Plastics: Economic Trends in the Plastics and Related Industries

January 13, 2020 Jim Damicis

Editor's Note: This article was originally published in Expansion Solutions in the January/February 2020 edition. 

Stop. Look around you. Somewhere very near you right now is plastic. It could be a piece in your computer or phone, on your desk or chair, or within your flooring.  Simply said, plastic is part of the many products we see and use every day and therefore critical to our economy.

In this article we examine plastics and plastic-related industries. First, we provide an overview of key economic performance data and trends for the industries and examine how plastics connects with and impact other industries through supply chains. We then present key factors that impact growth and investment in plastics.  Finally using a case example in Northwest Pennsylvania, we provide guidance to business and economic developers on how they can support and attract investment, businesses, and employment in their region.

Plastic industries include the manufacturing of plastic and resin materials as well of the manufacturing of products made from plastic and resin materials. They include the following industry sectors:

In 2018, plastics industries employed 653,383 people, representing 0.4 percent of all jobs in the U.S. The 2018 level of jobs in plastics was an increase of two percent from 2008. During this same period, all jobs in the U.S. grew eight percent. Jobs in plastics industries are projected to grow a total of one percent in 2028, while overall jobs in the U.S are projected to grow nine percent (EMSI). Slower growth in plastics is related to several factors including foreign competition with less exporting and more importing occurring, a projected slowdown in construction, and automation reducing the need for workers.

Though plastics industries combined have not grown and are not projected to grow as much as the employment overall in the U.S, they are significant to the U.S economy. In 2019, the plastics industries generated $307 billion in sales and $65 billion in exports with the largest amount of exports being to Canada, Mexico, U.K., Belgium, and China (IBISWorld).

Additionally, they provide an important component for the manufacturing of goods in multiple sectors particularly packaging for food products, motor vehicles and aerospace, construction, electronics, and medical devices. In 2018, leading the pack in terms of purchases of plastics by manufacturing subsectors are vehicle related manufacturing, soft drinks, and medical and surgical instrument, together accounting for more than $18 billion in plastic purchases. Construction industries are also major plastics purchasing sectors.

Driven by the need for advanced skills and experience needed for the plastics workforce, average earnings per job are also higher in plastics industries than for jobs overall in the U.S., $70,512 for plastics compared to $66,686 for all jobs in 2018.

While plastics industries exist in every state and region in the U.S., they are most highly concentrated in the Midwest, Texas, and California (EMSI).

Plastic Industry Jobs by State, 2018

Source: EMSI

There are several factors that strongly impact the performance of the plastics industry as well as investment location decisions.  These include:

  • Outlook and Strength of Downstream Markets: Notably automotive and vehicle industries, consumer goods, medical goods, and construction. Demand for plastics rises and falls with demand in these markets.  
  • Global Competition: There is strong global competition for plastics manufacturing, and this has dampened recent growth. Since 2001, the United States has imported more plastic products than it has exported. Import competition has gained momentum due to looser regulations and lower labor costs in these regions relative to domestic manufacturers (IBISWorld).  Imports of plastics to the U.S. is dominated by China account for more than half of all imports followed by Canada and Mexico.
  • Transportation and Logistics: Proximity to downstream manufacturers and proximity to feedstocks such as ethane crackers are important. Though the former (downstream markets) is generally more critical. Access to feedstock is important; however manufacturers can reasonably be located within 500-700 miles of feedstock sources. In both cases, access to, reliability of, and cost of truck and rail are critical components for market support.
  • Technology and Innovation: In a mature market like plastics technology and innovation for efficiently and productivity are important. Research and development in the industry has been focused on expanding the use of recycled materials, improving product performance (i.e. increased strength, flexibility and durability) and expanding product applications. Machine technology used to produce plastic products has improved in recent years creating more automated and efficient processes (IBISWorld).
  • Workforce: Higher than average skills requires, demanding higher than average wages, and an aging manufacturing workforce results in continual demand for training and labor recruitment.
  • Policy Environment: The industry is regulated for clean air emissions as well as subject to recent policies that include requirements to integrate recycled plastics into production. Additionally, policy initiatives banning plastics at the end use such as straws and cups in restaurants are on the increase.
  • Emerging Trends and Disruptions: Policy, market, and consumer preferences are creating threats to plastics markets through production of alternative products based on bio-based materials. Though still a small portion of plastics markets, “the global bioplastics market was valued at $21,126.31 million in 2017, and is projected to reach $68,577.25 million by 2024, registering a CAGR of 18.8 percent from 2018 to 2024 (Bioplastics News,…).

Takeaways for Economic and Business Developers – The Case of Northwest Pennsylvania

The Northwest Pennsylvania region is comprised of eight counties in the extreme northwest corner of the state.  The region is roughly equidistant from the major metro areas of Pittsburgh, Cleveland, and Buffalo. In light of the Northwest Pennsylvania’s challenges in recent decades to retain and attract industry and residents amid the evolving global economic landscape, the region identified a critical opportunity to pivot and reposition itself to reap the benefits of the flourishing natural gas and petrochemicals industry in the greater Appalachia region. This included opportunities specifically related to the Shell Pennsylvania ethane cracker and polyethylene production complex in Beaver County, Pennsylvania, expected to open in the early 2020s to serve downstream plastics manufacturers.

The region retained Camoin 310 and its engineering partner, CEC PLANNING, to conduct a supply chain opportunity analysis to determine targeted opportunities for attraction and to assess and prioritize areas for site development. For this latter task, a GIS model was developed to identify and prioritize geographic “hot spots” based on critical factors including land availability and quality, infrastructure assets needed, incentive zones, and land use regulation. The analysis and GIS modeling revealed several findings about market potential for plastics.

As a result of falling production costs and the abundance of natural gas in the Marcellus Shale and Utica Shale, the states of Pennsylvania, Ohio and West Virginia have seen a boom in economic activity related to petrochemical production. Further driving this boom is the fact that up to 40 percent of natural gas produced in the region is rich in natural gas liquid, a valuable commodity that can be refined into ethane, propane, and other raw materials, known as feedstocks, which are critical to downstream plastics manufacturing.

The relatively low cost of producing these feedstocks in the Appalachia region compared to the Gulf Coast, which has until recently been the sole hub of petrochemical production within the U.S., creates a key advantage for producers and has led to soaring investment in the region.

By 2030, the region is expected to account for over 40 percent of U.S. natural gas production, compared to 27 percent in 2017, and just two percent in 2008.

With its strong manufacturing history, existing concentration of plastics manufacturers, training programs in plastics, proximity to production facilities across the petrochemical supply chain, and transportation access via road, rail, and water, Northwest Pennsylvania has the foundation of critical assets needed to capture the growing economic activity associated with petrochemicals including plastics.  

Based on the analysis the Northwest Commission and its partners are engaging to prepare the region for attracting investment from petrochemicals related industries including plastics and grow its employment and tax base. Through the process they learned several keys to success for business and investment development related to plastics.

Keys to Success – Multistate Collaboration

Shale gas offer opportunities across multiple states and Pennsylvania joined with Ohio and West Virginia in the Tri-state Shale Gas Coalition to market and support the petrochemical and related downstream industries including plastics. This extends the resources and reach of economic development beyond what one region or state could achieve.

Workforce Commitment

The region already offers education and workforce training consistent with industry best practices. Training programs include the American Injection Molding Institute in Erie and the Plastics Engineering Technology programs at Penn State Behrend. It also has a system of organizations with missions related to building plastics-related workforce capacity in the region. These include Clarion University – training to support petrochemicals industry, Keystone Community Education Council – educational training program development organization, Northwest Industrial Resource Center – services for small and medium-sized manufacturers, NWPA JobConnect – workforce development planning and implementation for the region, NWPA Oil and Gas Hub – partnership promoting petrochemical-related economic development.

Site Assessment and Readiness

Through its recent work, the region now has a data driven, site assessment GIS tool. This allows them to identify those geographic areas within Northwest Pennsylvania possessing the highest degree of physical potential to accommodate a range of petrochemical supply chain facilities including plastics manufacturers, wholesalers and processors. These lessons can help other regions understand and prepare for opportunities in plastics and related industries.