Industry Profiles: Plastics Products

Overview

The plastics industry produces an extraordinarily diverse range of finished goods and components made from plastics. While this industry category excludes the manufacture of plastic sheets, bottles, and pipes, it encompasses such diverse products as air mattresses, plastic kitchen and bath accessories, plastic windows and doors, plastic hardware, and apparel and accessories fabricated from plastics. These products combined account for more than half of all finished plastics goods sales in the United States.

By value, the most important specific categories within the industry are plastics used in transportation equipment (mainly automobiles), packaging, and construction. Together these three areas are worth more than $31 billion annually, or 47 percent of industry sales. The broad category of consumer and institutional products that includes kitchen goods, waste baskets, storage bins, and many other items, commands another 21 percent of industry sales.

Manufacturers of finished plastic goods and components often obtain their resins, which come as pellets or other crude shapes, from chemical and plastic resin producers, although some manufacture their own resins. Plastics product manufacturers then apply any number of processes to the raw materials in order to produce finished goods.

Many different kinds of resins may be used in plastics manufacturing depending on the structural requirements of the end product. The two main classes of plastics are thermosets and thermoplastics. Thermosets, which account for only 10 percent of the materials used in this industry's products, harden by chemical reaction and can't be melted and reshaped once they are created. Thermosets are used in applications like epoxies, an ingredient in flooring, coatings, and adhesives. Thermo-plastics account for the vast majority of industry products and include materials like acrylics, polyethylene, and polyvinyl chloride (PVC), which yield such products as construction materials, machine parts, packaging, and automotive parts.

There are at least 12 major processing techniques used to form plastic goods, but three of the most important are extrusion, blow molding, and injection molding. Others include calendering, film casting, rotational molding, laminating, and casting.

Extrusion entails melting and compressing plastic granules in a tube. A screw conveyor inside the tube then forces the plastic through a nozzle at the end of the tube. The physical characteristics of the plastics can be altered by applying heat or cold to the barrel, adjusting the screw pressure, or using different types and sizes of screws. Extrusion is used to make pipe, sheeting, film, and other various forms.

Blow molding takes the extrusion process one step further. In blow-molding, the extruded plastic is forced into a bottle-shaped mold, to which compressed air is applied to inflate the plastic and press it against the cold surface of the mold.

In a similar process, injection molding entails extruding plastic directly into a two-piece mold, where it hardens into a solid form. When the shape has cooled enough to hold its form, the mold can be opened and the shape removed. Depending on the product's specifications, the molds may be made of simple, low-cost soft alloys like aluminum or more expensive and durable materials for high-precision molding.

History of the Industry

Keratin, a natural plastic, was used in the United States to make lantern windows and other simple items as early as 1740. Gutta percha, or gum elastic, was first used during the mid-1850s to make billiard balls and ocean cable insulation. Manufacturers borrowed forming and processing techniques from Malayan natives (in present-day Malaysia), who first discovered use of natural plastics. Shellac plastics, developed by Samuel Speck, also emerged during the mid-nineteenth century and were used to create goods such as checkers, buttons, and insulators.

Following the invention of the first synthetic plastics in the late 1870s, plastics products sales began to accelerate. American Dr. Leo Baekland introduced the first moldable plastic, Bakelite, in 1909. This invention prompted a flurry of new molding techniques and resins, the materials from which plastics are made, in the following decades. Additional refinements and new uses for plastics during the 1960s and 1970s made them commonplace in U.S. manufacturing. In many cases they were cheaper and more versatile than the materials they replaced.

Significant Events Affecting the Industry

Environmental concerns about plastics became an increasingly important issue during the 1990s as consumer demand and government regulations called for controls on various forms of pollution plastics can cause. In addition to taking up space in landfills, some plastics also leech harmful chemicals into the ground, and the manufacturing process can release harmful substances into the environment as well. As a result, some manufacturers have sought ways to lessen the environmental impact of their products. They have made plastics easier to recycle and, in some cases, have changed materials or processes used in order to reduce the threat of pollution. The broader U.S. plastics industry spent an estimated $1 billion between 1990 and 1998 to improve the recycling rates of plastics. In the early 2000s, the industry continued to work toward this goal. At that time, approximately 2000 firms were involved in the recycling of plastics at the consumer and industrial levels.

Key Competitors

The plastics industry is highly fragmented, and many of its participants serve as component contractors to other manufacturers rather than producing finished products for sale to end users. In the late 1990s, according to U.S. Census Bureau figures, there were more than 7,500 separate plastics facilities in the United States, and the 50 largest firms accounted for about 23 percent of shipment values. Most industry firms specialize in just a few lines of plastics products.

Tupperware The Tupperware Corporation, until 1996 part of Premark International, is a major international manufacturer and direct marketer of household plastic goods. Traditionally, the firm's storage bins, kitchenware, and containers have been sold primarily via "Tupperware parties," in which the salesperson performs in-home demonstration and marketing of the product line. By the early 2000s, showcases in shopping malls, the Internet, and infomercials were among other channels Tupperware was using to sell its products. In 2000 the company acquired BeautiControl Inc., a direct seller of beauty products. The company's flag-ship brand is noted for its lifetime product guarantee. In 2001 Tupperware earned about 20 percent of its $1.1 billion in sales from the United States. The remainder came from all parts of the globe, especially Europe and Asia. As in the late 1990s, the company struggled in certain Asian markets like Korea due to volatile economic conditions.

Newell Rubbermaid Inc. While some of its household products are direct competitors to those of Tupperware, Newell Rubbermaid Inc. has a much more diverse product line, which as its name suggests, includes products made of rubber and other materials that aren't considered part of the plastic industry. Also unlike Tupperware, Rubbermaid distributes its wares through conventional retail channels like supermarkets and general merchandise stores. In 1999, Rubbermaid was purchased by Newell Inc. and the organization was re-named Newell Rubbermaid Inc. In addition to Rubbermaid brand products, the firm also is home to well-known brands like Sharpie markers; Paper Mate pens; Little Tikes and Graco/Century toys; and Levolor blinds. The company's Wooster, Ohio-based Rubbermaid Home Products division accounted for about 26 percent of its $6.9 billion 2001 revenues. Although domestic sales represented approximately three-quarters of the company's revenues in the late 1990s and early 2000s, international sales were growing at a faster rate.

Industry Projections

Because plastics products are used in so many different applications, the future performance of the indus-try's various segments hinges on many economic variables. In the transportation sector, the trend toward lighter-weight materials in vehicles, along with stable production levels in the late 1990s and early 2000s, has meant healthy demand for plastic components. Similarly, the relatively strong U.S. construction market of the mid-1990s and early 2000s helped generate sales in that segment. In areas like consumer goods, sales in some product categories is relatively flat—growing at the rate of inflation at best—although broad-based economic growth tends to boost sales as consumers have greater disposable income to spend.

Global Presence

Most of the U.S. industry's largest firms have some international presence, although as the examples of Rubbermaid and Tupperware illustrate, the amount of company sales outside the United States may vary greatly. Since the United States is considered a mature market for many of the industry's products, international diversification has been important to some plastics products manufacturers.

The globalization of the plastics products industry is coincided by the emergence of significant resins production outside the United States. Producers in countries such as China, Saudi Arabia, and Malaysia are rapidly building up their capacities to produce plastic resins. While this trend doesn't necessarily affect finished product manufacturers, increasingly a rift is forming between the pricing of well-established, low-tech plastics and highly engineered plastics. Low-tech plastics are being produced increasingly by developing countries at significant cost savings compared to U.S. producers, driving prices downward in a commodity-like environment. Meanwhile, since they can't compete as well on low-cost goods, U.S. firms are concentrating more on high-tech plastics that can demand a higher price and thus greater profits. The key effect of these trends on U.S. plastic product makers is that they face volatile pricing for their raw materials and, ultimately, some may begin to purchase increasing shares of their raw materials from foreign suppliers. The value of industry imports and exports were both growing at a healthy pace in the late 1990s and early 2000s, averaging 11 percent and 13 percent, respectively, between 1997 and 2000.

Employment in the Industry

The plastics industry is a major employer in the United States, with a labor force of approximately 555,600, according to U.S. Census Bureau statistics. These workers have a net payroll of about $16 billion annually. Almost 80 percent of the industry's workforce is made up of production workers, as opposed to management and administrative personnel. This percentage suggests a leaner management and administrative structure in the plastics industry compared to the average manufacturing industry. Production workers earn hourly wages that are lower than the average for other kinds of manufacturing work.

Sources for Further Study

1997 economic census. washington, dc: u.s. department of commerce, economics and statistics administration, u.s. census bureau, may 2001.

annual survey of manufactures. washington, dc: u.s. department of commerce, economics and statistics administration, u.s. census bureau, february 2002.

"plastics and rubber." u.s. industry and trade outlook. new york: mcgraw-hill and u.s. department of commerce, 1998.

"recycling facts from the american plastics council." plastics resource. american plastics council, 2002. available at http://www.plasticsresource.com.

"recycling rate study." plastics resource. american plastics council, 1998. available at http://www.plastics.org.