15:05 PM | May 16, 2019 | Mark Thomas
The worldwide plastics market is facing “historic challenges” after a record period of growth, with headwinds developing that could substantially impact the market's future, according to Nick Vafiadis, IHS Markit vice president/plastics. “While plastics markets have always been dynamic in nature, we believe the market is currently facing historic challenges as it responds to geo-political developments, shifting supply/demand conditions, and evolving environmental priorities,” he says.
The market is in transition mode, after “a stellar two years relative to demand growth,” Vafiadis says. Legitimate questions have been raised as to whether that momentum and profitability trend can be sustained, with some “significant headwinds developing,” he adds.
Polyethylene (PE) demand has always been closely tied to GDP performance and the plastics industry is currently caught in a worldwide economic slowdown, according to Vafiadis. “We’re beginning to see sustainability-related issues trim demand growth. China is contending with internal and external issues that are affecting demand and profitability, which can have a global ripple effect,” he says. A reduction in China’s PE demand growth is significant because the country accounts for about half the worldwide growth rate, Vafiadis says.
Key areas of focus for IHS Markit include “closely monitoring developments associated with the ongoing trade dispute between the US and China,” says Vafiadis. “The trade war is affecting demand for PE in China and around the world. We believe the tariffs, and the loss of access to the China market for US PE producers, has had—and could continue to have—a significant impact on global PE prices and margins,” he says.
He also describes the sustainability issue as “a rapidly developing story that could have major implications on growth and profitability for plastics-industry participants throughout the value chain for many years to come.”
A new IHS Markit study on the potential impact of sustainability on key commodity resins concludes that sustainability-related market dynamics “could conceivably cut historical growth rates by as much as 50% for polyolefins,” Vafiadis says. Sustainability also represents opportunities for those willing to invest in technology and circular infrastructure, with the industry’s response to the challenge to “affect its social license to operate,” he adds.
IHS Markit experts and industry leaders representing plastics producers, processors, and brand owners will provide the latest perspective on sustainability trends and key industry issues at the Global Plastics Summit, in Houston, Texas, on 4-6 June. View Nick Vafiadis’s video here.
PepsiCo’s user perspective
The linked issues of sustainability and growing worldwide concern over single-use plastics are two of the plastics industry’s greatest challenges.
PepsiCo’s sustainability focus “is centered on striving to build a more sustainable food system. The packaging that we use for our products is a key component of this system and is therefore key to our efforts,” according to Burgess Davis, senior director/corporate strategy at PepsiCo. “We share concern over the growing threat that plastic packaging waste poses to our communities and marine environments. Consumer-goods companies like PepsiCo are significant users of certain types of plastics, but are also well placed to help rethink packaging, with the aim of maintaining the benefits of plastic packaging without the unsustainable costs,” she says.
The intention of PepsiCo’s sustainable plastics vision is to use innovation, and the scale and reach of its business, to make a positive contribution to transforming the world’s relationship with plastic packaging, she adds. “We aim to achieve this vision by reducing, recycling, reusing, and reinventing our plastic packaging, and leading change through partnerships,” Davis says.
Companies such as PepsiCo embracing the circular-economy concept is also a key driver. “Higher plastic packaging recycling rates mean that less material is littered or ends up as landfill, and a greater supply of recycled plastic material is made available. This can then be used to make new plastic packaging. By displacing virgin materials with recycled materials, we can move towards a circular economy for plastics, reduce our dependency on non-renewable fossil resources, and boost the carbon and resource efficiency of our packaging,” says Davis.
Sustainability goals PepsiCo has set itself include:
• Designing 100% of its packaging to be recyclable, compostable, or biodegradable by 2025
• Using 25% recycled materials in its plastic packaging also by 2025
• Reducing packaging’s carbon impact
• Working to increase recycling rates, in partnership with the PepsiCo Foundation
Davis will be participating in a keynote panel on sustainability at the Global Plastics Summit. Learn more? Click here to register.