Plastics and Rubber Industry News

Plastics and Rubber Industry News

By Jim Zipursky

September 21, 2015

Green TubingAccording to a report from industry trade publication Plastic News, the plastics and rubber sector should continue its strong M&A activity for the remainder of 2015 following a robust 2014. Analyst Ben Whiting from KeyBanc Capital Markets reports that some companies are commanding EBITDA multiples as high as 7, with specialty firms seeing multiples closer to 9 or 10.

As US shale gas production drives down plastic resin manufacturing costs, global plastics companies may reconfigure their manufacturing strategies and invest in increased US production capacity. The increase in US shale gas production is expected to generate $25 billion in new US plastic resin manufacturing capacity over the next decade, according to a May 2015 report by the American Chemistry Council (ACC). The abundance of shale gas liquids, a key feedstock for plastic resin manufacturers, is forecast to make US resin producers more competitive and spur investment in manufacturing capacity. The boom in US plastic resin production is expected to increase exports from $6.4 billion in 2014 to $21.5 billion by 2030, according to Nextant Consulting. Increased US plastics production is also forecast to create more than 125,000 plastics industry jobs over the next decade, according to the ACC.

Fed by plentiful domestic supplies of shale gas, the US plastics manufacturing industry is expected to grow its workforce by more than 20% over next decade, according to a report released by ACC in May 2015. The trade group projects the industry will add 462,000 jobs as ample gas feedstock supplies attract as much as $47 billion in capacity expansion investments. The boom in gas extraction from shale formations has given the US a competitive advantage over other countries, most of which rely primarily on oil-based feedstocks for plastics production. The ACC cited a report from Nexant Consulting that projects net exports of plastics from the US will triple between 2014 and 2030.

Posted by Jim Zipursky.

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