One of the more compelling keynote presentations from the Global Plastics Summit, Nov. 4-6 in Chicago, was delivered by Greg Jozwiak, North America commercial v.p. for Dow Packaging and Specialty Plastics, and Scott Farmer, executive vp for global purchasing for processing giant Berry Plastics. In separate presentations, they gave their viewpoints on the growth opportunities shale gas will ultimately offer to packaging suppliers.
Both were extremely optimistic. “Shale gas offers plentiful and competitive energy for America,” Jozwiak said in his talk, titled Shale Gas: Fueling the Resurgence of the American Plastics Industry. “It justifies new investments and provides opportunity for growth across the plastics industry via core market growth, reshoring, traditional material conversion to plastics, potential to export converted goods, and selective resin export.”
Jozwiak went on to point out that in the $173 billion packaging market, plastics overall has a 35% market share. Polyethylene in particular has a 10% share in packaging, he said. If PE’s share would increase by just a single percentage point, Jozwiak said, the consequences would be extraordinary. “An increase of 1% translates to 200,000 metric tons of PE consumption,” he said, citing the Smithers Pira Packaging in North America to 2017 study. “That amount alone would require about 28 (film) processing lines.”
But the Dow packaging executive is more bullish than that. “Core growth (due to shale gas) could boost growth by 2.5%, reshoring 1%, substitution (of non-plastics packaging) by 0.75% and export of finished goods another 0.25%,” he explained. “That’s 4.5% of growth, representing 770,000 metric tons/yr.” Jozwiak added that Dow customers outside of the U.S. are looking at establishing a manufacturing footprint in America to tap into this potential. Other sources say the reshoring trend has already begun, pointing to new installations this year of high-density lines to make T-shirt grocery sacks, can liners and produce film.
To Berry’s Farmer, however, much of shale gas’ potential to U.S. processors is tied to how much—or if—resin prices come down. “Resin generally comprises the largest portion of the overall cost to plastic packaging, as much as 70% or more,” he said. “Producers are enjoying lower costs due to investments made in the shale boom. Converters are paying on average higher prices than previous years. Lower costs will allow plastic packaging to grow into spaces currently occupied by other substrates. Lower costs will increase domestic manufacturing bringing products and jobs back to the US. Lower costs will create the potential to drive innovation and growth.”
Left unsaid in this discussion was equipment. One industry source estimates that more than 70% of the 20 billion lb/yr of blown film is currently processed on equipment that’s 10 years old or older. It can be argued that if resin costs from shale gas drop even a penny a pound—a huge amount for any processor, particularly those who deal in high volumes—film producers will still be leaving money and opportunities on the table if they continue to run it through equipment that doesn’t offer the lastest capabilities in throughput, gauge control and quality.