Plastics make up a major part of our lives and the economy. Its flexibility, pliability and applicability explains why plastic is used across almost every sector, including and not limited to produce packaging, building and construction, textiles, consumer products, transportation, electrical and electronics and industrial machinery.
Researchers at Reportlinker via its recently published ‘Plastic Material And Resins Global Market Report 2022’ expects the global plastic material and resins market to grow from US$714.72 billion in 2021 to US$803.08 billion in 2022 at a compound annual growth rate (CAGR) of 12.4 per cent.
The market is expected to grow to US$1.24 trillion in 2026 at a CAGR of 11.6 per cent.
The plastic materials and resins market consists of the sales of plastic materials and resins by entities (organisations, sole traders, or partnerships) that manufacture plastic materials, resins, and nonvulcanisable thermoplastic elastomers, and mix and blend resins on a custom basis and/or manufacture non-customised synthetic resins.
The main types of plastic materials and resins are polypropylene-plastic material and resins, high-density polyethylene, polyvinyl chloride, polyethylene terephthalate, polyurethane, low-density polyethylene, polystyrene-plastic material and resins, and other types of plastic material and resins.
Polyvinyl chloride is a thermoplastic made of 57 per cent chlorine derived from common salt and 43 per cent carbon derived from ethylene from hydro-carbon feedstocks, sugar crops, crude oil, and natural gas.
The applications involved are packaging, housewares, bags, sheets, bottles, fibers, tapes, films, medical materials, and other applications.
The end-user industries chemical industry, the coating and printing industry, the electronics industry, food, and pharmaceutical industry, and other end-user industries.
“Asia Pacific was the largest region in the plastic material and resins market in 2021.North America was the second-largest region in the plastic material and resins market,” Reportlinker said, adding that the regions covered in the plastic materials and resins report are Asia-Pacific, Western Europe, Eastern Europe, North America, South America, Middle East, and Africa.
However, these lends into another issue: sustainbility. Malaysia’s issue with garbage is no joke, and as plastics make up a majority of that, it begets the question: How do we reduce plastic wastage?
The answer to solving the plastic pollution problem lies in circular economy, more specifically for the plastic manufacturing industry.
The 12th Malaysia Plan announced on September 27 last year prioritised advancing sustainability, with one of the game changers being embracing the circular economy.
The circular economy is needed to extend the lifecycle of a product, particularly one as damaging to the environment as single-use products, which involves refurbishing, repairing, reusing, and recycling a product for as long as possible.
Kenanga Investment Bank Bhd (Kenanga Research) Kenanga Research in a special report on this topic observed that sales turnover for Malaysia’s plastics sector increased by 2.3 per cent to RM48.5 billion in 2020 from RM47.4 billion in 2019, charting positive growth in spite of the Covid-19 pandemic, based on data from the Department of Statistics.
“As the plastic packaging sector is a significant contributor to the local economy, it stands to reason that priority and urgency should be given through policy to aid the transition from a linear economy to plastic circularity,” it said in the analysis.
“The circular rconomy model is the best option for now. A recent study by The Pew Charitable Trusts and SYSTEMIQ in the US suggests that a recycling model or collect and dispose alone is not sufficient to treat the plastic problem.
“This does not account for the devastation of GHG emissions every time virgin plastics are produced.
“Considering that the Malaysian government has plans to discuss the viability of carbon pricing (i.e. carbon taxes and the Emission Trading Scheme), the recommendation for the best carbon taxation system as mentioned in the 12th Malaysia plan would eventually increase the cost of virgin production due to higher emissions.”
On a macro level affecting the plastic sector, Kenanga Research noted that the 12th MP aims to: reduce GHG emissions intensity to GDP up to 45 per cent by 2030 based on emissions intensity in 2005; encourage businesses to develop the circular economy and the sharing economy models; and enhance policies, regulations, green financing and economic instruments.
State of affairs of local plastic packagers
Local-listed plastic players are in the transition phase and the process of developing environmental solutions such bio-degradable plastics, or mono layer plastics for easier recyclability.
On top of that, plastic packagers, through product innovation and regular R&D, are constantly pushing to create thinner and more sustainable stretch film variants which utilises less raw material that are cheaper to produce.
Kenanga Research saw that SLP Resources Bhd (SLP Resources), Thong Guan Industries Bhd (Thong Guan) and SCGM Bhd (SGM) have their own versions of biodegradable or degradable products on top of their transition to more recyclable plastics.
However, demand for biodegradable products is not overwhelming or significant at this juncture, making up only about five to six per cent of company earnings.
“The lack of demand is largely attributable to the high costs which in some cases are three to five timeshigher than normal plastic products, (in part attributable to the polylactic acid (PLA) component required) or the absence of policy and implementation on a national scale to enforce environmentally friendlier alternatives.
“Additionally, degradable products may not be the best solution as it may have other ramifications such as creating microplastics that are harmful to the environment.
Additionally, Scientex Bhd (Scientex) (through Daibochi) and Tomypak Holdings Bhd (Tomypak) produce flexible packaging.
Their clientele includes large multinational corporations (MNCs) such as Nestle, which is shifting to 100 per cent recyclable and reusable packaging by 2025.
“This in turn has already pushed local plastic packagers to come up with alternatives such environmentally friendly packaging that can be reused and recycled moving towards a more circular economy.
“This bold step by large MNCs is a clear sign of credible demand for green plastic packagers due to ongoing public pressure on large MNCs which are the main clienteles for single-use plastic.”
Local players such as BP Plastics Bhd (BP Plastics) are embracing their role in playing a part in the path towards circular economy and supporting low-carbon initiatives.
According to managing director Lim Chun Yow, the group is working with raw material suppliers and customers, and have to continuously explore, innovate and develop solutions and products, focusing on plastics circularity and life cycle impacts.
“Traditionally, most of the flexible plastic packaging is made of laminated structures and/or multi-material multi-layered structures that serve different function needs, such as printing, oxygen and moisture barrier, strength and puncture resistance, and sealing.
“However, such laminated/multi-material structures pose challenges in segregation of materials and thus it is difficult to be recycled entirely,” he said in the group’s annual report released in April 2022.
“In the recent years where transition to circular economy is promoted, there has been a growing demand for monomaterial plastic packaging as it is seen as an important sustainable packaging due to its recyclability.
“According to The Circular Economy for Flexible Packaging (CEFLEX), plastic packaging is considered mono-material if it is made of more than 90 per cent of one polymer type.
“In BP Plastics, all the products that we have been producing and supplying are considered mono-material as they are made of more than 90 per cent of Polyethylene (PE).
“Ongoingly, we are continuously exploring potential developments and suitable investment opportunities in sustainable packaging.
“In terms of access and use of recycled contents, Lim said BP Plastics have been re-using its internally generated recycled materials, both Post-Consumer Recycled Resin (PCR) and Post-Industrial Recycled Resin (PIR) which are processed in its own recycling facilities.
“For FY21, overall recycled materials consumption in our manufactured products is 7.3 per cent.
“We are also continuously exploring availability of suitable recycled materials from external sources, potential and feasibility of other renewable sources, as well as the relevant improvements and developments including certification systems, e.g. International Sustainability and Carbon Certification (ISCC) PLUS.”
Future possibilities for plastics sector
Plastics manufacturer, Thong Guan, believe recycling is one of the practical solutions to address these issues.
“We focus on driving changes of our stakeholders’ perception towards recycling,” it said in its Annual Report 2021. “In FY21, we increased our sharing to educate our Stakeholders (employees, suppliers and customers) on recycling the importance of plastic circularity.
“Encourage our customers to consider high recycled content products (30 per cent above) or low carbon products. The sales team conducted briefings & meetings with customers to promote the green features of our products.
“We increased the awareness among our customers on their role to minimise environmental impact by supporting environmentally friendly products. We provided data and evidence-based test results by Newton R&D Centre to assure our customers of the quality performance of our recycled packaging.
“We quantified our sustainability commitment through green certificates, ISCC Plus and GRS.”
A study conducted by World Bank Group “Market Study for Malaysia: Plastics Circularity Opportunities And Barriers” suggested that Malaysia’s total value of recyclable material that could be unlocked is US$1.3 billion per year.
However, only 19 per cent of these materials are recycled, resulting in around US$1 billion to US$1.1 billion income loss annually. Currently the rate of recycling for key plastic resins remains low in Malaysia at only 24 per cent as at 2019, based on the study.
As such, a transition to a circular economy would benefit recyclers. At present, most plastic recyclers are not listed.
The group is currently able to process 31 (40 per cent) of the 77 available waste codes in Malaysia and is able to either recover/reuse or recycle 95 per cent of incoming waste.
Based on Reportlinker’s report, new developments in the packaging industry, such as CO2RE foaming technology, big data, IoT integration, are expected to drive the market going forward.
“Convenience features, such as resealable packs, easy-opening, stand-up pouches, and smaller pack sizes for single-servings are being introduced and more promotional packs and brand extensions are being developed to ensure customer loyalty.
“Similarly, the recent development of biodegradable plastics – which degrade naturally from the actions of microorganisms such as bacteria, algae, and fungi – is gaining traction.
“These developments in packaging will increase the consumption of plastics and this will drive the market growth,” Reportlinker said.
Meanwhile, Kenanga Research added that the search for new characteristics for plastic materials and innovations in the manufacturing process have led to the development of various high-performance plastics.
For example, smart polymers are materials that can change based on external environmental stimuli.
Nanocomposites are a product that is a result of a combination of nanotechnology and plastics engineering.These products have high electrical conductivity, dimensional stability, and are also flame retardant along with resistance to scratch, dent, and heat.
These new high-performance plastics have gained rapid acceptance and find their applications in the medical, electronics, food packaging, automotive, and aerospace sectors.
For instance, some of the major developments in plastic materials include plastics from potatoes and Virgin PET from discarded textile fabric and waste bottles.
Problems plaguing plasticmakers
In spite of plastic’s optimistic rise, a barrage of roadblocks persist for the sector.
SLP group managing director Khaw Seang Chuan in SLP’s Annual Report 2021 noted that the industry’s challenges have intensified since the outbreak of Covid-19.
“Issues such as supply chain disruptions, hike in freight costs, shortages in manpower emerged undoubtfully,” he said in a statement in the report.
“In Malaysia, flash floods occurred in late 2021 and at the beginning of 2022 which caused disruption and damaged in infrastructure, houses, motor vehicles and other properties to the extent of approximately RM6 billion.
“In spite of the above, the global flexible plastic packaging market attained a value of about US$154.7 billion in 2020. Analysts expect the market to expand in the forecast period of 2022 to 2027 at a 4.2 per cent compounded annual growth rate to reach nearly US$198 billion by 2026.
“They also expect the Asia Pacific region to maintain its significance in the global market for flexible plastic packaging during the forecast period.”
Khaw also cited that the shortage of manpower will remain unsolved until the government allows manufacturing sectors to bring in foreign workers.
On March 19, 2022, the Malaysian government announced an increase to the minimum wage from RM1,200 to RM1,500 per month with effect from May 1, 2022. The upward adjustment in the minimum wage inevitably increases plasticmakers’ labour cost including the statutory contribution.
“Although the Ukraine-Russia conflict will not directly impact Malaysia’s trade, prolonged disruption in the global supply chain, rising commodity prices, and higher import costs are all threats to growth,” Khaw said of the industry’s struggles.
“Besides, the Russia-Ukraine war may push resin price upwards, and manufacturers are buying more raw materials to stock up lest the price surges further.
“Stringent environmental regulations present another critical challenge to the group’s flexible plastic packaging business.
“Strict legislation to mitigate the threatto the environment has increased consumer demand for bioplastics and other environmentally-friendly packaging solutions.”