Plastics industry expects drop in raw materials costs with shale production boom

As rapid production of domestic oil and natural gas increases the availability of feedstocks used in the manufacturing sector, this may change how companies strategize their procurement operations, according to National Geographic. In the International Energy Agency's recent World Energy Outlook, the organization expects key energy production trends to transform the energy landscape of the United States. In one of its predictions, the IEA said oil sales will stem from increased industrial and consumer demand for plastics, which are used to make a wide variety of goods such as smartphones.

A growing number of plastic industry leaders anticipate they will see revenue growth thanks to the recent boom in shale oil and gas production using hydraulic fracturing and horizontal drilling technologies, Plastics News reported.

"A few years ago, we said we expected industry growth to be in the Middle East or in emerging geographies," said Greg Jozwiak, commercial and business vice president at Dow Chemical. "But starting in 2008, things changed significantly. Now it's about how plastics can seize these opportunities."

Shale production means drop in plastic prices

Resin manufacturers are taking advantage of increased oil and gas output to boost their production capacity for ethane and ethylene, a crucial component for polyethylene and PVC plastics. He said oil and gas production will help the plastics industry grow through an increase in materials, processing and finished goods exports. Jozwiak also said plastics will see more hiring activity, according to Plastics News.

In addition to the 485,000 additional petrochemical jobs shale production is expected to generate, the plastics industry will benefit directly with 55,000 more resin production jobs and 10,000 new plastics manufacturing positions.

Berry Plastics, manufacturer of plastic packaging and other products, also predicts growth in the industry. Scott Farmer, executive vice president of global purchasing at Berry, described the shale boom as the most exciting occurrence the plastic industry has experienced. With the rise in oil and gas production causing a drop in PE prices, it means good news for plastics manufacturers that aim to use this material for their products. Berry predicts a 10 percent decline in PE prices could result in 5,500 more manufacturing jobs and boost PE demand by 800 million pounds per year, according to Plastics News.

"The people who drive the volume of plastic pellets are consumers," Farmer said. "We have to get the [resin] cost to the point where [the shale advantage] can be passed on to converters and on to their customers."

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