Technology Developments and Market Opportunities Drive Industry Growth

Cautious Economic Optimism

Analysts report that U.S. gross domestic product (GDP) posted a 3% increase in 2018 from 2017 and should expand 2 to 3% in 2019, a range that represents healthy growth but is not considered high enough to trigger inflation, prohibitive interest rates or “irrational exuberance” among investors, lenders and consumers that could lead to an economic contraction.

Some experts, however, anticipate that 2019 GDP results will be at the low end of that scale. According to The Balance, an online publication, U.S. GDP growth will slow to 2.1% in 2019 and decline to 1.9% in 2020 and 1.8% in 2021. The reasons stem from a predictable reduction in demand for goods and services that follows the healthy growth of the past two years, and to the side effects of what the publication calls Trump’s trade war, during which he imposed 10% tariffs on $200 billion (€224 billion) worth of products from China, and levied tariffs against other countries.

The president also ordered tariffs on imported steel and aluminum and renegotiated a trade agreement with Canada and Mexico that will replace NAFTA, the 25-year-old North American Free Trade Agreement, with a treaty known as USMCA, or the U.S.-Mexico-Canada Agreement. The impact of the steel and aluminum tariffs has been generally good for the balance sheets of U.S. producers of the metals and costly to most end-users. The verdict is still out on how successful USMCA will be. Though it has been signed by the leaders of the U.S., Canada and Mexico, the treaty must be confirmed by the legislatures of each country before it takes effect. At stake is $1 trillion (€1.12 trillion) of annual trade between the neighbors.

Another concern created by the tariffs on China and other countries is their cost to U.S. consumers in the form of reduced product availability, higher domestic product prices due to less competition, the passing along of tariff penalties by importers and supply disruptions. The New York Federal Reserve Bank, for example, estimates that the China tariffs alone cost U.S. consumers at least $6.9 billion (€7.7 billion) of income from January through November 2018, and possibly as much as $12.3 billion (€13.7 billion), depending on how the numbers are interpreted.

“We find that the U.S. tariffs were almost completely passed through into U.S. domestic prices, so that the entire incidence of the tariffs fell on domestic consumers and exporters … with no impact so far on the prices received by foreign exporters,” report the Fed economists. “We also find that U.S. producers responded to reduced import competition by raising their prices.”

Despite these concerns, U.S. manufacturing is poised for growth. The MAPI Foundation (Manufacturers Alliance for Productivity and Innovation) forecast last year that U.S. manufacturing as a whole will grow by an average of 2.8% per year between 2018 and 2021; spending on capital equipment will increase by an average of 6.8% annually during that period; and exports will rise by 6% per year.

All of this is good news for plastics, which, based on one metric, employment figures from 2012 to 2017, outperforms the U.S. manufacturing industry. During that period plastics manufacturing employment grew by 1.6%, while total U.S. manufacturing employment rose 0.9%, according to figures developed by the Plastics Industry Association (PIA) and Probe Economics LLC.

In a report released late last year that covers results in 2017, PIA (formerly the Society of the Plastics Industry) states that plastics manufacturing generated 989,000 jobs in the U.S., a 2.4% increase from 2016, and 1.81 million jobs counting suppliers. The association’s “2018 Size and Impact Report,” an annual publication, puts the value of manufactured plastics shipments in 2017 at $432.3 billion (€484.1 billion), an increase of 6.9% from the year before. When suppliers are included, the value of shipments reached $590.6 billion (€661.4 billion), up 7% from 2016.

While it’s likely that industry growth will slow somewhat in the next three years, demand for plastics products in the U.S. and the rest of North America, along with the evolution of major end-use markets, could be enough to cushion the impact of an economic slowdown for processors and suppliers. The relative stability, and in some cases depreciation, of the U.S. dollar compared with other major currencies will keep American-made products competitive at home and in export markets. The short-term outlook for the U.S. plastics industry and North America generally, is positive.

Enhancing Automation

The PIA report notes that the U.S. plastics industry is essentially at full employment. Anecdotal information from molders, extruders and other fabricators reveals that most are having a difficult time finding qualified workers. This situation is spurring efforts by product makers, compounders and others to further automate operations.

Many such initiatives are based on Industry 4.0 (I4) automation principles. I4 received a major boost from the German government in the past decade as a way of promoting digital manufacturing to improve productivity, product quality and, ultimately, competitiveness. In North America progressive processors are taking advantage of new and powerful controls and software from such specialists as Siemens, IQMS/Dassault Systémes, Allen-Bradley, Omron, RJG and others, as well as from select equipment and robotics vendors, to create connected operations in which machines communicate seamlessly with each other and provide detailed operational data in real time.

The results allow product makers to extend quality control to ever-smaller batch sizes, even individual parts if necessary, and assure that production fully meets customer specifications.

Automation suppliers, meanwhile, are equipping robots with vision-inspection systems and other sensors to detect quality problems ranging from excess flash on parts to surface imperfections and short shots. This data can be used to manually or automatically adjust a processing machine or mold to eliminate quality problems.

I4 connectivity is also effective for predictive maintenance on machines, molds and tooling, and other equipment. By placing sensors at key points and monitoring them, processors detect when a component needs replacing, thereby eliminating the potential for unexpected and costly downtime, as well as off-spec production.

Such capabilities are increasingly available in software systems and machine controls. As such, they have the potential to create fully automated process plants—so-called lights-out manufacturing facilities—in which human operators are either eliminated or reduced to a handful of supervisory personnel.

The capital expense of installing I4 and similar automation may be daunting to end-users, but suppliers maintain that the return on investment can be as little as one year or less and the upside in productivity, quality, economy and competitiveness is worth the cost. As a result, U.S. adopters of digital technologies include medium and even smaller companies as well as large manufacturers. Much of the attraction of I4-level automation relates to the production involved, rather than company size. Medical, automotive and electronic parts, for example, have high quality thresholds, and advanced automation is the price of market entry.

Automation is not without its downside—at least to critics who claim it deprives humans of jobs and governments of tax revenue from displaced workers. Initiatives are periodically proposed to levy taxes on robots. The latest effort in the U.S. comes from Chicago, Illinois, where a city official wants an annual tax on each robot that is equivalent to one year’s salary of every worker it replaces.

To date, no U.S. city or state has passed a law to tax robots. The European Union Parliament has rejected such a measure; and the only country in the world where a similar proposal has become law is South Korea. In this country, however, the government has removed business tax deductions for robots that take human jobs, not levied a tax on their use.

For now, however, mass replacement of humans by robots isn’t likely. Robot makers say that when manufacturers install their equipment, they typically reassign affected workers to higher-value jobs. And with the industry at full employment in the U.S., companies do not want to lose workers.

The Road Ahead

New and evolving markets will account for a range of innovative applications in coming years. Two areas in particular that will generate important opportunities for North American plastics are electric vehicles and autonomous vehicles.

Image: An autonomous vehicle operated by technology developer Waymo moves along a street in San Francisco. Fully autonomous vehicles could be a feature on many U.S. roads by 2030. (Credit: Waymo)

Read the complete article from the: “SOURCE”