With Russia’s Help, China Becomes Plastics Making Power In Pandemic

After giving up on recycling — American recycling that is — China is still in love with the plastics biz. In fact. their companies are becoming dominant in all things plastic, one of the most important supply chains in the world.

In other words, it will be yet another segment in global business that the world will need Chinese companies to get supply.

The pandemic has helped the petrochemicals industry make up for losses in oil and gas demand. Plastics are tied to the fossil fuels industry. Stay-at-home orders throughout the U.S. and Europe has led to more take-out food orders and a lot of that is being placed in plastic containers.

I’d like to highlight one thing though: China’s Sinopec is the behemoth in this space, and although you can buy into Sinopec on the U.S. stock market, if the incoming Biden Administration makes good on a Trump order to delist Chinese companies that are not compliant with the financial audit rules under the Sarbanes-Oxley Act of 2002, then Sinopec will probably leave the NYSE.

According to industry consultant Wood Mackenzie, petrochemicals will account for more than a third of global oil demand growth to 2030 and nearly half through 2050.

The growth in both plastics consumption and production is mostly coming from Asia where economies are catching up with the western levels of plastics consumption, and becoming a source for plastics exports to the U.S. and Europe.

Within Asia of course, China is the powerhouse. Last year Exxon Mobil XOM -4.8% began constructing its $10 billion petrochemical complex in Huizhou, China.

Russia Joins China, Wants To Be ‘Indispensible’

Russia’s petrochemical giant Sibur is also locked into China, mainly through a Sinopec partnership. The two companies began work on one of the world’s largest polymer plants for plastics making last August, spending $11 billion on the Amur Gas Chemical Complex in Russia.

The two sides are intimately connected in the global plastics biz.

“Amur is a milestone in the cooperation between Sinopec and Sibur,” Zhang Yuzhuo, chairman of Sinopec, says in a press statement, calling it a “model for Sino-Russian energy cooperation.”

The entire industry, while not exactly the sexy and green industry the Davos crowd is promoting heavily in the Western world, is seen by China and still-emerging markets like Russia — as a development tool for regions far away from the big city hubs of Moscow or Shanghai. This is as much about job creation as it is pumping out plastic molds and the ethylene needed to make it.

Russia recently introduced negative excise tax on LPG and ethane used in petrochemicals which was a meaty financial bone thrown to Sinopec and Sibur’s Amur project, among others in the Russian far east. 

The Sibur Russia angle has gained momentum recently due to the ramp up in production from the new ZapSib Siberian facility last year. They make polyethylene and 500 thousand tons of polypropylene there; all must-have ingredients for plastics manufacturers.

Their relationship with Chinese investors, buyers and counterparties was one of the main reasons to even build that manufacturing plant in the first place, and is something the Moscow market likes to give as one of the best reasons to be bullish about a rumored initial public offering for Sibur.

Sibur has said in press statements that they expect “another jump in scale” of plastics chemicals output with the addition of the Sinopec project, Amur.

“Sibur has long built relationships with Chinese clients, partners, and investors and Sinopec has been our strategic partner since 2013,” says Dmitry Konov, Chairman of the Management Board for Sibur. Konov told Reuters recently that there was no timeline for any IPO in the Moscow Exchange. Moscow was home to one of the top four largest IPOs last year, shipping firm Sovcomflot.

Konov said their logistical advantages in the far east, near China, and competitive pricing for its polymers means they will “scale up these relationships to further expand the delivery of high-quality petrochemicals from Siberia to China.”

VTB Capital, a Russian investment bank, says those projects would allow Russia to become one of the world’s top four producers of ethylene by 2030. Russia wants to position itself as the indispensable partner to China in this space, much in the way that China has positioned itself as the key source for numerous key inputs, whether its cobalt used in electric vehicle car batteries, or solar panels now expected to criss-cross the U.S. in the Biden Administration.

Due to the pandemic, China has been focused on industries of the future alongside those needed to get itself, and its trading partners, out of the pandemic rut — those polypropylene Olive Garden to go containers might not come from China, but the plastics that made it sure might.

China remains the place for growth in this space, too. Plastics-use patterns and penetration are rising. Figure the Asians are a good 10 to 20 years behind the U.S. in terms of plastics use. They’re gaining fast.

China As Plastics Demand Driver

Plastics aren’t made from tree bark, that’s for sure. It comes from fossil fuels and non-organic chemical compounds that make the stuff designed to last hundreds of years.

And China now accounts for roughly 40% of the demand for the chemicals used in making it, an increase of just 20% in 2005. 

China’s ethylene demand grew by 8.6% between 2014-17 while global demand grew by only half that. 

Looking out five years, Deutsche Bank industry analysts said in a November 25 report that China will account for over half of global consumption growth for ethylene (to which Sibur and Russia are happy as their go-to for now). 

China has 50% self-sufficiency in ethylene and derivative products – the domestic desire to expand capacities and increase self-sufficiency remains high. Russia is a solution. But Sinopec will invest domestically, as will the big Western multinationals who are frowned upon doing similar work back home. Exxon is case in point.

China was a relatively late entrant to the global petrochemical industry, but that does not mean much. They ramp up, and rev up fast due to state subsidies and state-owned companies’ ability to obtain raw materials and pass them along downstream for pennies on the dollar. These are loss leaders, but China doesn’t care about that stuff. They are looking to produce plastics for the locals, and for the export markets, especially U.S. and Europe, which are increasingly disinterested in anything fossil fuels related, at least on paper. 

In the 1990s, the Chinese petrochemical industry was significantly smaller than the U.S. In 1995, China’s ethylene capacity totaled 3% of global capacity. In comparison, Japan had 9% of global ethylene capacity and Korea had 5% of global capacity. Ethylene is naturally occurring.

During the 2000s, China’s petrochemical industry grew substantially driven by government support and strong demand from government-directed infrastructure spending, a burgeoning middle class with rising disposable incomes, expanding residential construction and exports of course.

Between 2004 and 2012, China’s ethylene capacity — the flammable gas used to make ethanol for cars, fruit ripeners, and — more importantly, plastics — doubled to 11 million tons per year. Within 25 years, China’s capacity has moved from 3% of global to 16% of global. Who thinks they’re going to slow that down? Need plastic? China will have it. For now, Russia has the chemicals. China might just gain on that next. Follow me on Twitter or LinkedIn

Kenneth Rapoza

Kenneth Rapoza

I’ve spent 20 years as a reporter for the best in the business, including as a Brazil-based staffer for WSJ. Since 2011, I focus on business and investing in the big emerging markets exclusively for Forbes. My work has appeared in The Boston Globe, The Nation, Salon and USA Today. Occasional BBC guest. Former holder of the FINRA Series 7 and 66. Doesn’t follow the herd.


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The Market For Plexiglass Is Booming–And The Nation’s Largest Manufacturer Says It’s Here To Stay


Plexiglass is a hot item all of a sudden, as the need for social distancing and protection has increased. That’s meant a huge uptick in business for Columbus, Ohio-based Plaskolite.

The rush of calls started in mid-March. As the coronavirus pandemic logged its first thousand cases in the United States, hospitals were in desperate need of face shields for protection. So manufacturers turned to Plaskolite, the nation’s largest manufacturer of thermoplastic sheet, the glass-like material needed for the production of face shields.

“There were practically no face shields in the country; the supply was just not there, so there was a major, major rush to manufacture the product,” says Mitch Grindley, Plaskolite’s executive chairman. “Clearly, the need outweighed anything else that we were running at the time, so we took two of our plants, adjusted our lines and started cranking them out as fast as we could.”

A couple of days later, Grindley says, the rush was amplified. But, this time, it was orders for clear acrylic barrier sheets that were piling in. One of the first big orders came from Walmart, which needed the sheets installed between cashiers and customers. Coffee shops and small restaurants quickly followed suit. And all told, orders are up six-fold since March, Grindley says. “It basically has not stopped.”

Founded in 1950, Plaskolite got its start producing hula hoops and fly swatters but has since grown to be a leader in the roughly $4 billion market for acrylic sheet, also known as plexiglass. Last year the company, which is majority owned by billionaire Anthony Pritzker’s Pritzker Private Capital, did an estimated $650 million in sales. Now, with demand for its plexiglass soaring, Plaskolite’s ten manufacturing plants, which were already operating on a 24/7 basis, have ramped up production to nearly 100% of capacity—producing enough resin weekly for about 3 million face shields and enough sheet for 200,000 barriers. Even so, they’re facing a backlog of at least 15 weeks for every product they manufacture.

Demand for face shields could normalize by the end of year, Grindley says, but he’s not so sure the booming market for acrylic barriers will wind down anytime soon. In addition to the surge in demand from restaurants, retailers and offices that are slowly opening up, Grindley says more use cases and interested buyers keep popping up as nonessential businesses across the country also begin to reopen.

“Every day I come in and hear about a new application,” he says. Plaskolite is now manufacturing clear barriers installed between booths and tables at restaurants, shatterproof partitions to separate bus drivers from boarding passengers and “barrier stations” for employers to safely take workers’ temperatures at the start of shifts. The products have already made their way into retailers, casinos and courtrooms, and Grindley says he’s also received proposals for barriers between seats in movie theaters, airplanes and even dentist offices.

“It’s been a wild ride,” says Jay Smith, business director and vice president at Mitsubishi Chemical Corporation’s Lucite International, the nation’s largest producer of the chemical compound used to make acrylic glass–and Plaskolite’s exclusive supplier. Smith says the nearly complete stop in automotive manufacturing and construction had Memphis-based Lucite, which also supplies materials for those industries, initially bracing for a considerable market downturn. That quickly changed toward the end of March, when Grindley called to tell Smith of the unprecedented surge in demand for clear acrylics. “That’s when we became confident that this would be a significant shift for the market,” Smith says, “so we just started feeding the materials as fast as we could, moving barges of needed product up the Mississippi River, to Cincinnati, and then trucking it from there to the various sites that Plaskolite has.” Lucite’s sales have actually beat pre-coronavirus projections, Smith says.

Not everyone in the industry is convinced that the plexiglass boom will outlive the pandemic. France-based Altuglas, a subsidiary of competing specialty chemicals supplier Arkema, for example, says that the rising demand for its acrylic sheet is only enough to help offset declines in other segments, and that while it’s operating at capacity for these products, it doesn’t yet believe the market is sustainable enough to warrant increased investment in new lines. “I believe what we see today is the simultaneous requests of all the potential users… I think we see the peak,” says Altuglas chief Jean-Luc Béal. “We are just using our capacity to help weather the market, even if this area of the market is not the strategic area we tend to be in historically.” In late March, Arkema withdrew its 2020 EBITDA guidance, which was in line with last year’s figure of roughly $1.6 billion (1.5 billion euros). “In this fast-changing environment, this guidance is no longer relevant,” the firm said in a statement at the time.

Plaskolite’s longtime chief is less worried about the demand. “I think this is very similar to September 11 and what happened in security in airports; I see it as something that’s here to stay,” says Grindley, adding that Plaskolite is already working on a second generation of antimicrobial and scratch-resistant barriers. “Frontline workers are demanding it, consumers are demanding it, so this is something that people better get used to because it’s going to be around.”

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I’m a reporter at Forbes focusing on wealth and finance. I graduated from the University of North Carolina at Chapel Hill, where I double-majored in business journalism and economics while working for UNC’s Kenan-Flagler Business School as a marketing and communications assistant. Before Forbes, I spent a summer reporting on the L.A. private sector for Los Angeles Business Journal and wrote about publicly traded North Carolina companies for NC Business News Wire. Reach out at jponciano@forbes.com.



Many Perth businesses are hurting right now, but one plastic manufacturer has found a silver lining – making Perspex shields to protect people from coronavirus. Subscribe here: https://bit.ly/2ojPZ6G More Perth News here: https://bit.ly/36dullR Like us on Facebook: https://www.facebook.com/9NewsPerth/ Follow us on Twitter: https://twitter.com/9NewsPerth Follow us on Instagram: https://www.instagram.com/9newsperth/ #9News #9NewsPerth #PerthNews
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