Addressing Plastics Manufacturers’ Concerns Amid Recession Risks
Despite the recently elevated risk of a recession, plastics manufacturers do have reasons for optimism.
Resilient Plastics Manufacturers Know How To Weather Storms
The plastics industry has been well-tested in recent years, and converters have proven themselves to be a hardy bunch. Leaders have worked hard to adapt to business threats brought about by a global pandemic, major weather events, and supply chain and workforce challenges.
More recently, inflation has been on the rise, as have the perceived chances of the next U.S. recession. The median probability of a recession between now and summer 2023 is 47.5%, up from 30% in June 2022, according to economists surveyed by Bloomberg.1
In August 2022, 72% of economists polled by the National Association of Business Economics said they expect the next recession will begin by the middle of 2023, with nearly one in five saying the country was already in a recession.
That is a reason for concern, to be sure, but converters have reason to be optimistic. The plastics industry is better-positioned than many for continued growth, even as a potential downturn looms.
Despite evolving economic conditions, the U.S. plastics industry is still expected to see above-average growth in 2022.
Plastics News’ Bill Wood wrote that 2022 growth is expected to be just over 3% for the full year. That beats a typical year for the industry, though it does represent a slowdown in activity compared to a cyclical peak for the industry reached in the second quarter of this year.
In addition to that industry-specific strength, a number of forecasters have said a mild recession is more likely, which is also good news for converters and their customers.
Manufacturing supply chains can be significantly impacted by recession, so strengthening supplier networks can be a crucial step to be better prepared when and if the downturn arrives.3 Manufacturers should consider:
- Assessing the financial strength of their suppliers
- Securing additional resin suppliers
- Keeping extra inventory on hand (this can be a tricky call for converters seeking to hedge against potential short-term price changes using a just-in-time inventory strategy).
Other preparation strategies include securing adequate access to capital and relatively low debt, and making targeted capital investments that increase productivity.
Manufacturers that pursued those tactics ahead of the 2008-2010 Great Recession were more successful in bouncing back during the recovery that followed.4
Keep Your Finger on the Pulse With an Attentive Resin Supplier
Converters can’t control the weather, recessions, nor global pandemics, but they can partner with a resin supplier that helps them stay current with and adapt to longer-term trends in the industry.
It’s all commercial-scale equipment – the same types of machines used by converters in their own facilities – so customers don’t need to worry about being able to trust the results.
Having commercial machinery on-site also means that Shell can produce articles similar to those seen in industry, offering a higher level of confidence that Shell Polymers resin will run well on commercial scale equipment.
Shell Polymers can provide additional value with off-site polymer testing - helping customers test out productivity-boosting accessories and formulations, without having to reduce their production capacity to do so.
For example, our pipe extruder has optical terahertz measuring equipment that can instantly identify a pipe’s wall thickness as it is being produced, which can help reduce scrap.
Predictions are just predictions. Anything could happen with the U.S. and global economies. But what’s clear is that the importance of plastic in our day-to-day lives makes our industry a relatively resilient one.