Global consumption of plastic in 2007 was 400 billion pounds, and by 2010 researchers forecast consumption will jump 25% to 500 billion pounds globally. Plastics' physical advantages, such as weather and heat resistance, flexibility, and light weight have made it a favorite material in everything from beverage bottling to body armour. Cheap petroleum prices fuel production for companies like DuPont (DD) and General Electric Company (GE), and support substitution away from paper, metals, and glass.
A transition into plastics picked up steam during World War II, when large supplies of basic materials were demanded for the war effort. Innovation was rampant, and by the 1960s, inexpensive plastics were common in every household. However, with oil and gas (the main raw materials for plastic production) spiking in 2008, companies have an incentive to find alternatives to plastics. Bioplastics, which are produced from high-fructose corn syrup, vegetable oils, and even bacteria, present a viable option to traditional manufacturing processes much like Renewable Energy does to Oil & Gas Refining & Marketing. Further, environmentalists, who disapprove of the poor degradability of petroleum-based plastics, want to cap its usage.
These economic and political considerations have affected plastics consumption - China has already banned the use of plastic bags and Ireland passed a 33 cent tax on each plastic shopping bag which essentially stopped their usage. The United States may eventually follow suit as several municipalities have passed restrictive legislation. For instance, San Francisco prohibits the use of plastic bags and Seattle has required businesses serving food to stop the use of foam and petroleum-based plastic by 2010. In response, start-ups like Metabolix (MBLX) and conventional plastic manufacturers such as DuPont (DD) and BASF SE (BASFY) have begun developing bioplastics which won't depend on the price of oil or take the same toll on the environment.
7 Major Plastics and their common uses include;
As the main raw material inputs, Crude Prices and natural gas prices impact the cost of plastic production. Plastics and energy prices move in unison much like gasoline does with crude; the general directions are the same, but there are slight variations depending on supply and demand.
Americans consume 7.5 billion barrels of oil annually. 254 million, or 3.6%, is used in plastic and chemical production. The U.S. bottled water market uses 17.6 million barrels of oil annually in manufacturing its products. This usage is equivalent to 1.5 million cars on U.S. highways. Further, Americans used 100 billion plastic bags in 2007, which equates to 12 million barrels of oil. The nation imports 13.15 million Barrels per Day (bbl/d or bpd).. However, the supply has met the demand. As indicated in the chart, production has steadily risen about 5% annually, with production greater than 230 million metric tonnes in 2005. Two periods, the 1973 recession and the early 1980s did have world production decrease or stall; however, the trend is higher. The main driver for price movements has been Oil Prices. Cheap petroleum kept the cost of petroleum-based production below alternatives like paper, metal, and glass. 
Legislation is a key determinant of plastics price. In the case of China, San Fransisco, and Ireland, the governments banned or taxed the use of plastic bags. These types of laws directly decrease demand. Other legislation actions include the U.S. House requiring that all spring water be packaged in bioplastics and Seattle requiring all businesses serving food to use bioplastics by 2010. These policies favor bioplastic manufacturers and hurts conventional petroleum-based plastics by cutting out demand.
A move towards environmentally friendly products is negative for conventional plastics. Petroleum-based products decay slowly and account for 25% of all landfill content. Further, each manufactured pound of plastic produces 2-3 pounds of carbon dioxide. A move towards using reusable clothed bags, like in Ireland, or promoted by grocery stores such as Safeway (SWY), decreases demand for plastics.
Innovation in bioplastics will decrease plastic prices if it drives input costs below Natural gas or Oil. So far, companies have found ways to produce plastics by using sugars, vegetable oils, and bacteria rather than petroleum. The European Bioplastics trade group predicts that the bioplastic industry will grow 17% a year through 2012 and have an annual capacity of 1.5 million tons by 2011. Profitability and increasing returns to scale support competitiveness of bioplastic manufacturers.
The London Metal Exchange used to list two plastics contracts but they have been discontinued due to low trading volumes.
The Chinese Dalian Commodity Exchange includes various polymer futures, including a Linear Low-Density Polyethylene (LLDPE) futures contract
|U.S. Imports of Plastics Material (in $000s)||2003||2004||2005||2006||2007|
|U.S. Exports of Plastic Materials (in $000s)||2003||2004||2005||2006||2007|