Plastics processors need to be proactive in the tight oil market

As I write this, crude oil prices are topping US$70 a barrel. Continuing political strife in the Middle East, and the recent devastation in the wake of hurricane Katrina, which disrupted oil production along the Gulf Coast (not to mention, the loss of life and extensive property damage), will continue to put upward pressure on oil prices. As well, there has been talk amongst oil market analysts and geologists that oil reserves around the world may have reached capacity, and will soon decline. Add in the increasing demands for energy and consumer goods from India and China, and you have another factor contributing to the rising oil prices.

For Canadian plastics processors, this will likely mean further increases in resin prices. With resin often making up between 40 and 60 per cent of the cost of manufacturing plastic products, this will put even more pressure on the bottom line, which is already feeling the squeeze from OEMs demanding drastic price reductions.

Some plastics processors may consider the economic pressures jus the cost — no pun intended — of doing business. Unfortunately, because plastics processors cannot dictate foreign policy, control oil consumption levels, or in any way influence the weather, it seems increasing oil prices and the subsequent increase in costs for resin, are realities they have to live with.

But I’d like to make a suggestion. Perhaps Canadian plastics processors have more power than they realize.

In this issue of Canadian Plastics, we profile Dr. Mohini Sain of the University of Toronto, and his research developing bioplastics with hemp, soy and wood. He showed me a variety of parts molded and formed parts made from these bioplastics, many which could be used for automotive, consumer and industrial applications. Sain predicts these new bioplastics will eventually find their way into the market, first through specialized or smaller makers of plastics. And that’s where Canadian plastics processors come in.

Using bioplastics will let plastics processors decrease the amount of oil-based resin used in molding plastic parts and products, thereby relieving some of the cost pressures. It is in their best interest for Canadian plastics processors to start working with researchers like Sain to develop applications with these bioplastics, as well as determine which current applications could maintain their performance with these materials.

In this way, Canadian plastics processors can start developing new markets and business models with bioplastics. This will result in decreased dependence on oil-based resins and consequently, saving money. At the same time, when a large enough market exists for biologically-based plastics, resin manufacturers will hop on board and plug more money into developing alternatives for oil-based materials. Eventually, resin costs will decrease, reducing price pressures faced by plastics processors.

Certainly, this won’t happen overnight, but it won’t happen at all unless Canadian plastics processors take the initiative to work with Canadian researchers to develop non-oil-based materials. Waiting for someone else to go first is a recipe for no one doing anything, meaning we will remain in a situation that can only get more difficult as time goes on.

Remember, it was less than a handful of years ago when people ridiculed the idea that oil would cost over US$50 a barrel. “The times were good and things can only get better,” was the mantra. How quickly things change.

e-mail: tvenetis@canplastics.com