This article will discuss how the drop in demand for plastic will be affecting our country and in our battle against Covid-19
Current Drop in Demand for Plastic
According to LyondellBasell Industries, the demand for plastic will plummet this year despite higher use in single-use items like face masks and food packaging to help to prevent coronavirus from spreading.
The US-listed chemicals group is predicting a 15 per cent drop in consumption of two of the more common types of this material, with people purchasing fewer household appliances and automobiles due to the pandemic.
This high of a drop would be a sign of a rare retreat from a material that has been proliferating with increasing living standards all over the world but is also associated with environmental blight due to discarded throwaway items.
Bob Patel, chief executive of LyondellBasell, says that usually, plastics do not decline, even during recessionary periods. There is data available for the past 25 years of the global demand for polypropylene and polyethylene. The only year where there was a decline in demand was in 2008, which was during the time of the global financial crisis.
Even then, it was just 3 or 4 per cent, and not 15 per cent, he adds.
The risk of an oversupply of plastics is heightened by the downturn, following the huge investment into new types of petrochemical complexes over the last decade.
3.5% to 4% Long-term Trend-line Global Growth in Plastics
In the United States, over $200 billion has been promised by such companies as ExxonMobile, Royal Dutch Shell, and Dow for massive facilities that are fed with inexpensive raw materials derived by shale extraction.
That has resulted in a surge in polyethylene, which is contained in pipes, shopping bags, and packaging film. In 2019, 105m tonnes were produced, according to the data services provider ICIS. There were 75m tonnes of polypropylene produced, used in shampoo bottles, car bumpers, and crisp packets.
With coffee chains going back to using disposable cups for hygiene purposes and bans on single-use items like stirrers and straws being delayed in certain countries due to coronavirus disruptions, environmental advocates are fearing a setback in their war against plastic waste.
There have been pockets of demand created for polymers due to Covid 19. For example, it is used in some personal protective equipment items like hospital gowns and gloves.
For numerous producers, that is overshadowed by declines in such areas as the aerospace, construction, and automotive sectors.
Bob Patel says two black swan events have been experienced by the chemicals industry – the coronavirus pandemic as well as the oil price crash that occurred earlier in the year that reduced the amount that chemical supplies are able to charge for a range of substances associated with the fossil fuel.
Prior to this double hit, values for certain plastics benchmark grades were languishing already at its multiyear lows.
Mr Patel says this is going to be a very hard year, and when it comes to earnings it will be similar to 2008-2009. However, the worst is behind us, and it is all about the recovery’s pace now.
He adds, ‘I believe this will be a time of challenging margins and new global supply will be reduced by profitability.’
Ciaran Healy, an ICIS analyst, says that most likely commodity polymer producers will experience a significant negative effect, with some potentially registering losses during the second quarter.
He adds that he expects the effects of this crisis to continued to linger well into the year 2021. It will take much longer to return to high profitability levels.
Mr Patel says this year’s hit to plastic may end up being less severe if an additional major viral outbreak can be avoided. He added that as reopening takes place with summer on the way, it is possible that a surge in industrial plastic demand could occur.