We will discuss the fall in demand for plastic in this article and how that will impact our country as we continue to battle Covid-19.
Drop in Consumption of Plastic
According to LyondellBasell Industries, the demand for plastic is going to fall this year even though food packaging, masks, and one-use items are being used more to prevent further spread of the coronavirus.
A 15 percent drop in the consumption of two popular material types was predicted by the US-listed chemical group since in general people are purchasing fewer automobiles and household appliances as a direct result of the current pandemic.
This significant downturn would indeed be a massive step down for a substance that has grown constantly in demand as living standards around the world rise; however, a substance that also plays a considerable role in environmental issues linked to throwaway products which are discarded.
Mr Patel, the chief executive of LyondellBasell Industries noted in communication with the Financial Times that even recessionary periods don’t tend to see a drop in the demand for plastics, He noted that data shows a worldwide demand for polythene and polypropylene with the only decline being seen in 2008 when there was a global financial crisis.
He noted that even during 2008, the drop was only by 3-4 percent, not the predicted 15 percent.
This decline comes with a risk of over-supply of plastics as a significant investment has gone into new petrochemical complexes in recent years.
3.5 – 4% Increase in Plastics Worldwide as a Long-Term Trend
A figure in excess of $200bn has been promised by Royal Dutch Shell, Dow, Exxon Mobil and other such companies for massive facilities in the US that make use of cheap raw materials for shale extraction.
The result of this is an increase in polythene, such as shopping bags, packaging, pipes, and so forth, in fact, in 2019 105m tonnes were produced according to ICIS. The figure was 75 tonne for polypropylene, which is used for things such as crisp packets and bottles for shampoo.
Since coffee chains currently need to use disposable cups to meet hygiene standards and one-use items like straws and stirrers are banned, there is a fear amongst environmental campaigners that we will see a setback in our continued fight against plastic waste.
The current pandemic has created areas of demand for polymers, for example, gowns for use at hospitals, gloves and other pieces of personal protective equipment.
However, for a lot of producers, this stands small next to areas of decrease such as the sectors for automotives, aerospace and construction.
According to Mr Patel, within the industry there have been “two black swan events” – the pandemic and the crash in oil prices which happened in the first half of 2020 and which brought down the acceptable price that suppliers could secure for substances which were linked to the fossil fuel.
Even before this two-fold event, the value that some benchmark grades of plastic were making was at a low for several years running.
Mr Patel has noted that when it comes to earnings this year will be a challenging one and similar to what was experienced in 2008-09; however, he notes that the worst has now passed and it is all about pacing the recovery.
According to Mr Patel, new supply worldwide will be reduced during this current period of difficult margins and profitability.
An analyst at ICIS notes that the impact on commodity polymer and producers is likely to be significantly negative and that some are likely to have losses within the second quarter.
He also notes that he sees this crisis continuing well into 2021 and that getting back to high levels of profitability will take even longer.
Mr Patel added that if a further major outbreak of the virus is avoided then the impact on the world of plastic could be less severe and that as the summer season starts the demand for plastics could increase significantly, with companies like Marine & Industrial Plastics seeing an upturn.