The discussion in the article below will highlight how the ongoing fall in demand for plastics will affect the UK economy as well as how it will impact the fight against the COVID-19 pandemic.
Fall in Demand for Plastics
According to LyondellBasell – an industry leader in the plastics market – the demand for plastics will continue to tumble this year despite the great use of these materials in the food packaging industry as well as in manufacturing items such as face masks which are crucial in combating the coronavirus.
Projections given by the company, which is listed in US markets, show that demand for two of the most common plastics may fall by as much as 15% as consumers buy less vehicles and other household appliances because of the economic constraints that come with the virus.
A drop in demand of this magnitude will signal a rare turnaround for this commodity whose use has risen dramatically over the years as living standards of people across the world change, but which has also been fingered as the main cause of environmental degradation because of poor waste disposal and recycling mechanisms.
“The demand for plastic materials rarely falls even during times when the economy is in turmoil. In our records we have data on the global demand for polypropylene and polyethylene which shows that the only time the demand for plastics slowed was in 2008 when there was a global economic crisis,” said Bob Patel, the CEO of LyondellBasell to the Financial Times.
“However, even at this time, the demand for plastics fell by just between 3%-4% and not the current 15% drop we are seeing,” said the chief of the plastics giant which is valued at $25 billion.
The fall in demand for plastics will most likely lead to an oversupply of the commodity given the heavy investments that have been sunk into new petrochemical factories in the last 10 years.
Companies that deal in plastics in the US such as ExxonMobil, Royal Dutch Shell and Dow have promised over $200 billion to be invested in huge complexes to allow for shale extraction from cheap raw materials.
The massive investments have led to a surge in production of polyethylene used in making shopping bags, packing papers and pipes as well as polypropylene used in making shampoo bottles and car bumpers. According to data company ICIS, as of 2019, the production of polyethylene stood at 105 million tonnes while that of polypropylene stood at 75 million tonnes.
With more coffee chain shops rejecting disposable cups over fears that they may help spread diseases and some countries delaying enacting the ban on plastics, many pro-environment activists fear that the war on plastic waste may slow down drastically.
At the moment however, the Corona pandemic has led to a surge in the demand of certain plastic polymers especially those used in making protective gear.
However, according to many plastics manufacturers, the demand caused by the pandemic cannot cover the shortfall created by the lowered demand in the automotive, aerospace and construction industries.
According to Mr Patel, the petrochemical products industries has faced two dark times this year. The first is the start of the COVID-19 pandemic, while the second is the fall in prices which made manufacturers re-think the costs of items that are made from fossil fuels.
However, even before the double tragedies mentioned above, the demand and use of certain grades of plastic materials had already hit multi-year lows.
Looking to the Future
According to Mr Patel, this year will be one of the worst for the plastics industry, comparable only to the 2008-2009 period. However, he believes that the worst is over and moving forward, the industry will slowly recover, with companies like Marine & Industrial Plastics seeing a growth in demand.
He also opines that the low profit margins for plastic materials will lead to a lower supply across the globe.
According to Ciaran Healy – A data analyst at ICIS, polymer producers across the globe are likely to suffer significant losses in the second financial quarter.
He opines that the crisis may run well into 2021 and projects that polymer producers are likely to take longer than expected to recover from the financial rut they are currently in.
According to Mr. Patel, if another major outbreak of the virus or any other pandemic is avoided, then the losses to the plastics industry could be less severe. “When most countries re-open in the summer, then the demand for plastics may soar,” he said.