MDN Interview: CEO of Plastics Industry Assoc. LOVES Shale Energy

The 8th Annual Utica Downstream Conference will be held on Feb. 25 in Canton, OH. MDN editor Jim Willis had the opportunity to interview one of the keynote speakers, Tony Radoszewski, President & CEO of the Plastics Industry Association, in December. Tony assumed the role of president & CEO in early 2020, just prior to the pandemic. Jim spoke to Tony about his upcoming talk, to get some insights into the state of the plastics industry in America in general, and in the Appalachian Basin in particular. It was a fascinating discussion.

You’ll find Tony Radoszewski (pronounced rad-ah-chef-ski) is a big fan of the shale oil and gas industry. Shale and plastics are tightly integrated. He’s also a fan of recycling and reusing plastics in creative ways.

The following interview is lightly edited for clarity.

MDN: What is the outlook for the plastics industry as the result of the pandemic and other recent trends, particularly in the northeast and in Ohio?

Tony: You can make the argument that COVID was a big “shot in the arm” for our industry. The amount of personal protection equipment is predominantly made of plastic, whether it’s face masks, ventilators, you name it. And then the downstream effect of the pandemic. People are eating out and getting food delivered. Typically food is delivered in plastic bags and contains foam styrene containers to keep it warm. It’s a short-lived benefit because when the pandemic is over this demand will die down.

What the pandemic did do is help us to balance a part of our industry that was down–the automotive industry. A fair amount of plastics goes into automobiles as you might imagine. Something like 40% of the components in autos is plastic, not by weight but by components. The auto industry was down in the third and fourth quarter of 2019–it was one of those things we were just trying to hold on to. Fortunately, that’s now coming back. That’s good news for us.

Another sector where demand is up is housing, and that may be due in part to COVID because people are looking to buy houses and expand their existing homes. Some people are moving out of the city because they no longer have to live there for work. With the housing increase, our vinyl siding business is way up. Resilient flooring is way up, which is basically made out of vinyl. So you’ve got a lot of good things in the housing sector.

Plastics production increased 11.9% in October, which is much improved from the 6.6% decline we saw in April. Everything tanked in April globally, but we’ve come back very strongly. If you look at plastics material and resin manufacturing overall, it was up to 87.9% which was just barely below the 88.2% in January before COVID hit. So we recovered pretty nicely all things considered.

In Ohio, Pennsylvania, Michigan, in that whole area a lot of our equipment manufacturers are based there. The people who make the steel products that process plastics. What we’re seeing is that shipments of machinery increased in the third quarter which is very good. It was a 15.8% increase following a 4.5% increase in the second quarter so we’re seeing this beautiful trend coming up for demand in equipment, and that’s because the demand for plastics is up. Manufacturing and processing in the Ohio Valley and in Pennsylvania are very strong right now.

MDN: When you think about shale energy and plastics, what is the Plastics Industry Association’s view on shale energy?

Tony: We love it! And you can quote me on that! I’ve been in the plastics industry my entire career, I’ve spent 42 years in this business. With that you see trends. Seven or eight years ago if you went to any technology conference they would tell you that there’s not going to be any more growth in plastics reactors in North America. There’s not going to be any more growth in crackers. None of that, because the cost of energy was so weighted to the Middle East. The advent of fracking and horizontal directional drilling was a game-changer. In 2017, there was somewhere around 11 billion pounds of plastics production added, on the order of a 50% increase in North America. This was in a location where most said you would not have an increase! With the United States being basically the lowest-cost producer of energy in the world (save for the Middle East), that has made us a highly competitive producer.

Plastics in North America are exclusively generated from natural gas rather than from liquids as they are in Europe and parts of Asia, so that’s very beneficial for us. It’s made us the lowest-cost producer of plastic products in the world.

MDN: Given the high demand to produce PPE [personal protective equipment], and given the impact of the storms we had in the Gulf of Mexico, what effect has that had on plastic pellet pricing and the price of plastic products being produced?

Tony: That’s a complicated question. You also have to look at the increase in the production of plastic, the raw material, which is based on an export market. We produce more plastic than we can consume as a country. Look at the downturn in the economy based on COVID, look at restrictions for people who can’t go to work and so can’t produce. I would suspect (I don’t have the exact numbers) the price of materials–because of supply and demand, because demand went down and because supply was still cranking up–it would have an adverse, negative effect on the price. It’s positive for the processor but not so great for the producer. As we get on the road to recovery, our numbers are looking good.

Price depends on what plastic you’re talking about. There’s only one aluminum, like the aluminum in a can. But with plastics, there are seven major types of plastics, like polyethylene, polypropylene, nylons–all used in specific applications. The quantity of those materials is based on overall demand. Most expansions in demand have been for polyethylene and polypropylene.

So I would say right now, prices are good from the processors’ standpoint, those buying plastics, and for the consumer who’s buying the final product. We’re in a very good place with that. I would expect it to continue for the foreseeable future.

MDN: From time to time MDN writes about the connection between shale energy, plastics, and the environmental movement. We’ve heard some environmentalists use the blanket statement that plastics are ‘bad,’ like oil and gas is ‘bad.’ We think such a view comes from a minority of the environmental movement at this point. Do you hear from those who say “plastics are killing the planet” and that sort of sentiment? Is that a big consideration for your association? Are you worried about that sort of thing? And how do you counteract those arguments?

Tony: We are concerned. It’s a major focus of our association. The advocacy on behalf of plastics is one of the key cornerstones of our association. You mentioned it’s a minority, but it’s a very vocal minority. They get the ears of a lot of sympathetic followers in the media and left-leaning politicians. I’ll give you an example.

We had an interview yesterday with a Congressman from southeastern Virginia. He heads up the black caucus and a subcommittee on the environment. It’s the first time we’ve had a chance to visit with him. Again, one of the “blessings” of COVID is that it’s actually easier to see a Congressman or a Senator than it was when such meetings were in person. We had the Congressman’s three staffers and him on a call with myself and two of our folks from our government affairs team. We talked about this very issue. “We” (the collective we) live longer, healthier, and better because of plastics. From the moment you wake up to the time you go to sleep you are touching plastics throughout your entire day. Imagine a world without it!

What critics focus on is the solid waste problem. I’ve said this many times: People are slobs. I walk three miles every morning along a walkway. There are trash cans all over the place. And yet, 10 to 15 feet away I see a Gatorade bottle, I see a plastic bag or a soft drink cup. What we have is not a plastics problem per se. There’s so much plastic because people want it. Nobody is jamming plastics down your throat. People buy it because it’s convenient, it’s inexpensive, it’s sanitary, your food is wrapped in it, it preserves it longer, all those good things. That’s why there’s so much of it.

What we have to do is build a better infrastructure to handle plastic waste. When you have these different types of plastics, it’s a lot harder to separate and get it into the right recycle stream. But our industry has invested billions of dollars in order to help improve that–money spent on technology to sort and separate plastics at municipal recovery facilities. That’s where our focus is.

People want to ban products like plastic bags and straws. Nobody likes drinking from a paper straw! Nobody. So that’s really not the answer. The answer is proper disposal of plastics and awareness of everyone’s individual responsibility to keep the planet clean. We’re working on the mechanisms to recycle, reuse or repurpose those materials. That’s where we’re actively engaged at this point.

MDN: A few months ago I [Jim] virtually attended the Shale Insight Conference held by the Marcellus Shale Coalition. Hillary Mercer from Shell was one of the speakers. Mercer is the person in charge of building the cracker plant in Beaver County. One of the things she talked about was recycling and Shell’s emphasis on recycling. Not only will they make the plastic pellets but they also want to be involved on the other end with recycling. She mentioned something that the layperson doesn’t hear all that often which is there are a couple of different kinds of recycling. There’s mechanical recycling, where you grind plastics up, but she said every time you grind it up the molecules degrade a little bit more. Then there’s pyrolysis or chemical recycling. What can you tell us about chemical recycling?

Tony: We like to call it “advanced recycling.” In advanced recycling, you take a plastic product back down to its original molecules. That technology has just leaped from the bench to scale. Chevron Phillips is the first one to announce they have a full production capability for advanced recycling. You hit something on the head. You might think chemical companies would be the last people who want to support this stuff but they are right there at the top. They realize the importance. Sure it’s a public relations campaign, but it’s also the right thing to do.

We also say this quite a bit: We see a lot of value in plastic scrap. Whether it’s recycled back into what it was before or whether it’s recycled into something different. A lot of the clothes we wear come from PET bottles. The insulation for winter-wear, that fiber is all from PET bottles. It’s a great opportunity.

The NGOs are trying to force us into recycling plastic back into the same exact thing it came from. As you mentioned, sometimes that’s impossible. But you can make lawn furniture out of it. You can make resilient flooring out of it. You can make insulation out of it. Whole different ways of reusing it. So we’re promoting that, and the resin companies are actively behind it and support it because it’s the right thing to do.

MDN: As we’ve often heard and said, we live in the same communities. We don’t want all this plastic waste. We live on the same planet. It’s not in our best interest to allow this to continue. We care, as humans, about this stuff.

Tony: I testified last October at a subcommittee meeting and I made a very clear point of it. We hire over a million people in our industry in the United States. We are the eighth largest industry in the country. Our people don’t wake up every morning thinking, “How can we pollute the planet?” We are people who like clean air, clean land, we like pristine parks and recreation areas.

MDN: It’s the same with the shale industry, with drilling and pipelines. The shale industry wants to be safe and do it right.

Tony: To that point, plastics play a very important role in fracturing and drilling. Firstly, in moving water to drilling sites. Quite of bit of water is moved through plastic pipes. And all the well sites are built for environmental standards. Drilling pads typically use polyethylene pond liners–a thick sheet of polyethylene built around the pad to protect the environment.

After a well pad is built and gets shrunken down to a fourth of its original size, we have members who have built plants right in the Marcellus area to reprocess and recycle that excess film right away.

MDN: Reshoring, bringing manufacturing back to the United States from other countries. Do you see that happening? A lot? A little?

Tony: A lot. There’s a lot of moving parts to that issue. A number of years ago I sat on the board of directors for the Council of Manufacturing Associations. That’s a part of NAM, the National Association of Manufacturers. Jay Timmons, the CEO of NAM, made a statement prior to the 2016 election. He said if you remove burdensome regulations–not all regulations (we’re for worker safety, clean air, all those things), but there’s a whole host of burdensome regulations–if you remove those, the United States becomes the lowest-cost producer in the world because of our efficiencies and modern equipment. What happened in the Trump Administration, one of the key things he ran on, was the significant reduction in regulations. I think his campaign said for every new regulation two would be eliminated. I think the number got up to eight, at one point in time! What happened is regulations were removed and taxes were lowered. The U.S. is one of the highest-taxed manufacturing entities in the world. When taxes came down and burdensome regulations were eliminated, people who went to manufacture in Asia, China, Vietnam, Southeast Asia, wherever, realized they would rather have their facilities close at hand. Quality issues are more easily handled closer to home, and there’s less loss of intellectual property.

After China was admitted to the WTO [World Trade Organization] in 2001, a lot of manufacturing went over there–a bad thing for us but a good thing for China. What happened is China developed a middle class, and now labor costs in China have gone up and it’s not as attractive as it was before. If you can manufacture here in the U.S. people want to do it here. You’ve seen an increase of 600,000 manufacturing jobs in the U.S. since 2016. The thing is, can we keep that number going?

MDN: You mentioned the Trump Administration has eliminated regulations. Do you have a concern about the incoming Biden Administration?

Tony: It will be a challenge for us. During the campaign when Joe Biden was running for the nomination, at a campaign whistle-stop some young lady asked him about getting rid of plastics. Biden said yes, we should get rid of plastics. We fired off a response and told Biden it is irresponsible to say stuff like that. Kamala Harris is the Vice President-elect. She’s on record wanting to ban plastic straws in California.

Biden and Harris are on record as not being friends of the plastics industry. What that means for us is that we have to step up our game and we are doing it, positioning ourselves as reasonable people. We don’t want to say “no” to everything, that’s not what we’re about. But if we can work with both sides in a bipartisan way, we are all for it. In fact, there was legislation just passed in the Senate on “Save our Seas 2.0” which was bipartisan. Senator Sullivan (Republican) from Alaska and Senator Whitehouse (Democrat) from Rhode Island were the big sponsors for it. We were able to demonstrate that our industry was all for working for solutions. We were willing to step up as an industry, in time and talent and finances, to make sure we do the right thing.

One of the things we would like to see is a divided Congress. When you have a divided Congress then they have to start working together and form a consensus rather than just ramming stuff through. That’s the way the Founders established it. If you have a speed bump there, you are forced to work together. We look forward to that opportunity.

MDN: We’re talking to you from the Binghamton, New York area. As we often say, we live and work behind enemy lines. Here in New York, we have a single-use plastic bag ban. It was interesting that the ban was delayed as soon as COVID hit, but they’ve returned to it recently within the past month or so. All of our plastic bags are disappearing and we imagine straws are not far behind.

Tony: We’re actively involved in that. Our government affairs team, and also our organization ARPBA [American Recyclable Plastic Bag Alliance], they are the ones actively involved in trying to fight these bans. Here’s one thing people don’t realize: What are you going to replace it with? People forget plastic bags came about because environmentalists said it was horrible we were cutting down all those trees for paper bags. So now they want to go back to that.

MDN: Anything we didn’t ask that we should have?

Tony: We talked a little bit about it, but the whole recycling thing is very, very important. We see that as one of our rallying cries in the next decade–to enhance that area as one of our big focuses. The natural gas industry, whether the Marcellus play or up in the Dakotas and Montana or down in West Texas, we love that industry. It’s made us a very competitive industry and we want to do everything we can to support it and make sure we maintain energy independence as a country. It’s critical not only from an economic standpoint but from also a security standpoint. We’re a strong advocate for shale energy.