US Plastic Resins Industry In 2011

U.S. PLASTIC RESINS INDUSTRY GROWS STEADILY IN 2011
In 2011, the U.S. plastic resins industry held ground in its recovery from the global economic recession. According to the American Chemistry Council (ACC) Plastics Industry Producers’ Statistics (PIPS) Group, resin production grew 0.4 percent to 103.2 billion pounds in 2011, after a low of 98.7 billion pounds produced during hard-hit 2009. Total sales rose 1.5 percent in 2011, to 104.8 billion pounds. Economic Summary for 2011 The global economy remained in fragile condition through 2011. Though much of the world had emerged from the Great Recession, the recovery failed to gain momentum and the recession in the Eurozone and stifled activity elsewhere presented major challenges. Growth in the global economy expanded only 2.7 percent in 2011 following a 3.9 percent rebound in 2010. World trade also grew but at a much slower pace, rising 6.5 percent in 2011, following 12.4 percent growth in 2010. In North America, the recovery persisted but growth was anemic. During 2011, US GDP grew 1.7 percent down from the 2.8 percent pace in 2010. Boosts from inventory restocking played out and underlying demand remained weak in the US. The housing sector (having triggered the financial crisis and subsequently the worst economic downturn since the Great Depression) appeared to have finally hit bottom in 2011. Some progress was made to work down excessive inventories of homes, which improved the outlook for the industry and cleared the field for some momentum in new construction. Nonetheless, even while housing prices lingered at record lows, challenges remained as high unemployment persisted and credit conditions were tight. In Canada, GDP grew 2.5 percent in 2011 following a 3.1 percent increase in 2010. Together, North American (Canada and US) GDP cooled to a 2.4 percent pace in 2011. Trends in Customer Industries Domestic demand for plastics held steady through 2011 but failed to gain momentum. This weak demand was somewhat offset by continued strength in trade, but growth in imports surpassed growth in exports as foreign demand was inhibited by the recession in the Eurozone and a soft landing in China. The recovery in end-use markets plodded along and for the most part 2011 was characterized by moderate improvements. Analysis of thermoplastics industry activity indicates that customers were drawing down their inventories through much of 2011. Downstream customers of thermoplastics followed a pattern of several months of drawing down and then several months restocking their inventories until the last four months of 2011 which were
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2011 Year In Review - Resins March 2012 Page 2

characterized entirely by inventory draw downs. The year as a whole was one of downstream inventories being drawn down as thermoplastics consumption (domestic sales plus imports) was less than underlying demand. Although the demand for plastics is ultimately tied to overall economic growth, plastic resins are used in a variety of end-use markets which featured different dynamics at play: • Packaging is the largest market for plastic resins and historically, packaging resin use has been correlated with ‘real’ retail sales, i.e., retail sales adjusted for inflation. According to data from the Bureau of the Census and Bureau of Labor Statistics, real retail sales continued to strengthen and rose 4.7 percent in 2011 following a 5.1 percent increase in 2010. This largely reflected a slowly recovering job market as well as some restoration of confidence among households and businesses and pent up demand. According to Statistics Canada, the Canadian retail sector increased 3.6 percent in 2011 after a 5.5 percent gain in 2010. As a result, output of the North American retail sector experienced a 4.6 percent gain in 2011. Both imports and exports of plastic products and other finished goods incorporating plastics resins

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