In this week's ‘Sector Friday' blog we're looking at the industry that produces the material that shaped the modern age: plastic.
Strictly speaking this is the “rubber and plastics” sector and includes the following:
Some key stats:
- 4.5% total manufacturing
- Output grew 1.6% in 2012
- 145,800 people work in the sector
- Exports worth £6.5bn
Key inputs include petrochemicals (approx 39% by value), making rubber and plastics vulnerable to fluctuations in oil price.Electricity and gas account for about 5% of inputs by value.
Key industrial customers
The industries the sector sells into are highly diverse, but the main customers are construction and automotive.
Economic outlook for the sector
Rubber and plastics output fell in the second half of 2012 and in the first quarter of 2013, meaning output is likely to fall overall this year. However, the sector is likely to benefit from strong demand in the automotive sector and the likely growth in construction as a result of the government's Help to Buy scheme. As a result we expect growth of 3% in 2014.
- Higher-margin specialist uses such as semiconducting polymers (for electronic components) and advanced composites (for machinery/construction)
- Biodegradable plastics (especially plastic bags/food packaging) which are likely to see an increase in demand as a result of consumer demand.
- Regrowth of UK transport industries should benefit plastics in structural, mechanical and electronic uses, especially as manufacturers look to substitute metals for plastics
- Shale gas may reduce input costs, but this will provide the greatest boost to the competitiveness of US plastics manufacturers.
These clips from the excellent BBC documentary, Plastic – how it works, give some examples of exciting technological breakthroughs in the sector.
- The sector is vulnerable to prices rises of inputs such as petrochemicals:However, new capacity scheduled to come on stream in the Far East and additional capacity in the US derived from fracking should reduce polymer prices.
- Environmental regulations:For example ‘plastic bag taxes' can significantly reduce demand for plastic bags. However, in other areas regulation and changes in consumer demand are creating new opportunities such as closed loop recycling.
- Risks of a downturn in China are partially offset by the dampening effect this would have on input prices.