ACIPLAST Presentation San Jose, Costa Rica 8-16-13

An Overview of the U.S. Economy, Plastics Industry and Trade

Michael D. Taylor Senior Director, International Affairs and Trade

ACIPLAST August 16, 2013

San Jose, Costa Rica

Agenda

SPI

U.S. Economy

Manufacturing Sector

Plastics Industry

Trade Flows

Bilateral Trade – U.S.-Costa Rica

NPE2015

Founded in 1937,

SPI is the only U.S. trade association

representing ALL segments of the plastics industry.

The SPI2020 Mission

SPI advances a pro-manufacturing agenda,

strengthens global competitiveness, improves

productivity and pursues zero waste strategies

for the U.S. plastics industry.

Strategic Focus Revolves Around Three Areas

Strategic Elements

• The SPI2020 mission will be accomplished through a

combination of: – Advocating for science and fact-based legislation, regulation, codes

and standards and other public policies where appropriate that promote our nation’s welfare.

– Educating the industry, consumers and policy makers about the benefits of plastics as the preferred and sustainable material.

– Connecting the entire supply chain, from resin and machinery manufacturers, processors, OEMs and consumers who rely on plastics to maintain and enhance their daily lives.

“The economic recovery has continued at a moderate pace in recent quarters despite the strong headwinds created by federal fiscal policy.” -- U.S. Federal Reserve Chairman Ben S. Bernanke to the House Financial Services Committee on July 17, 2013

U.S. Economy Is Surprisingly Robust

• In a year when tax hikes and “sequester” spending cuts by the federal government were expected to bleed the life out of the nation’s economy: – GDP grew at a 1.8 percent rate in the first quarter.

– The U.S. added an average of 196,000 jobs a month in the first four months of 2013, up from 180,000 in the second half of 2012.

– The DOL reported that unemployment rates declined in 344 of the 372 largest metro areas in April.

– As of June 2, the Dow, S&P 500 and Nasdaq stock indexes were up between 14% and 16% for 2013.

U.S. Economy Is Surprisingly Robust

• The S&P/Case-Shiller index of property values in 20 cities rose more-than-expected in April, increasing for the 11th consecutive month, rising to an annualized rate of 12.1% in April from a year earlier, resulting in the highest monthly gains in the history of the index.

• DOC reports that applications for building permits rose 14.3 percent to a rate of 1.02 million, the most since June 2008.

• The Conference Board’s consumer sentiment index, which had improved in May, increased again in June, up from 74.3 to 81.4 – the highest since February 2008.

• The Conference Board’s Leading Economic Index (LEI)—a forward-looking measure of the U.S. economy—rose a healthy 0.8 percent in April, 0.2 percent in May, and remained unchanged in June.

Real GDP Growth

Chart courtesy of NAM

Employment Situation

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2008 2009 2010 2011 2012 2013

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Durable Goods Nondurable Goods Unemployment Rate

Source: Bureau of Labor Statistics

Housing Market Situation

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2005 2006 2007 2008 2009 2010 2011 2012 2013

Housing Starts Housing Permits New Home Sales

(in Thousands of Units)

Source: U.S. Census Bureau

U.S. Manufacturing Still on the Rise • NAM: “Manufacturing should continue to grow, benefiting from strong

growth in exports, lower energy costs, an improving housing market and increases in consumer spending.” (05/23/13)

• The Bureau of Economic Analysis reported a rise in foreign direct investment in U.S. manufacturing from $476.5 billion in 2001 to $838.3 billion in 2011. And NAM expects another increase for 2012.

• Boom in energy markets (shale) has spurred new investments by manufacturers. ACC reports that businesses have announced 97 projects representing a cumulative investment of $71.7 billion over the past two years.

• Shale gas development could lead to approximately 1 million additional manufacturing jobs by 2025, according to a study by PwC and the National Association of Manufacturers.

U.S. Manufacturing Still on the Rise

Manufacturing activity worldwide has slowed noticeably. Yet US manufacturing is still expanding at a greater rate than anywhere else in the world!

U.S. Manufacturing Output

Manufactured Durable Goods


Manufacturing Sectors with the Largest Net Employment Gains YTD

182.6

178.7

124.4

46.2

45.0

20.3

11.9

7.3

5.5

2.8

1.1

Transportation equipment

Fabricated metal products

Machinery

Plastics and rubber products

Primary metals

Food manufacturing

Miscellaneous nondurable goods…

Electrical equipment and appliances

Miscellaneous durable goods…

Petroleum and coal products

Chemicals

(December 2009 to June 2013, in Thousands of Workers)

Source: Bureau of Labor Statistics

Global GDP Forecast by Region


Percentage Growth of Manufactured Goods Exports 2011-2013

Reshoring of U.S. Manufacturing Jobs

• In a survey of American manufacturing companies by the BCG in April 2012, 37% of those with annual sales above $1 billion said they were planning or actively considering shifting production facilities from China to America.

• MIT looked at 108 American manufacturing firms with multinational operations last summer. It found that 14% of them had firm plans to bring some manufacturing back to America and one-third were actively considering such a move.

• A study by the Hackett Group expects the outflow of manufacturing from high- to low-cost countries to slow over the next two years and the reshoring to double during the same time period.

Key Drivers of Reshoring

• Lower labor costs. • Weakening of the dollar. • Even as pay is rising rapidly in China, costs in America

are falling, in particular energy costs. • The workforce is becoming more flexible and

productivity continues to rise. • Rising transport costs are playing a big part. • Advanced manufacturing techniques are boosting

reshoring with the promise to alter the economics of production, making it a far less labor-intensive process.

Shale Gas – A Game Changer

• Shale gas growth is helping to reduce natural gas prices and create a stable supply - US manufacturers will be more competitive than producers in the rest of the world.

• Feedstock: U.S. natural gas; European/Asian mostly oil-based.

• A decade ago, the U.S. was among highest cost producers of ethylene and its resin derivatives; today a complete reversal.

• By 2010 advantage shifted to North America, investments followed.

• Initial investments in ethylene capacity; more recently in derivatives and co-products.

• Shift to ethane feedstock constrained propylene, butadiene supplies; but recent projects announced to produce those.

• As of April 2013, more than $73B shale-related investments announced.

Shale Gas – A Game Changer

• ACC report (May 2012) showed positive impacts of shale gas for the chemistry industry and the 8 natural gas-intensive manufacturing industries, including plastic & rubber products:

– $121 billion in increased output that would directly generate 200,000 high-paying jobs in these 8 manufacturing industries

– An additional 979,000 jobs in the supply chain and elsewhere through indirect and induced economic effects of expanded production from these 8 manufacturing industries…

– …Leading to a total 1.2 million jobs generated from the effects of expanded production (and would generate 1.1 million jobs in construction, capital goods manufacturing, in their supply chains and elsewhere over the course of the investment phase).

The U.S. Plastics Industry - 2012

• Value of goods shipped was more than $373 billion

• Employed 892 thousand workers

• Operated 15,949 facilities in every state of the United States

• Plastics manufacturers spent more than $9.6 billion on new capital equipment

• Plastics still ranks as the third largest sector of U.S. manufacturing

Source: SPI “Size and Impact of the U.S. Plastics Industry” (2013)

Plastics Have Historically Grown Faster than all Manufacturing

• Plastics manufacturing employment grew 0.1 percent per year since 1980.

• The value of manufactured shipments grew by 2.3 percent per year since 1980.

• Productivity grew by 2.2 percent per year since 1980.

Growth Rates: 1980 - 2012

Plastics

Mfg

All

Mfg

Employment 0.1% -1.4%

Real Shipments 2.3% 0.3%

Real Value Added 2.2% 0.7%

Productivity Growth 2.2% 1.7%


U.S. Demand for Plastics is Recovering

Apparent Consumption = Shipments + Imports – Exports


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1994199519961997199819992000200120022003200420052006200720082009201020112012

Machinery Molds Plastic Products Resin

Apparent Consumption (in $ billions)

U.S. Plastics International Trade Flows 2012


• Industry exports were flat, and imports increased by 7.5 percent.

• Plastics industry exports represented 5 percent of all U.S. merchandise exports.

• The industry’s trade surplus fell 9.4 percent to $14.9 billion in 2012 from $16.3 billion in 2011 due to the relative economic recovery of the U.S. when compared to other countries.

• Exports were at 21 percent of domestic shipments in 2012, down from 2011, as the domestic market grew where the overseas market stagnated.

U.S. Plastics Top Export Markets 2012


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Mexico Canada China Belgium Japan

23%

21%

8%

4% 4%

U.S

. $

Bill

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Mexico and Canada remained the U.S. plastics industry’s largest export markets. In 2012, the industry exported $13.6 billion to Mexico and $12.5 billion to Canada. China is the industry’s third largest export market. However, the industry overall, had its largest trade deficit with China — $7.8 billion in 2012.

U.S. Plastics Top Export Markets 2012


Top Five U.S. Plastic Import Sources 2012


Canada, Germany and Japan were top import suppliers for resins and machinery. China continued as the top plastics products import supplier, and was also a top supplier for molds. Canada was also a top import supplier for plastics products and molds. Total 2012 imports were $43.7 billion.

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China Canada Mexico Germany Japan

13% 13%

15% 16% 5% U

.S. $

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2012 Trade Statistics In 2012:

– U.S. plastics industry exported goods valued at $58.5 billion, down 0.1% from 2011

• Resins: $ 33.7 billion (-2.8 percent)

• Products: $ 22.8 billion (+3.6 percent)

• Machinery: $ 1.4 billion (+3.7 percent)

• Molds: $ 583 million (+16.4 percent)

– Plastics imports were up 7.1% to $43.7 billion

– Positive trade balance of $14.9 billion

1st Half 2013 Trade Statistics

During the first six months of 2013:

– U.S. plastics industry exported goods were up 1.8 percent from the same period in 2012

• Resins: $ 17.5 billion (+2.3 percent)

• Products: $ 11.8 billion (+1.8 percent)

• Machinery: $ 684.6 million (-4.9 percent)

• Molds: $ 281.4 million (-5.9 percent)

– Positive trade balance of $7.4 billion

U.S. Exports to Central America 2000-2012

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Panama Costa Rica Guatemala

Honduras El Salvador Nicaragua

Belize

U.S. Exports to Central America 2012

Panama $9.2 billion

Costa Rica $6.6 billion

Guatemala $5.5 billion

Honduras $5.4 billion

El Salvador $2.8 billion

Nicaragua $1.0 billion

Belize $251 million

Total $31 billion

U.S. Plastics Industry Exports to Central America 2000-2012

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Costa Rica Guatemala El Salvador

Honduras Panama Nicaragua

U.S. Plastics Industry Exports to Central America 2012

Costa Rica $422 million

Guatemala $247 million

El Salvador $180 million

Honduras $165 million

Panama $106 million

Nicaragua $22 million

Belize $3 million

Total $1.1 billion

U.S. Resin Exports to Central America 2000-2012

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Honduras Panama Nicaragua

U.S. Resin Exports to Central America 2012





Panama $46 million


Total $729 million

U.S. Plastic Products Exports to Central America 2000-2012

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Costa Rica Honduras Guatemala

Panama El Salvador Nicaragua

U.S. Plastics Products Exports to Central America 2012




Panama $57 million



Belize $2 million

Total $383 million

U.S. Plastic Machinery Exports to Central America 2000-2012

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Costa Rica Guatemala Honduras

Panama El Salvador

U.S. Plastics Machinery Exports to Central America

2012

Costa Rica $21.3 million

Guatemala $2.8 million

Honduras $1.95 million

Panama $1.90 million

El Salvador $1.5 million

Total $29.6 million

U.S. Plastics Industry Imports from Central America 2000-2012

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Costa Rica Honduras Guatemala El Salvador

U.S. Plastics Industry Imports from Central America 2012

Costa Rica $103.9 million

Honduras $17.7 million

Guatemala $15.1 million

El Salvador $14.5 million

Total $151 million

NPE2015 Space Update

Phase One – Pre-Draw is complete • Qualification criteria – SPI Member companies with a Show History of 16

shows or above.

• Applicants – 72 companies requesting 191,000 nsf (net square feet).

• Results – 71 companies secured 217,600 nsf.

• Largest booth in NPE history assigned (24,600 nsf).

• Comparison

1. Space secured is up 10% 2. Assigned versus Applied – 217,600 nsf assigned vs 191,000 nsf applied 3. Average exhibit size – 3,500 nsf

Timeline

• Packets mailed and emailed to past exhibitors (August 12).

• Packets emailed to all prospects (by late August).

• Space Application available at www.npe.org (August 12).

• Applications and down payment due November 15 to be

eligible for Space Draw Lottery.

• Applications received after November 15, 2013 are placed at

bottom of selection category.

• K Show (October) activities include:

1. NPE2015 Reception 2. Domestic and international sales teams will attend 3. Meetings between SPI Staff and Key Exhibitors

http://www.npe.org/

Marketing Highlights and Floor Attractions

• International marketing focus segmenting end user markets (automotive, appliance,

building/construction, electronics, medical, packaging, etc.).

• Foster relationships with brand owners, Mission Control Centers for buying teams.

• Educational focus on new technology, process and material focused.

• “Hottest Technologies” area on the floor, co-promoted by Plastics Technology

Magazine.

• Expanded Mold Makers Pavilion to accommodate demand.

• Business of Plastics pavilion and a Processor pavilion.

• Re-formatted Design Center (formerly the Design Competition).

NPE2015 Topline Strategy

Why Attend NPE2015? 835,000 NSF of exhibit space. 1,933 exhibitors. Over 55,000 attendees representing $100 billion in purchasing power. 30 percent of attendees from outside the U.S. and 11 percent from Latin and South America. 87 percent of these attendees either make or influence purchasing decisions. 68 percent of NPE attendees only attended one show that year.

Thank You!

谢谢 Merci Vielen Dank Grazie ありがとうございました

감사합니다 Obrigado Спасибо Gracias teşekkürler