President Trump’s Mexico policy is the elephant in the room as the U.S. plastics industry emerges from a difficult 2016.
“Shipments of plastics equipment rose steadily during the six-year period from 2010 through 2015, but this trend hit a plateau in 2016,” said Bill Wood an economist, commenting late last year on data reported by the PLASTICS Committee on Equipment Statistics.
Milacron reported that demand for large injection molding machinery was weak in 2016, creating demands for price discounts.
U.S. 2016 production of resins for domestic use and exports was 79.6 billion pounds, a 1.7 percent increase as compared to the same period in 2015, according to data from the American Chemistry Council.
The stock market has boomed since Donald Trump’s election due to high hopes of economic growth fueled by tax cuts, infrastructure spending, and reduced regulations.
That ebullience has not carried over to the plastics industry in the United States. U.S. production of major plastic resins totaled 6.8 billion pounds during January 2017, a decrease of 0.9 percent compared to the same month in 2016.
The consensus economic forecast is for a 2.1 percent growth in U.S. GDP this year, up from a 1.9 percent growth in 2016.
Yet, there is a sense of caution in the plastics industry.
In its recent earnings webcast, Milacron forecast zero to two percent organic growth this year. Considering that demand is still fairly strong in China and India, that forecast does not indicate a lot of confidence in the underlying strength of the U.S. plastics market.
And the trade situation with Mexico is unstable.
That’s a problem because the American plastics industry has an $11 billion trade surplus with Mexico
Mexicans are angry about the talk of “the wall” and border adjustment taxation. Bills have already been introduced in the Mexican legislature to favor imports from countries other than the United States.
Officials at the Plastics Industry Association (formerly known as the Society of the Plastics Industry) are collecting data from members on how Mexican trade restrictions could affect them in an effort to thwart any harmful changes.
The Mexican trade issue injected uncertainty into what was already a soft American market.