now evident in areas once reserved for more traditional materials. However, new applications are emerging. These will place greater demand on convenience and safety features and are likely to generate interest in newer general purpose materials. The cost, low weight, and versatility advantages of newer plastic materials will also make them more attractive in the auto assembly industries. The demand for recycled and biodegradable materials is expected to continue, as well as drive development of more economical recycling technologies.

PLASTIC PRODUCTS

This section (SIC 308) summarizes developments for seven of nine industries. These include SIC 3081 (Unsupported Plastics Film and Sheet), SIC 3082 (Unsupported Plastics Profiles, Rods, Tubes, and other Shapes), SIC 3083 (Laminated Plastics Plate, Sheet, Profiles, Rods, and Tubes), SIC 3084 (Plastic Pipe), SIC 3086 (Plastic Foam Products), SIC 3087 (Custom Compounding of Purchased Plastic Resins), SIC 3089 (Miscellaneous Plastic Products, not elsewhere classified).

The production process for most plastic shapes is well defined. Once a final use is established, the primary inputs (monomers and polymers) are reacted with a variety of chemical reagents (reaction accelerators, antioxidants, and emulsifiers) to impart desired characteristics, and then processed using one or more methods such as coating, extrusion, molding, laminating, and others. Consumption of plastic products is highest in the electronics, health care, construction, transportation, automotive, and food packaging industries.

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INTERNATIONAL COMPETITIVENESS

In 1992, exports of about $4.5 billion only slightly exceeded imports of about $4.3 billion. The value of the total trade turnover (sum of imports plus exports) amounted to about 13.5 percent of total industry shipments, domestic and foreign, in 1993. U.S. exports compete favorably against lower cost producers in many third-country markets. Canada, Taiwan, China, and Japan accounted for the bulk of imports in 1993.

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ENVIRONMENTAL PROFILE

Although plastics waste constitutes a minor component of total U.S. solid waste collected, efforts to develop environmentally safer products in response to public pressures remains a high industry priority. The percentage of total plastic recycled remains low compared with total production or consumption. However, significant recycling advances have been made, particularly for polyethylene terephthalate beverage bottles). Industry associations continue to work with federal, state and local legislative bodies to evaluate the relative merits of recycling compared with other disposal methods, such as landfill and burning.

Outlook for 1994

Shipments of miscellaneous plastic products are expected to grow by 5 percent in 1994, largely as a result of stronger consumer confidence and spending, and expected increases in demand from the electronics and health care sectors. Highest growth is expected to be for molded and extruded products.

Long-Term Prospects

Greater reliance on computer-aided design and manufacturing is expected in the last half of the 1990's as the industry streamlines its production. These measures will be aimed at strengthening the industry's competitiveness in the areas of quality control and improved client relations.

SYNTHETIC RUBBER

Synthetic petroleum-based rubber materials in this sector (SIC 2822) are also known as elastomers.

The development of synthetic rubber parallels that of other materials: general purpose commodity materials used in bulk in the tire industry and elsewhere give rise to new applications that, in turn, become more refined over time and stimulate needs for more complex specialty materials. Synthetic rubber (SR) materials therefore fall into two broad categories: general purpose or commodity materials, and the specialty elastomers.

Among the most common general purpose elastomers are styrene-butadiene latex, polychloropropylene, nitrile, ethylenepropylene diene monomer, carboxylated styrene, polybutadiene, and solid elastomers. These are widely used in the production of tires and industrial rubber products. In contrast, specialty elastomers are used in applications where resistance to extreme environmental conditions or considerations of weight and volume are important. While relatively minor as a percentage of total SR volume, specialty elastomers continue to show growth rates far higher than the industry as a whole.

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INTERNATIONAL COMPETITIVENESS

The United States now ranks first in production of synthetic rubber with about 26 percent of total world output in 1992. Other major world-class producers in 1992 include the former republics of the Soviet Union (18 percent), Japan (15 percent), Germany (5 percent), and China (4 percent).

Foreign trade is significant in the SR industry: total trade turnover exports plus imports) accounted for more than one-third of industry shipments in 1993. The favorable U.S. trade balance in synthetic rubber grew steadily during four consecutive years starting in 1989. Recession in major world markets, however, tended to depress export levels during most of 1992. Canada remains both the largest supplier and export market. Other major suppliers in 1992 were Belgium and Mexico.

Outlook for 1994

Industry shipments of synthetic rubber are expected to grow by 3 percent in 1994, largely as a result of expected increases in tire production and new applications in non-tire uses. Growth in demand for then-noplastic elastomers is expected to exceed 7 percent in 1994.

Long-Term Prospects

Growth prospects for the domestic synthetic rubber industry remain mixed, reflecting the industry's dependence on tire manufacturing. Demand for tire-related uses is expected to remain uncertain. Declines, however, will be partially offset by increased use of synthetic rubber as a plastic additive, as well as higher rates of material substitution (rubber compounds for plastic) in the auto industry. Exceptionally high growth rates for high value elastomers are expected through the end of the decade.

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RUBBER PRODUCTS

This section includes SIC 3011 (Tires and Inner Tubes) and SIC 3069 (Fabricated Rubber Products).

Tires

The tire industry includes companies whose main line of business consists of the production of pneumatic casings, inner tubes, and solid and cushion tires for a variety of vehicles (passenger cars, buses, trucks, bicycles, farm equipment, and airplanes). Also included are tiring, camelback, tire repair, and retreading materials. The primary production elements are natural and synthetic rubber materials, and carbon black.

The industry shows signs of stabilizing after undergoing a period characterized by massive restructuring, the effects of recession in the domestic market, and consistently high levels of imports. With tire durability virtually pushed to what many consider the practical limit, industry strategy has shifted to servicing the fast-growing emerging markets for high-performance, light truck, and recreational vehicle (RV) tires.

INTERNATIONAL COMPETITIVENESS

International restructuring of the industry in recent years has brought about the formation of multinational companies, particularly in Europe and Japan. Among the advantages to be realized by the surviving companies are the reallocation of global resources to spread out R&D costs, and economies of scale across procurement, manufacturing, distribution and service.

Imports continued to outpace exports at a nearly 2:1 ratio in 1993. But a steady growth of exports, starting in 1989, has slowly cut into this negative net trade position since then.

The foreign trade sector of the industry is stable, as evidenced by several consecutive years when the ratio of combined exports and imports to overall industry shipments remained relatively constant. Trade turnover remains at about 30 percent of total industry shipments. Canada is now the United States' largest trading partner, absorbing 40 percent of total U.S. exports, while supplying about 30 percent of imports in 1992.

ENVIRONMENTAL PROFILE

Environmental concerns over the proper disposal of scrap tires raise continuing challenges to the industry. Large scale recycling of scrap tires is not a reality at present. Although the implementation of options such as landfill, export of ground or usable tires, and burning (tire-derived fuel) have been helpful, they have not made significant inroads in the nation's vast supply of scrap tires.

Outlook for 1994

Industry shipments are projected to grow by no more than 1 percent in 1994. Higher than average growth is expected for the high-performance, truck, and light truck tires. Little or no growth is projected for original equipment passenger tires installed on new cars.

Long-Term Prospects

A pronounced shift is forecast to non-price factors such as convenience and safety. Retreading and recycling will continue to attract research funding as public concerns grow over the glut of scrap tires. State and local funding of programs to provide incentives for finding acceptable disposal methods is likely to proliferate in coming years.

FABRICATED RUBBER PRODUCTS

This miscellaneous category (SIC 3069) includes a wide variety of industrial rubber products including rubberized fabrics, vulcanized rubber clothing, rubber-based medical and health-related supplies, custom-made rubber products, as well as rubber products made from recycled rubber. As with tires and plastic products, the production process for fabricated rubber products is standardized, consisting of four basic operations: design, compounding of the material, mixing, and molding.

Customer service has come to the fore as a key factor in the industry. With a large number of players, firms have taken recourse to strengthening product design, delivery and service capabilities.

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INTERNATIONAL COMPETITIVENESS

Trading patterns reflect the U.S. industry's position as a moderately competitive producer; the United States is both a major exporter to industrialized nations and an importer of lower-cost product from industrializing countries. Imports continue to make inroads in the domestic market and stand at a nearly 2:1 ratio to exports. Two-way trade relative to total industry shipments remains stable, at about one-fifth of total industry shipments.

Outlook for 1994

Industry shipments are forecast to grow by 3 percent in 1994, largely reflecting expected increases in manufacturing use of fabricated rubber products, as well as higher consumer spending. Higher than average growth is expected for automobile and health-related protective items.

Long-Term Prospects

Highly flexible, client oriented production will continue to be the industry's mainstay in coming years, enabling companies to benefit from individualized product design and efficient production. New materials coming on line can be expected to add significantly to product quality and durability. The use of recycled materials will become more frequent as suitable reprocessing methods are refined and as new material costs remain relatively high.

Additional References

(Call the Bureau of the Census at (301) 7634100 for information about how to order Census documents.) Miscellaneous Plastic Products, Not Elsewhere Classified, 1987 Census of Manufactures, MC87-1-30-BP, U.S. Department of Commerce, Bureau of the Census, Washington, DC 20233. Rubber - Products, Shipments, Stocks: 1992, MA30A, U.S. Department of Commerce, Bureau of the Census, Washington, DC 20233. The New Material Society, Challenges and Opportunities, Volume 2, U.S. Department of the Interior, Bureau of Mines, 1990, Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402. Telephone: (202) 783-3238. Synthetic Organic Chemicals, Investigation No. 332-135, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436. Telephone: (202) 205-2000. Chemical Marketing Reporter, Schnell Publishing Company, 80 Broad St., New York, NY 10001 -2205. Telephone: (212) 248-4177. Facts and Figures of the U.S. Plastics Industry, The Society of the Plastics Industry, 1275 K Street NW, Washington, DC 20005. Telephone: (202) 371-5200. The Council for Solid Waste Solutions, 1275 K St. NW, Washington, DC 20005. Telephone: (202) 371-5200. The Rauch Guide to the U.S. Plastics Industry, Rauch Associates, Inc., P.O. Box 6802, Bridgewater, NJ 08807. Telephone: (908) 231-9548. Modern Plastics Encyclopedia, P.O. Box 602, Hightstown, NJ 08520-9955. Telephone: 800-257-9402. Rubber Statistical Bulletin, International Rubber Study Group, 8th Floor - York House, Empire Way, Wembley HA90PA, London, England. Elastomerics, Communication Channels, 6255 Barfield Rd., Atlanta, GA 30328. Telephone: (404) 256-9800. Rubber Directory and Buyer's Guide, Rubber and Plastics News, Plastics News, Crain Communications, 1725 Merriman Rd., Suite 300, Akron, OH 44313. Telephone: (216) 836-9180. Rubber Manufacturers Association, 1400 K St. NW, Washington, DC 20005. Telephone: (202) 682-4800. International Institute of Synthetic Rubber Producers, 2077 S. Gessmer St., Suite 133, Houston, TX 77063. Telephone: (713) 783-7511.

COPYRIGHT 1994 U.S. Department of Commerce
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