MPMA Roadshow 2015 24.03.2015

Trends

Strategies

Prospects

Conclusion

Source: ICIS Consulting

In 2005–2013, the global resin consumption grew by 45m MT to 202m MT, corresponding to an average annual consumption growth of 3.2%.

Global annual GDP growth was 2.3% during the same period.

The market is likely to be better over the next few years. Global consumption of the nine major thermoplastics should grow by around 4.5% per year during 2013-17, adding a further 40m MT of polymers demand by 2017.

Source: ICIS Consulting

Demand for polymers has been growing at different rates in the various regions of the world, based on the maturity of the different markets.

The different regions will continue to perform unevenly, with the emerging regions growing at rates typically three times higher than those of North America and Europe.

What happened in the US..??? … and the UK …..???...

Consumption is generally the principal driver of a robust GDP.

Consumption can, directly or indirectly , account for 60% of the GDP.

However, consumption can only take place if the people are gainfully employed.

Unemployment in the US and UK spiked when manufacturing jobs were lost …

No jobs = no money = no purchasing capacity = manufacturing and other sectors of the economy spirals downwards.

China boomed, even without the superior technology or the “Apple-like” type of innovation, …. because the manufacturing sector was humming along …. creating jobs … spurring consumption ….

Innovation creates wealth … for a few …but manufacturing creates jobs for the masses … that is the REALITY …

Trends of the Manufacturing Sector

Source: Economic Reports

Malaysia, following Germany or US/UK?

MNCs are not expanding, some are relocating.

Less conducive manufacturing environment, Government is emphasising more on the service sector and selected high-end manufacturing activities. Pressure of labour issues.

MNCs have more choices: Indonesia, Vietnam, Thailand, etc.

Migration to China has however abated due to the increase in labour cost and increasing difficulty in securing workers in certain main areas.

Domestic sector: construction sector is still strong, however, growth for the automotive and electrical & electronics is minimal.

Packaging sector remains bright, both domestic and export.

Third generation effect: some are leaving the plastics industry – not keen in the trade, but others are stepping up to the challenge.

Labour issues will continue to weigh negatively on cost and availability of workers.

.

(1) Reduction in packaging materials – thinner, stronger design, lighter, simpler.

(2) Packaging closer to manufacture – less empty cartons carried in lorries.

(3) Smart packaging – more use of RFID technology for electronic tagging, tracking of stock, as cost of RFID tags falls.

(4) Better recycling – easier recycling of packaging, higher percentage recycled materials in new packaging.

(5) Space-saving packaging – e.g. growth of square cartons for drinks.

(6) Customer returns packaging – improvement in re-seal pouches to keep pace with huge growth of online ordering of e.g. clothes where customers often order several sizes to try on, returning most goods ordered.

(7) Better ways to print branding/marketing on plastics e.g. bottles.

(8) Less use of solvent-based inks for printing.

(9) Consolidation of packaging industry – economies of scale with larger machines, faster turnarounds, next-generation technology.

Source: GlobalChange.com

The AEC aims to transform ASEAN into a region with free movement of goods, services, investment, skilled labour, and freer flow of capital.

The AEC areas of cooperation:

(1) Human resources development and capacity building – Malaysia is lacking both skilled and unskilled labour.

(2) Recognition of professional qualifications – a common standard must be established for mutual recognition.

(3) Closer consultation on macroeconomic and financial policies – more consistency on regional policies.

(4) Trade financing measures – facilitate cross border investments/joint ventures.

(5) Enhanced infrastructure and communications connectivity – creating a more business friendly environment, if you are doing intra-Asean trade.

(6) Development of electronic transactions through e-ASEAN – more efficient and speedy import/export procedures.

(7) Integrating industries across the region to promote regional sourcing – greater economies of scale.

(8) Enhancing private sector involvement for the building of the AEC – more public-private collaborations.

Increase productivity and efficiency – need to focus on quality throughput. Automation/machine upgrades – investment is not a choice, it is a necessity. Reduce dependency on workers, especially unskilled general workers.

Allocate resources to a winner ….. make what the market wants, not what you can make …..

Move towards higher value-added products with better margins. Product differentiate, instead of price differentiate. (Invest in people/machines).

Forward and backwards integration – suppliers and customers technical support/optimisation

Keep up with technology – tap on suppliers’ resources, exhibitions/trade fairs, magazines, etc.

Possible to monetise your current factory land ? Relocate to purpose built factory – better new floor space utilisation/process flow translates to improvement in yield, safety and workers work conditions.

Seek new markets - intensify marketing/sales activities…the world is out there …. Global market is huge.

Place emphasis on customer loyalty and develop products that they want to invest in …focus on long term relationship – there are always ups and downs

Size matters - better pricing, supply reliability and technical support from suppliers.

Size matters - provide comfort to key customers on wider range of capability and capacity. Ability to grow with them.

However, may be a challenge for SMEs as majority are family owned.

Merger integration issues may not result in 1+1 = more than 2.

Automation will take time but moving forward now is a necessity.

Reinvestment Allowance (RA) – great help to companies but many have their RA lapsed after they started to make claims 15 years ago or earlier. (continuing to pursue this matter with the Government – especially when the authorities are pressuring manufacturers to reduce dependency on foreign workers.)

Depreciation in the Ringgit poses a challenge due to higher cost of imported machines

MPMA-Talent Development Programme (TDP)

The Malaysian government allocated a grant of RM3 million to MPMA for the MPMA-TDP ( Phase 1)

MPMA-TDP’s primary objective is to create a pool of knowledge-based technicians/engineers as envisioned in the Government’s Strategic Reform Initiatives (SRI) for human resource development as outlined in the New Economic Model (NEM) for Malaysia.

However, efforts to source for balance RM7 million for Phase 2 is still ongoing.

Reduction in weight will translate to lower production/transport costs and lower carbon footprint.

Downsizing, light weighting and downgauging – “less is more” approach. New polymer and processing technology allows for plastic products to be made thinner and lighter and yet retain or exceed the mechanical properties that is required for many applications.

Changes in lifestyle has resulted in an evolution in design – compact, light, mouldable, etc. Advanced printing, extrusion, moulding processes have transformed the shape and design of many products.

Food packaging – changes in family unit, working/family lifestyle, rural-urban migration, smaller family units, etc .

Food waste reduction – packaging cuts down waste tremendously. Global population rapid growth putting strain on food production. Urgent need to cut down on food waste

Desire for lower carbon footprint targets – lighter product/packaging. Particularly with global warming being a major issue.

Plastics Make it Possible

Source: ExxonMobil

Temporisation 0,5 s Temporisation 0,5 s

200µm

80µm

2015

1990

Source: Study conducted by ExxonMobil Chemical and peer reviewed by external panel per ISO 14040 & 14044 -- Photos used are representative of potential product applications only

70%

Water consumption

30%

100%

Paper sack 1 Paper sack 2 Exceed™ mPE

Source: Study conducted by ExxonMobil Chemical and peer reviewed by external panel per ISO 14040 & 14044 -- Photos used are representative of potential product applications only

60%

Energyconsumption 55%

100%

Paper sack 1 Paper sack 2 Exceed™ mPE

Source: Study conducted by ExxonMobil Chemical and peer reviewed by external panel per ISO 14040 & 14044 -- Photos used are representative of potential product applications only

100%

Weight

50%65%

Paper sack 1 Paper sack 2 Exceed™ mPE

Source: Study conducted by ExxonMobil Chemical and peer reviewed by external panel per ISO 14040 & 14044 -- Photos used are representative of potential product applications only

Damage rate up to

5%

Damage

Damage rate

negligible

Over the years, the Malaysian plastics industry has transformed from being manufacturers of low-end consumer products for import-substitutions, into manufacturers for high-end industrial applications and for the export-oriented sector.

Prospects for future developments are bright as plastics will continue to innovate to be the material for the future in many applications.

Co-extrusion technology = less means more through downgauging.

Enhancement in machine/processing technology.

Enhancement in polymer technology.

LCA savings in carbon footprint, water, energy, waste disposal.

Higher awareness of global warming and water shortage concerns.

To face the global challenges, the Malaysian plastics industry will focus on new product development, advanced materials, advanced technology and skills upgrading to develop into a world class player.

This will enable the Malaysian plastics industry to compete effectively in the world market through high quality “product differentiation” instead of merely low cost “price differentiation”.

PLASTICS MAKE IT POSSIBLE … Innovate!

Malaysian Plastics Manufacturers Association, 37, Jalan 20/14, Paramount Garden, 46300 Petaling Jaya, Selangor, MalaysiaTel: 03-7876 3027 Fax: 03-7876 8352