CHANGING STRUCTURES IN THE NORTH AMERICAN PLASTICS INDUSTRY - FROM LOCAL TO GLOBAL INFLUENCES -...

CHANGING STRUCTURES IN THE NORTH

AMERICAN PLASTICS INDUSTRY - FROM LOCAL TO GLOBAL INFLUENCES -

Applied Market Information Ltd.45-47 Stokes CroftBristol, BS1 3QP, UKTel: +44 (0)117 9249442Fax: +44 (0)117 9892128Email: [email protected]

Applied Market Information LLC1210 Broadcasting Road, Suite 103

Wyomissing, PA 19610, USATel: +1 (610) 478 0800

Fax: +1 (610) 478 0900Email: [email protected]

©Applied Market Information Ltd 2013

Western Plastics Association Slide 2


Western Plastics Association

The programme

About Applied Market Information Where North America fits in the world The position of North American demand Downstream industries and changing structures Global Flexible Packaging markets – the PE example Consumer trends impacting plastics Retailer trends impacting plastics Conclusions

Slide 3Slide 3


About AMI Consulting

4

Market Analysis– In-depth multi-client reports

The NAFTA market for Thermoplastic Concentrates (March, 2012)

The Global Market for BOPP films The Global Market for Grass Yarns Studies by application e.g. Pipes,

membranes, cables Studies by polymer e.g. PP, PE

– Single client projects and reports

Market & Database products– Plastics in India– The Thermoplastic Compouding

Industry Report (NAFTA, Europe, Asia, Latin America)

– Processor & compounder databases

Conferences– Compounding World Forum – AMI Plastics Industry Seminar – Shrink and Stretch film– Thermoplastic Concentrates – Polyethylene Films – Fire Retardants in Plastics– Polymers in Cables

Other Digital magazines

– Compounding World, Injection World, Film & Sheet, Pipe & Profile

E-publishing contract services Technical publications


AMI has over 25 years experience in providing insight and information to the global plastics industry.

AMI has databases on over 30,000 plastic processors globally

AMI has unrivalled knowledge on down stream plastics markets

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The international marketing, business and technical conference for the

polyethylene film industry

11-13 February 2014The Shores Resort & Spa, Daytona Beach, FL, USA

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WHERE NORTH AMERICA FITS IN THE WORLD

Evolving patterns of demand



The trends that shape the world

Global population growth to 9.2 billion by 2050– With an increasing share living longer and requiring greater services

Urbanization as more of the population moves to cities– By 2050 65% of the world population will be city dwellers

Transport needs will mean over 2.5 billion cars are needed by 2050 The fight to access resources:

– Raw materials to drive industrial development

– The basics of life water and food– Energy and power needs will have grown by 50% from the levels of 2012

Energy efficiency and resource optimisation will be essential drivers in the globally successful economies

Slide 9Slide 9



Total polymer demand by type 1983-2017

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

1983 1998 2012 2013 2017

mil

lio

n lb

sPolyethylene Polypropylene

PVC Polystyrene

Expanded Polystyrene ABS

PET Engineering polymer


The World 1983 and 2012

98.8 million lbs 496.9 million lbs

Slide 11Slide 11Western Plastics Association

1983 2012

Europe20%

NAFTA17%

Latin America5%Greater China

29%

Asia15%

Indian Sub Continent

5%

Africa and the Middle East

9%

Europe38%

NAFTA30%

Latin America4%

Greater China6%

Asia17%


1%


4%


Total world demand 1983-2017

Slide 12Western Plastics Association

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

1983 1998 2012 2013 2017

mil

lio

n lb

s

Europe NAFTA

Latin America Greater China

Asia Indian Sub Continent



Global polymer demand 2012


Polyethylene34.6%

Polypropylene24.2%

PVC16.9%

Polystyrene6.1%

Expanded Polystyrene

2.2%

ABS3.5%

PET8.7%

Engineering polymer

3.8%



End use applications for all polymers 2012

Slide 14Slide 14

Flexible Packaging Industrial

7%

Flexible Packaging Consumer

17%

Rigid Packaging Industrial

6%

Rigid Packaging Consumer

22%

Building20%

Agriculture2%

Automotive3%

Electrical Appliances

5%

Medical1%

Housewares3%

Toys1%

Sport and Leisure1% Furniture

1%Others

11%


Total NAFTA demand 1983-2017


0

20,000

40,000

60,000

80,000

100,000

120,000

1983 1998 2012 2013 2017

Mil

lio

n lb

sPolyethylenePolypropylenePVCPolystyreneExpanded PolystyreneABSPETEngineering Polymer


Total NAFTA demand 1983-2017

Slide 16Western Plastics Association Slide 16

Units: million lbs 1983 1998 2012 2013 2017

Polyethylene 13,272 30,640 34,673 35,467 40,075

Polypropylene 3,526 13,444 15,626 16,067 18,232

PVC 6,094 13,962 13,427 13,619 14,399

Polystyrene 3,758 6,083 4,728 4,761 4,904

Expanded Polystyrene 496 937 1,358 1,395 1,492

ABS 904 1,631 1,713 1,770 1,940

PET 551 4,188 10,238 10,612 12,100

Engineering Polymer 886 2,513 4,033 4,232 4,963

Total 29,487 73,398 85,795 87,922 98,105



Dynamics of the NAFTA market

Highly evolved market dominated by USA economy– Mexico the faster growing area

2012 characterised by:– Acceleration of domestic demand– Profitability maintained

Evidence of renewed acquisition activity in processing industry Renewed confidence in domestic manufacturing of both resin and

plastics processing; shale gas driven Global investments continuing, driven by the desire to serve brands on a

global basis– Importance of retailers in encouraging low cost goods from around the world– Continued global investments by US companies

North American resin and additive companies continue to be at the forefront of global development

Slide 17Slide 17

Downstream industries and their changing structures



The plastics industry in 2013

Plastics processing is successfully established in every region and country of the world

The impact of plastics products and goods is felt in every economy and society on the planet

The average consumer relies on and uses numerous distinct plastics products every day

Plastics drive the global economy– Building and infrastructure– Communications– Transport – Packaging of all consumer goods (rigid and flexible)– Leisure and social activities



Development of the processing industry

Local production

National and regional processors

Interregional processors

Global dimension

Pre 1970’s

1970’s-1980’s

1980’s- 1990’s

2000’s-2010

In same time resin

producers exit

processing and

financial

groups

take larger

holdings



Global distribution of processors 2013

Total number 196,255

Europe13.2%

NAFTA7.1%

Latin America5.9%

Greater China34.2%

Asia18.6%


15.4%

Africa and Middle East

5.6%



Global processors by activity 2013

Total Number 196,255

Injection Moulding

61.5%Blow Moulding7.9%

Rotational Moulding

0.9%

Film14.6%

Pipe 2.6%

Profile4.7%

Cable0.9%

Sheet2.3%

Compounders2.5%

Other2.1%



Processor industry structure 2013

% of polymer demand % of processor numbers

Europe13.2%

NAFTA7.1%

Latin America5.9%

Greater China34.2%

Asia18.6%


15.4%


5.6%Europe20.5%

NAFTA17.3%

Latin America5.0%

Greater China28.8%

Asia14.8%


5.2%

Africa and the Middle

East8.5%


Global distribution of plastic processors 2013


Injection Blow Rotational Polyolefin Pipe Profile Cable Sheet Thermoplastic Other Grand %

Moulding Moulding Moulding Film Extrusion Extrusion Producers Extruders Compounders Processors Total Share

Europe 16,525 1,735 321 2,099 778 1,394 477 1,046 762 690 25,827 13.2%

NAFTA 9,000 905 220 1,080 230 855 205 505 580 300 13,880 7.1%

Latin America 6,294 817 38 2,463 151 659 76 463 271 294 11,527 5.9%

Greater China 45,500 4,890 180 10,935 645 2,185 310 625 1,075 745 67,090 34.2%

Asia 17,460 4,055 355 6,705 1,165 3,190 530 1,055 995 1,080 36,590 18.6%

Indian Sub Continent 20,100 1,975 310 4,015 1,750 145 110 425 962 505 30,297 15.4%

Africa and Middle East 5,850 1,185 343 1,323 300 702 156 349 295 541 11,044 5.6%

Total 120,729 15,562 1,767 28,620 5,019 9,130 1,864 4,468 4,940 4,155 196,255 100.0%

% share of total 61.5% 7.9% 0.9% 14.6% 2.6% 4.7% 0.9% 2.3% 2.5% 2.1% 100.0%


Industry dispersed in all countries– Strong structure in United States– Developed industry in Canada– Rapidly evolving industry in Mexico

Many companies but limited resources– The average company have limited management skills and resources

Consolidation in the last ten years – Takeovers and mergers driven by specialisation– Consolidation of the customer base– Movement of business to Asia and developing world– Future of equity owned assets uncertain

Specialization increasing Number of truly National players

– Few with truly global ties


The plastics industry in NAFTA


Distribution of processors NAFTA 2013

Slide 26Western Plastics Association Slide 26

Injection Blow Rotational Polyolefin Pipe Profile Cable Sheet Plastic Other Grand %

Moulding Moulding Moulding Film Extrusion Extrusion Producers Extruders Compound Processors Total Share

United States 7,150 570 160 545 140 545 145 380 495 200 10,330 74.4

Canada 525 165 30 110 60 160 35 60 50 70 1,265 9.1

Mexico 1,325 170 30 425 30 150 25 65 35 30 2,285 16.5

GRAND TOTAL 9,000 905 220 1,080 230 855 205 505 580 300 13,880 100.0

% share of total 64.8% 6.5% 1.6% 7.8% 1.7% 6.2% 1.5% 3.6% 4.2% 2.2% 100.0%


The structure of the North American industry


Injection Molding66%Blow Molding

6%

Polyolefin Film6%

Rotational Moulding

2%

Pipe and Profile8%

Cable1%

Sheet4%

Compounders5%

Others2%

Global flexible packaging markets-the Polyethylene example-



Preservation and

protection

Product Information

Consumer appeal

Supply chain efficiency

Sustainability

• Freshness and food value maintained

• Pack integrity in supply chain

• Clear brand identity• Range of colours & effects

• Stored safely with minimal space

• Identity and impact on the shelf• Differentiation on the shelf• Easy to carry and transport• Strong and Robust

• Light weight• Easy to open & reclose/seal• Easy to carry• Easy to identify for recycling• Meets packaging waste requirements

Range of retailer formats

Packer, Retailer, Consumer – meeting many needs


Global size of market

Europe23%

NAFTA19%

Latin America7%

Greater China23%

Asia15%


5%

Africa & Middle East

8%


Total market 115 billion lbs



Global distribution of PE extruders 2013

Total number of

companies 28,620

Europe7% NAFTA

4%Latin America

9%

Greater China38%

Asia23%


14%


5%


Average film producer throughput 2012


0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00


Asia

Greater China

Latin America

Africa & The Middle East

Europe

NAFTA

Million lbs


Base substrate demand – trends and comments


PE Film market is a 84 billion lbs. market globally accounting for over half of world PE demand, future growth globally 4.5% per annum

PP Film market is a 19 billion lbs. market global market growing at over 6% per annum

Other films and plastic substrates account for over 11 billion lbs. and are growing at over 7% per annum

Strong regional focus to most markets, but with trade increasingly influencing markets

Polyethylene73%

BOPP14%

PP film3%

PET6%

Others4%

Slide 33


Increased specialisation and focus

Materials - wide range of polymers and copolymers

Innovation in additives and modification

Extrusion - more sophisticated processing (co-extrusion)

Conversion – Improved printing (more colours

greater print definition)– Pack making (specialized shapes

and structures)– Lamination

Need to understand new materials - training and investment

Investments in co-extrusion often necessary to fully exploit palette of materials

Co-extrusion often the route to achieve downgauging and superior performance

Development of new products essential to justify investment


Technology Advances Impact on Extruders



Key drivers of packaging growth

Environmental– Recycling

– Minimisation

Cost savings– line speed/filling speed improvement often related to sealing time

– Greater pack integrity

– Down gauging

Others– Reclosability

– Tamper evidence

– Excitement!

– Barrier properties


Case study of the opportunity: Labels

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Pressure Sensative Glue Applied IML Sleeves and Others

Plastic Paper



Case study of the opportunity: Sacks

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Europe NAFTA Asia Latin America Japan Rest of theWorld

Polyethylene Polypropylene Paper


Consumer trends impacting the plastics industry



Profits from forecasting and understanding

Future behaviour and attitudes

Future needs



How are our lives changing?

Time is money “instant

convenience”

Individual as a market

Communications age

Appealing to the young at

heart

The natural world

Healthy lifestyle choices

How are our lives changing?



True value propositions

Can I offer elements of uniqueness?

Do my products contribute to the uniqueness of the brand?

Retailers and brands and their influence on market development


Retailer brand issues/challenges


Shorter product life cycles

– More product variants

Environmental challenge

Rise of private label

– Walmart private label $135 billion

– Nestle is a $98 billion company

Need for brand protection

How to sell in an interactive world


Retailers & Consumers


What is a brand?

Promise How does it lookAesthetic appealEnvironmental impact

Experience How does it workFunctionality

Memory What brings you back



What drives innovation

Innovation

What’s Needed?

Consumer

Competition

Stakeholders

What’s Possible?

Technology

Chemistry

Materials

Processes

Business Model

Supply Chain

Summary and conclusions



Observations – Market overview

The footprint and influence of plastics products are now global in scope and contribute to all areas of industry and the economy

Although we are slowly seeing a global industry emerge in many markets the extent of globalisation is limited:

– Few global standards exist

– Resin availability and its pricing remains regional

The activities of global brands, combined with modern technology, are the major factors reshaping the structure of the upper levels of the processing industry. A limited number of players are adapting to this circumstance

The demand for plastics are also developing under the influence of economic, environmental and an increasingly political/legal frameworks.

Stronger growth is occurring in the more populous developing economies of India and China. Other countries joining this group are Russia, Brazil and Indonesia.

All around the world the opportunity to replace traditional material is strong



Observations – industry structure

The processing industry continues to be extremely fragmented with the faster growing regions of the world seeing the number of processors advance while the more developed world is seeing a decrease in processor numbers.

Within each major region and also on a global scale the larger processors are gaining an increasing share of the overall market. This process is most advanced in the NAFTA region where a single market has existed for many years, but similar trends are observable in the other regions.

Thus in the future the industry shape will be characterised by:

– The big will get bigger, the small entrepreneurial and focused supplier will remain– The medium size processor will be challenged

“Disruption” will be the characteristic of markets to an increasing extent As larger groups improve their profitability, access to capital and strong

balance sheets, this will drive a further process of company acquisition and restructuring

Energy costs are emerging as a longer term driver of processing location

THE ENDwww.amiplastics.com

Applied Market Information Ltd.45-47 Stokes CroftBristol, BS1 3QP, UKTel: +44 (0)117 9249442Fax: +44 (0)117 9892128Email: [email protected]


Wyomissing, PA 19610, USATel: +1 (610) 478 0800

Fax: +1 (610) 478 0900Email: [email protected]

Attendees to this seminar are reminded that the contents are copyrighted and that the copyright belongs to Applied Market Information Ltd. and/or its subsidiaries. Unless otherwise agreed and confirmed by Applied Market Information Ltd. in writing, it is

forbidden to distribute the contents to any third parties or transmit it via any electronic medium forum.

Andrew Reynolds: [email protected]

Applied Market Information Ltd.AMI House, 45-47 Stokes Croft

Bristol BS1 3QP, UKTel: +44(117) 924 9442 Fax: +44(117) 989 2128

E: [email protected]


Wyomissing, PA 19610 USATel: +1(610) 478 0800 Fax: +1(610) 478 0900

E: [email protected]

CHANGING STRUCTURES IN THE NORTH AMERICAN PLASTICS INDUSTRY - FROM LOCAL TO GLOBAL INFLUENCES -...

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