Despite an ongoing pandemic, supply chain woes, and worker, resin and material shortages, the plastics industry experienced robust growth in 2021. Whether that growth will continue or ebb in 2022 remains to be seen as new and evolving challenges present themselves.
In the latest edition of M. Holland’s Plastics Reflections Web Series, our host and moderator, Dwight Morgan, Executive Vice President of Corporate Development at M. Holland, spoke with an expert group of panelists, including Andrew Reynolds, Director at Business Publishing International (BPI); Andy VanPutte, Senior Director at Jabil; Nate Buza, Director of Polyolefins Marketing at LyondellBasell; and Jen Riley-Brady, Vice President of International at M. Holland. The panel covered the amazing resilience of the plastics industry despite labor shortages, supply chain issues and raw material supply disruptions while offering advice and insights on how the industry can continue its growth trajectory.
While the industry continues to face challenges that originated with the pandemic, plastics remain a significant part of the North American economy. In an introductory overview, Andrew Reynolds attributed the current landscape of the plastics industry to a combination of science, emotion and unpredictable real-world events. “There is a degree of uncertainty about when there might be light at the end of the tunnel,” he explained. “But in fact, most of the picture recently has been good, broadly speaking.”
Andrew noted the remarkable developments and unexpected trends in the industry that contributed to its 25% to30% growth during 2021. Almost all North American polymer markets saw significant growth last year. Despite the increased demand for resin, the majority of end-use segments remained buoyant, and construction advanced rapidly as people staying home improved their dwellings. Packaging, too, benefited from strong consumer support, while medical and pharmaceutical markets saw the positive effects of increased spending and reshoring of operations related to COVID-19.
These developments have proven the industry to be resilient in the face of challenges like the limited availability of raw materials, staffing and labor shortages, and extreme stress on supply chain logistics. As we move into the second quarter of 2022, Andrew expects the industry to continue to grow. Markets will be further boosted by new industry investment and innovation, increased government expenditure on infrastructure, and accelerated reshoring in response to global supply chain concerns. “All that gives a vibrancy and positivity to our industry,” he said. “The longer-term outlook for the North American plastics industry is very good.”
Despite the industry’s position of strength, the lack of supply and availability of raw materials continues to be a barrier to growth. Shortages brought about by the perfect storm of a global pandemic, the war in Europe and the rippling impact of both on supply chains will likely be a problem throughout 2022.
While there are still pockets of trouble, Jabil’s Andy VanPutte says availability has generally improved. Compounds with additives and certain engineering polymers continue to be a little short along with resins, glass and flame retardants, but industries have generally rebuilt and are exporting again. Andy noted that solving supply issues in the short term was just the first step. Producers are now rethinking the effectiveness of global and single-source supply chains due to the recent upheaval.
M. Holland’s Jen Riley-Brady explained how the industry had to face a steep learning curve to manage the way globalization has negatively affected the supply chain. “I don’t think everyone understood how global this economy truly is,” she noted. The asymmetric nature of the pandemic as it moved through different regions of the world has revealed the complexities that can result from an unreliable and limited supply.
“We’ve learned how fragile global supply chains are,” LyondellBasell’s Nate Buza agreed. “For many years they operated so well.” Now companies are backtracking to put supply chain resilience above efficiency and cost on the list of priorities. Many producers are focusing instead on avoiding the newly discovered risks of a global supply chain.
Andy says there is a soft science to de-risking the supply chain. “If you invest time and energy in [de-risking the supply chain], it’s possible to greatly reduce risk,” he said. “We can never eliminate [risk], but there’s a lot of overlooked links in the chain.” Andy stressed the need to address those broken links while the situation is improving or risk becoming sitting ducks in the face of the next calamity. “We need to keep the focus on longer-term health of the supply chain,” he added.
While producers reconsider everything from product components to suppliers in order to restabilize the supply chain, the general upheaval that started during the pandemic has taught businesses many hard lessons.
Cost pressure, supply and demand imbalances, production outages, and labor shortages have combined to expose weaknesses in the way many companies do business. Andy explained how dealing with the onslaught of challenges has given him a new attitude. “As buyers and sellers, we’ve had to change our behavior to cope with this new normal,” he said. “Realizing that everybody has challenges, that your partners would sell to you if they could. We’ve learned a lot and many things are going to be different going forward.”
Andrew expects one of those differences to be more regionalization and cooperation between regions. The war in Europe has highlighted the downside of being so dependent on one region or another. With the conflict came the realization that Ukraine is one of the world’s major wheat producers, that it has one of the largest fleets in the air transportation sector that has been grounded. Russia, too, possesses materials that are necessary to production like gas, oil and minerals. “To identify and find replacements for that dependency is going to be a long-term project,” Andrew said. More regionalized supply chains and alternative materials will help keep projects moving forward in the wake of global disruptions.
Jen also encourages cooperation, but on the business level. “Talking to your partners — whether it’s a direct producer, a distributor, a channel partner — the more information we can share with one another can give us an opportunity to make smarter decisions for our businesses in the short term,” she said.
Before collaborative conversations can take place though, producers must have the right staff in place. Labor shortages have crippled many industries in the past year. With many skilled laborers retiring or finding new positions, Nate stressed the importance of retaining staff or facilitating knowledge transfer whenever possible. “You cannot replace 30 or 40 years of experience,” he said. “It’s very difficult to do unless you hire somebody else with 30 or 40 years of experience to take their place. Then you simply have the same problem again.” It’s important to give employees the opportunity to balance work with life.
While the last two years have brought a multitude of unexpected challenges to the plastics industry, we have shown the resilience required to innovate, evolve and keep our industry thriving. Through global logistics challenges and supply availability issues, we have learned cooperation. Through labor shortages and business struggles, we have learned compassion. These are lessons that will only improve the future of the plastics industry as we face the unknown challenges of the years to come.