Plastics and chemicals looking forward to success

While there has been a decline in manufacturing in general, that is not the case with plastics and chemicals. And, as Alan Johnson writes, the industry is positioning itself to take advantage of future opportunities.

According to Samantha Read CEO of Plastics and Chemicals Industries Association (PACIA), the industries are proactive and are well positioned to take advantage of a range of factors, particularly population growth and economic growth in our region.

“About 12 months ago we produced a strategic industry roadmap, where the authors looked at growth opportunities for our industry both domestically and in the region,” Read (pictured) told Manufacturers’ Monthly.

“Areas they highlighted included agriculture and food, mining, healthcare, building and construction, and materials recycling, which are the industries we play a key role in the value chain to deliver into these areas.”

She highlighted the fact that the Australian chemicals and plastics industries are critical enablers and solution providers to 109 of Australia’s 111 industries.

“Investment and innovation in the Australian chemistry industry also has the power to multiply through these supply chains, exponentially increasing benefits,” Read said.

“Our industry is proactive in positioning itself to take advantage of these opportunities. Because we are embedded in so many supply chains in Australia, in industries that are growing, I think the picture is a little bit different for our industry.”

While rejecting the phrase ‘environmental vandals’, Read admitted the plastics and chemicals industries do get confused with how the products are used and disposed of.

“Improving the recognition of our industry as a valuable and a responsible part of the community we operate in is really important and is something the industry works hard at,” she explained.

“A key part of this is the need to make sure the community understands that the products of the plastics and chemicals industries are vital to Australia’s economy and the quality of life we have.”

She pointed to the humble milk bottle as a vital component to the distribution of fresh milk every day; and also highlighted the industries improvements in health and safety.

“We have just released a report which looks at the health and safety performance of the industry over the past ten years,” Read said.

“We have had a decade of continuous improvement of health and safety performance within the industry with over 40% reduction in incidents over that period. A tremendous result.”

While Read remains optimistic, one major issue facing the plastics and chemicals industries, probably more than most, is the unprecedented changes in Australia’s gas market.

“Natural gas is a significant issue for our industry and addressing the supply tightness in the domestic gas market is critical to the industries competitiveness,” she said.

In July this year, in alliance with five leading industry associations, PACIA released a comprehensive analysis into the impact on industry of the changes in our gas market.

The report titled ‘Gas Market Transformations – Economic Consequences for the Manufacturing Sector’, undertaken by Deloitte Access Economics, reveals the implications of forecasted Australian domestic gas price increases and supply tightness, and the severe side effects it is expected to have on the Australian economy.

“This analysis fills a major evidence gap. While we have known that prices have been rising, it has not been clear what this will mean for our industry and the broader manufacturing sector,” said Read.

The report brings to light major impacts on the Australian manufacturing sector from LNG export growth. It forecasts a loss of national manufacturing output of approximately $118bn by 2021 in net present value terms. Job losses for the same period are forecast to be 14,600.

“The impact on the chemicals and plastics industry is significant, with forecast losses of $13.7bn in manufacturing output and 4,000 jobs by 2021. This would represent a devastating loss of highly skilled jobs,” said Read.

“The projected hit to revenue would be a serious blow to businesses already operating in very challenging business conditions.

“Many in the Australian chemistry industry are significantly trade-exposed with limited ability to pass on cost increases.

“Revenue loss limits investment for future growth and employment. This is at a time when the Australian economy needs the strength and resilience that comes from diversification and improved competitiveness.

“There is no reason for Australia’s natural wealth to be spread so unevenly in the economy, given Australia’s abundant gas reserves. With smart reform and increased supply, Australia can support both strong energy exports and a thriving domestic manufacturing sector that adds value to its natural resources.

“Natural gas plays a unique role in our industry not only as a clean source of energy, but also as an essential and non-substitutable feedstock for chemicals and plastics manufacturing.

“Our industry contributes significant value-add in transforming gas through chemistry into ammonium nitrate used to fertilise our crops, and polyethylene to make water pipes, milk bottles and silage wrap. These products of chemistry are vital to our economy and to our quality of life.

“Every day, Australians open their fridge and take out a bottle of fresh milk. This milk bottle cannot be produced without the natural gas that makes the polyethylene, which is a lightweight and easily recyclable material. Australian farmers, customers and families all depend on reliable supplies of this high quality polymer to safely deliver our milk that is so valuable to our everyday lives.

“At the moment we are working with the federal government looking at what can be done to address the market issues that exist.

“We don’t support a reservation policy as we don’t believe it would address the challenges we have.

“Our three key asks in the policy area are to ensure we have adequate supply, so increasing the supply and availability of gas, secondly making sure there is sufficient competition in the market, and thirdly making sure we have transparency in the market, and is operating as a market should.”

It’s early days, but we are pleased to see a proposed gas pipeline from the NT to the East Coast, and governments are coming together to bring on new supply.

In a bid to improve the industries’ success rates in bringing research through to commercialisation PACIA recently launched the Chemicals and Plastics Innovation Network and Training Program.

Read said the association has already seen a tremendous response from industry to this initiative.

“This is recognition of the vital importance of strong collaboration between academia, the research community and industry in helping to drive innovation,” she said.

The role of innovation in helping to create competitive advantage for the Australian chemistry industry cannot be overstated.

“Australia’s extremely valuable technology and research base relies on the strong interconnectivity of manufacturing with innovation. If we want the chance to make the next breakthrough technology in Australia tomorrow, we need to be investing in manufacturing today,” Read said.

The Program is led by Monash University and PACIA, and underpinned by support from the Victorian Government. It will have an initial investment of $5.9m including in-kind support, in an innovative co-founding partnership between over 20 industry participants, the State Government and academia.

“Basically PHD students from Monash University are effectively placed into the companies and will work directly with the companies on different research projects,” said Read.

“It’s great to see closer partnerships between industry and academia, which I think is consistent with the government’s recent Industry Innovation and Competitiveness Agenda.”

Read said she was very pleased with the contents of the Agenda on a couple of fronts.

“We were particularly pleased to see the viable contribution of science and technology in driving our competitive advantage,” she said.

“We were also pleased to see the government recognise the need to reduce red tape and look at deregulation issues in our industry.

“The issues addressed related to the acceptance of assessments that had already been made by trusted international regulators.

“The move was really significant and will have a big impact on our industry, particularly the recognition of assessments and data from the EU. This will really reduce complexity and facilitate the introduction of newer and safer chemicals into the Australian market.”