Three markets to watch amid stimulus efforts

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The Democrat Party sweep of the Georgia runoff senatorial elections this week means President-elect Joseph Biden will take office on 20 January with his party in control of both houses of Congress and thus an easier path to enacting the policies on which he campaigned.

The blog previously outlined some possibilities for pandemic-recovery economic stimulus that might be prioritised under a Biden administration, but what chemical and polymer markets might be affected directly by them? Here are three markets to watch for in 2021 based on stimulus possibilities:

Polyvinyl chloride (PVC)

PVC demand is largely driving by construction, and in particular for pipe and conduit production, which soaks up more than 40% of North American PVC demand, according to the ICIS Supply & Demand Database. At present, the database projects 3.7% year-on-year demand growth for PVC pipe and conduit for construction, but the feeling here is that forecast is underselling the conditions on the ground.

With Democrats now set to take the reins of the federal executive and legislative branches, the likelihood of further significant economic stimulus in the US has grown, and one area that could even get some Republicans on board would be infrastructure investment focused on building or repairing roads, bridges, ports, public structures and such. Such investment would be positioned as job and economic growth engines, but it also would lead to higher PVC demand that could exceed that 3.7% growth expectation for 2021.

Low density polyethylene (LLDPE)

Demand for consumer staple goods such as foods and personal care products – many of them packaged with LLDPE – has remained elevated during the pandemic, and for most of the world the pandemic continues to rage on and will continue to be top-of-mind through H1 2021. With the likelihood of further direct stimulus payments to US taxpayers, that should help prevent a fall-off in demand in the short term while helping prop up nonfood packaging demand susceptible particularly to decreases in expendable income.

The ICIS Supply & Demand Database projects a 6.2% increase in US LLDPE demand for food packaging use and a 5.7% rise for nonfood packaging use. Both numbers feel a bit low in a Democrats-in-control environment in which the federal government will be looking to pump dollars into consumers’ hands to spend. That should be good news to the LLDPE industry, as food and nonfood packaging are the top demand centres for the polymer. Food packaging makes up 18% of US LLDPE demand while nonfood packaging makes up 15%.

However, another segment of LLDPE demand – retail bags – may be set for lowered demand growth expectations in the coming months amid possible new regulations at the federal and state levels.

Recycled plastics

News of the Georgia elections swinging the US Senate to Democrat control led to stock values in US recycling-related companies to surge higher, as expectations are that a Biden administration coupled with a Democrat-controlled Congress will enact policies and legislation to benefit sustainability and recycling efforts and curtail pollution and single-use plastics demand.

Those new actions could include stimulus targeted towards increasing the recovering of post-consumer and post-industrial plastics, as well as encourage or mandate greater use of recycled polyethylene terephthalate (RPET), PE (RPE) and polypropylene (RPP). While a national initiative similar to California’s recently enacted AB 793 recycled content mandate seems a bit too ambitious, policies and legislation that promote the evolution of recycled polymer markets in the US via increased supply and demand would be an opportunity for a packaging supply chain increasingly interested in circularity.

Disclaimer: The views in this blogpost should in no shape or form be taken as actual forecasts and are my personal views only.

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