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1) Introduction
to the Chemicals, Coatings & Plastics Industry.
The businesses of chemicals, coatings and plastics are closely
linked. Plastics comprise a branch of petrochemicals—that
is, chemicals refined from petroleum. Coatings, which include
paints, are chemical concoctions. Chemicals products include
pharmaceuticals, fertilizers, dyes, adhesives and explosives,
among many, many others. Among the more visible end products
are PVC (polyvinyl chloride) pipe for plumbing and other purposes,
plastic bottles and other food containers, vinyl windows,
flooring and carpeting made from vinyl and other synthetics,
as well as clothing of all types made from synthetic fabrics.
The U.S. chemicals industry will be about a $600 billion
business in revenues in 2005. Primary sectors include basic
chemicals, specialty chemicals, consumer products (largely
plastics) and life sciences chemicals (pharmaceuticals). About
887,000 people are employed in the American chemicals sector.
While the chemicals industry can be cyclical, gaining and
losing ground with changes in the global economy, many trends
in the world today point to rapidly increasing demand for
many types of chemical products. To begin with, a rapidly
aging population that has increasing access to, and budgets
for, drugs of all types are making demand for life sciences
chemicals soar. A worldwide housing boom is fueling rapid
growth for chemicals used in building products of all types,
from paints to vinyl siding to PVC plumbing parts to vinyl
flooring. The extremely rapid industrialization and commercialization
of markets in China and India, two nations where an immense
proportion of the world’s population live, is creating
demand for industrial and consumer chemicals of all types.
Growing demand for consumer products and convenience products,
such as processed foods and beverages, is enhancing demand
for plastic packaging on a worldwide basis. Meanwhile, makers
of many components in major commercial and consumer products,
from automobiles to computers, are switching to plastics due
to the durability, light weight and long life of plastic.
Growth in total world consumption of plastic materials is
forecast to nearly double from 2003 through 2015.
This boom in worldwide demand for chemicals and plastics
has the potential to create serious shortages. For example,
plastics must come from petroleum refineries, and there is
a serious shortage of refining capacity in the U.S. In petrochemical-based
products, such as plastics, rising costs are a serious problem
as well, with crude oil costs soaring above $60 per barrel
at times and natural gas prices more than tripling over the
past few years. Ethylene plants and many other types of chemical
manufacturing facilities are running at near capacity—93%
or better.
Watch for rapid changes within the chemicals sector. Many
factors are at work with the potential for driving the industry
in new directions. These include a growing use of biotechnology
to create biochemical products such as enzymes and solvents;
consolidation, mergers and acquisitions on a worldwide basis;
high raw components costs; increased environmental regulations
and concerns; rapid growth in demand for plastics and other
chemical products; the rise of nanotechnology in such chemicals
sectors as composites, coatings and exotic materials; technological
breakthroughs in such areas as ceramics; and the rapid rise
of China as both a producer and consumer of chemicals and
chemical products.
As in electronics manufacturing and automotive components
manufacturing, many providers of plastics products now find
that they must move beyond basic offerings to become ODMs
(original design manufacturers). This means that they must
offer value-added services in addition to manufacturing, including
engineering, design and perhaps increased logistics support.
Also, watch for a rapidly growing use of outsourcing and offshoring
in the plastics and chemicals field. For example, Newell Rubbermaid,
one of the best known brands in business and consumer products
made of plastics, plans to move the majority of its manufacturing
to Asia over the mid-term.
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