Chemicals & The Economy

China’s move last month to charge for plastic bags has now been followed by the iconic UK retailer, Marks & Spencer.

Whilst the environmental angle is clearly important, the move also represents a reaction to higher oil prices. Plastic bags are not ‘free’ to retailers, and their cost is now escalating. Restricting this cost, whilst also gaining ‘green’ credentials, is a ‘win-win’ for them. Similarly, its a ‘lose-lose’ for polymer producers. They have to pay the higher feedstock cost, and will now have lower volumes, so unit costs will increase.

Even worse, it probably marks the start of a more general movement to restrict ‘non-essential’ uses of crude oil. Gordon Brown, UK premier, has now said the UK government will force all supermarkets to charge within a year. Other governments will no doubt follow. The benefits of plastics are not well understood by the general public, and represent a soft target. Operating rates for producers and converters will suffer as a result.