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PLASTIC INDUSTRY OF PAKISTAN

PRESENTING BY:MUHAMMAD TALHA AHMED (SP06-BB-0017)

MUHAMMAD OZAIR AMIN (SP06-BB-0061)

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PLASTIC INDUSTRY IS A MOTHER OF ALL OTHER

INDUSTRIES.

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AGENDA

• Definition Of Plastic• Introduction• History• Global Overview• Industry Overview • Types Of Plastics• Raw Materials• Plastic Processing• Consumption Of Plastics• Plastics Units

• Duties & Taxes• Export Potential• Recycling Scrap• End Users• Interest Group• Support Service Institution• Environmental Hazards• SWOT Analysis• Problems• Suggestion

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DEFINITION OF PLASTIC• A plastic is a type of synthetic or man-made polymer; similar in many

ways to natural resins found in trees and other plants.

• Webster's Dictionary defines polymers as: “any of various complex organic compounds produced by polymerization, capable of being molded, extruded, cast into various shapes and films, or drawn into filaments and then used as textile fibers”.

• Plastics are used because they are:

•Attractive

•Hard

•Soft & Rubbery

•Easy To Clean

•Light Weight

•Hygienic

•Easy To Shape & Color

•Economical

•Flexible

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INTRODUCTION• In this modern era a world without plastics is unimaginable.

• Plastics can be made to resemble and replace such diverse materials as metal, wood, glass, stone, cloth, rubber, cardboard and leather etc.

• It is used in manufacturing automobiles, television, refrigerators, electrical goods, furniture, house-ware, defense products, etc.

• The plastic industry of Pakistan has seen a remarkable average annual growth rate of around 15 per cent during the last four years against a global average of 8 per cent despite severe technical and institutional impediments.

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HISTORY• 1953 - First plastics and polymer research center created with the

establishment of Pakistan Council of Scientific and Industrial Research (PCSIR) in Karachi. Plastics resin is sold for Rs.3.05 per pound in local markets.

• 1963 - Average prices of plastics resin move up only 90 Paisas in ten years. Exports Promotion Bureau is created.

• 1966 - Arkoy Chemical Industries becomes the first unit in Pakistan to manufacture PVC pipes.

• 1967 - Famous brand of PVC pipes "Galco" is introduced in local markets.

• 1971- Government begins to compile statistics of imports. Plastics raw materials imports are recorded at 30.7 million rupees.

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HISTORY (CONT..)• 1973 - 120% increase is recorded in the prices of plastics resins in 20

years. Plastics products worth 0.465 million are exported for the first time.

• 1980 - Pakistan Plastics Manufacturers Association is formed. The association is registered with the Ministry of Commerce in the month of May.

• 1982- Poly Industries sets up a cast acrylic and polystyrene sheet plant at Hub, Lasbella, some 35 km west of Karachi.

• In 1988,Plastics Technology Center (PTC) was established by FCCCL (The Federal Chemicals & Ceramics Cooperation Limited), in Karachi. With the inauguration of the centre in October, polymer sciences education begins in Pakistan, which later on provides highly qualified and skilled manpower to the plastics industry.

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GLOBAL OVERVIEW• With a global annual average growth rate of around 7.5 per cent,

consumption of all types of polymers has increased from 8 million tons in 1960 to around 180 million tons in 2003.

• The South East Asian countries have registered fastest growth of 15 per cent and are expected to continue growing at much higher rate in future.

• Production of major plastics raw materials like Polyethylene (PE), Polypropylene (PP), Polyvinyl Chloride (PVC) and Polystyrene (PS) is a capital-intensive activity and is thus confined to large scale manufacturing sector.

• The downstream plastic processing industry is mostly concentrated in the small-scale sector owing to high labor to capital ratio.

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GLOBAL OVERVIEW (CONT..)• Such industries are ideally suited for creating employment opportunities.

According to an estimate, 5 workers are required for processing 10 tons of plastics.

• Plastics consumption has traditionally been the highest in USA, Europe and Japan amounting to 75% of global consumption.

• Consumption in China, Taiwan, Korea, Thailand, Malaysia and India has increased manifold during the last few years.

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PER CAPITA CONSUMPTION OF PLASTICS

COUNTRY UNIT AVERAGE

Pakistan

India

China

World

Kg.

Kg.

Kg.

Kg.

3.1

3.3

7.0

17

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INDUSTRY OVERVIEW• The Pakistan Plastic industry comprises of an up-stream organized

segment having 7 units.

• A down-stream segment dominated by a large informal sector of over 5,000 units & the down-stream plastic processing industry also comprises of an estimated 700 organized units.

• Total investment made by the large-scale upstream plastic industry is around Rs. 5.677 billion. An estimated Rs 10 billion has been invested by the down-stream plastic industry of Pakistan.

• The industry attracted investment amounting to more than US$ 260 billion, almost half of which was foreign direct investment (FDI).

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INDUSTRY OVERVIEW (CONT..)• Particular growth is being seen in exports of plastic components for the

automobile industry.

• The industry is contributing more than Rs7.5 billion annually to the national exchequer in shape of custom duty, sales tax and income tax.

• Its contribution to the gross domestic product (GDP) was 1.69 per cent.

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TYPES OF PLASTICS• There are two types of plastic produces in Pakistan.

1. Thermoplastics

2. Thermosetting Plastics

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THERMOPLASTICS• Plastics, which are capable of being repeatedly softened by heat and

hardened by cooling, are called Thermoplastics.

• Polyethylene (PE), Polyvinyl Chloride (PVC), Polystyrene (PS), Poly Propylene (PP), etc. fall in this category.

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THERMOSETTING PLASTICS• These are plastics which when cured change into a substantially infusible

or insoluble product.

• These plastics are generally produced by addition polymerization.

• This category includes phenol formaldehyde, urea formaldehyde, melamine formaldehyde, polyglycol, etc.

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RAW MATERIALS• Polyethylene (PE)

• Polypropylene (PP)

• Polystyrene (PS)

• Polyvinyl Chloride (PVC)

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POLYETHYLENE (PE)• PE, the leading thermoplastic material, has established its usage in

packaging film, household articles, automotive and industrial parts.

• Valika Chemicals, Karachi was producing polyethylene in 1960s, which has since closed down. Now there is no plant producing polyethylene.

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POLYPROPYLENE (PP)• PP is used in the form of woven bags, household articles, furniture and

packaging film.

• There is no plant producing polypropylene at present.

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POLYSTYRENE (PS)• PS is being consumed in electrical and electronic parts, household

articles, automotive parts and packing material.

• Pak Petrochemical Industries, Karachi is producing polystyrene from imported styrene.

• This plant started production in 1987 with an initial capacity of 5,000 MTPY. The capacity has now reached 27,000 MTPY.

• There are three grade of PS produced.

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PRODUCTION, IMPORT & CONSUMPTION OF POLYSTYRENE (PS) (MILLION TONS)

YEAR PRODUCTION

IMPORT CONSUMPTION

1997-98 1,470 11,798 13,268

1998-99 1,302 16,387 17,689

1999-00 1,017 14,452 15,469

2000-01 11,627 18,938 30,524

2001-02 16,394 7,756 23,398

2004-05 36,000 N.A 23,400

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POLYVINYL CHLORIDE (PVC)• PVC is used for doors, windows, pipes & fittings, profiles, food

packaging, furniture, electronic components, foot-wear and cables.

• Engro Asahi Polymer & Chemicals started its production in December 1999 at Port Qasim, Karachi.

• It has an installed capacity of 100,000 MTPY & the project was completed at the cost of Rs 4.0 billion.

• It has the capacity to produce 5 grades of PVC.

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PRODUCTION,EXPORT & IMPORT OF POLYVINYL CHLORIDE (PVC)

(MILLION TONS PER YEAR)

YEAR PRODUCTION

EXPORT IMPORT

2000 65,000 25,512 34,602

2001 68,600 12,900 19,268

2002 83,600 16,407 13,144

2004 100,000 30,000 13,150

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DEMAND & SUPPLY PROJECTION(000 MILLION TONS)

PRODUCTS CONSUMPTION ESTIMATED DEMAND

  2001 - 2002 2004 - 2005 2009 - 2010

Polyethylene (PE) 157.5 235 340

Poly Propylene (PP) 144 150 205

Polyvinyl Chloride (PVC) 78 95 120

Polystyrene (PS) 23.4 35 45

Total 402.9 515 710

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LOCAL PRODUCTION

PVC 83,600

Polystyrene 16,394

Unsaturated Polyester Resin (UPR)

4,140

Alkyd Resin 1,644

RAW MATERIALS QTY/MT

Total 105,778

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MAJOR PLASTICS RAW MATERIAL MANUFACTURERS

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BREAKDOWN OF PLASTICS MATERIAL WITH GROWTH

Plastics End Use Industries%

Growth

Poly Vinyl Chloride (PVC)

Pipes, Artificial Leather, Cable Coating, Packaging, Footwear 10

Polyethylene (PE) Film for Packaging, Bottles and Pipes 27

Polypropylene (PP)

Woven Bags, Auto Parts, Packaging, Pipes House ware & Medical Applications & Pipes 17

Polystyrene (PS)

House & Sanitary Wares, Auto Parts, Electrical Parts 6

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PLASTIC PROCESSING• There are several different processing methods used to make plastic products.

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CONSUMPTION OF PLASTIC

DESCRIPTION CONSUMPTION (M.T)

Total Available For Consumption

711,787

Local Production (Estd.) 100,000

Total Import (Actual) 611,787

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PLASTIC UNITS

PROVINCE WICE PLASTIC UNITS

Punjab60%

Sindh30%

NWFP7%

Balochistan3%

Punjab

Sindh

NWFP

Balochistan

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CITY WISE PLASTIC UNITS

40%

25%

12%

7%4% 3% 3% 3%

8%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Series1

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MANPOWER ENGAGED WITH PLASTIC UNITS

MANPOWER ENGAGED WITH PLASTIC INDUSTRY

360,000, 60%180,000, 30%

42,000, 7%

18,000, 3%

PUNJAB

SINDH

NWFP

BALOCHISTAN

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DUTIES & TAXES• Plastics sector remains one of the major contributors in terms of the

amount of duty and taxes paid to the Government.

• During the last two decades, import duties have been gradually reduced from 105 percent to 10 percent on major plastics materials.

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DUTIES & TAXESDUTIES & TAXES %

Custom Duty (All Plastics) 5%

Polyethylene 5%

High Impact Polystyrene 5%

Pet Material 10%

Sales Tax 15%

Income Tax on Imports 1%

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EXPORT POTENTIAL• The potential of export in two sectors.

1. Plastic Materials

2. Finished Goods

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A. PLASTIC MATERIALS

• PVC: Pakistan has become a plastics material exporting country.

• In the year 2000, export of PVC has been 12,000 m. tons worth $ 8 million and the unit was expecting to increase export to 30,000 m. tons.

• The product exported to the countries: Sri Lanka, Bangladesh, UAE, China, Hong Kong, Vietnam and Nigeria.

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• PS: Polystyrene is being produced by Pak Petrochemical Industry.

• 50 percent of the production is being exported to Bangladesh, Sri Lanka and Nepal.

A. PLASTIC MATERIALS (CONT)

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B. FINISHED GOODSYEAR QUANTITY VALUE

  (MILLION TONS) (MILLION RS.)

1996-97 4,873 238

1997-98 12,325 600

1998-99 6,780 443

1999-00 11,035 686

2003-04 N.A. 33.4*

2004-05 N.A. 111.5*

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RECYCLING / SCRAP• Plastics scrap recycling has developed into an industry in Pakistan.

• About 400 known units are engaged in recycling of Plastics scrap.

• Presently Plastics waste is not being imported.

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PROCESS OF RECYCLING• There are three process of recycling.

1. Collection Of Scrap

2. Process Stages

3. Applications

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PROCESS 1COLLECTION OF SCRAP

• Household waste of broken unusable Plastics items.

• Industrial Plastics waste

• Plastics cans, container, etc.

• Hospital waste such as disposables syringes, canolas, etc.

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PROCESS 2PROCESS STAGES

• Collection of scrap.

• Sorting is done at site and also at the time of collection.

• Cutting to reasonable processing size.

• Washing.

• Melting to form lumps.

• Passing through cutter to have granules or into pieces

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PROCESS 3APPLICATIONS

• The recycled material is used for manufacturing of low cost and inferior quality products such as:

• House holds utensils

• Sandals / Chappals

• Washers and seals for water supply fittings

• Other Plastics goods.

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END USERS• The end-users of various categories of plastics processed goods are.

A. Construction

B. Consumer Goods

C. Medical Products

D. Automotive

E. Electronics

F. Other Appliances

G. Packaging

H. PP Woven Sacks

I. Furniture & Fixture

J. Paints, Paper & Textile

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END USERS

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END USERS

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INTEREST GROUPS

• There are two groups which are taking keen interest in Plastic Industry.

1. Pakistan Plastic Manufacturers Association

2. Lahore Chamber Of Commerce & Industry

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1. PAKISTAN PLASTIC MANUFACTURERS ASSOCIATION

• The PPMA was established to safeguard the interests of Plastic Manufacturers in Pakistan in 1980s.

• The main objectives were to protect, promote, encourage and develop plastic processing industry in Pakistan and raise the production standards of its member enterprises.

• The Association often holds certain seminars, trainings and Annual Exhibitions.

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2. LAHORE CHAMBER OF COMMERCE & INDUSTRY

• Lahore Chamber is a premium institution providing different kinds of services to Plastic Industry.

• These activities range from providing membership of the institution to holding different International Exhibitions.

• Standing committee on Petro-Chemicals & Plastic meet once in a month to discuss issues and problems of the sector and then formulate proposals to be sent to the government or raised through the chamber platform.

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SUPPORT SERVICE INSTITUTION

• There are two support service institution.

1. Financial Institution

2. Technical Institution

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1. FINANCIAL INSTITUTION• Commercial banks and specialized Financial Institutes (SME Bank,

PICIC, etc.) are individually linked to the industry.

• The demand of the cluster has been on the increase for expansion and the finances are mostly required for working capital needs, longer term supply contracts and machinery leasing.

• The Loan Repayment history of the cluster on the whole has been remarked as excellent.

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2. TECHNICAL INSTITUTION• Technical institution are also divided into two categories.

A. Technical Education & Vocational Training Authority

B. Plastic Injection Mold Technology Development Project

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A. TECHNICAL EDUCATION & VOCATIONAL TRAINING AUTHORITY

• The Technical Education and Vocational Training Authority (TEVTA) is a significant endeavor of the Government of Punjab, which focuses on the development of human resource in terms of skill up gradation for men and women.

• They also acquire skills whereby they can also set up their own small industrial or service establishments.

• TEVTA has also ensured liaison with industry at all levels in terms of the technical training as well ensuring relevant curriculum to suit industrial needs.

• Presently TEVTA and plastic Industry are not properly associated and the courses offered by the institute are outdated and requires updating the curriculum.

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B. PLASTIC INJECTION MOLD TECHNOLOGY DEVELOPMENT PROJECT• Government of Japan and Government of Pakistan joined hands to

support Local Plastic industry and started this project.

• In the first phase the staff members were trained by Japanese experts in the injection molding technology.

• In the second phase the market demands were collected to formulate the services of the center.

• Three kinds of services are planned to be provided to the Plastic Products Industry;

1. Training Courses & Seminars2. Backup Support Services3. Advisory services

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• In the coming years this center will be highly productive and helpful with the available resources.

• This center received a lot of demand for technical trainings and mold designing from the Lahore plastic products manufacturers.

B. PLASTIC INJECTION MOLD TECHNOLOGY DEVELOPMENT PROJECT

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ENVIRONMENTAL HAZARDS• Plastic bags are an environmental hazard and their production and use

need to be disallowed in the country.

• Used plastic bags are found in abundance in the streets and are responsible for clogging drains and sewerage lines.

• In the rural areas, these bags decrease the productivity of the arable land because they do not rot or turn into compost. The most dangerous are the black bags, made of recycled plastic which increases their toxic content.

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ENVIRONMENTAL HAZARDS (CONT)

• Plastic's non-biodegradability poses serious environmental and health problems. In addition, the additives used in processing plastics results in the presence of substances that are a serious health hazard.

• Burning the waste releases dioxin - a class of 75 chemicals - which is carcinogenic and causes birth defects and other serious ailments like cancer.

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SWOT ANALYSIS

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STRENGTHS WEAKNESSES

•Easy availability of cheap labor

•Increasing domestic market having demands from both low-end and high-end segments.

•Several Large Units are also present.

•Industrial Zones facilities are available.

•Location is a competitive strength.

•Acceptable as international Avenue for Exhibitions / Seminar / Foreign Buyers visit.

•Sound Cash flows

•The industry is largely unorganized and scattered.

• Professional management is not perceptible in the cluster.

•The manufacturers are dependent on imported raw material from outside.

•Lack of Research & Development efforts.

•Lack of vision / Planning.

•Traditional designs and no innovations.

•Not getting benefits from support institutions.

•Nominal Export.

•Weak Association.

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OPPORTUNITIES THREATS

•Pakistan is emerging as a major consumer market and international demand is also on the rise for plastics.

•Globalization and free trade.

•Strong National Economic indicators working for benefit of Industry.

• Linkages with BDS & Support service providers.

• Product Marketing

• New and innovative products.

•Globalization and free trade.

•High custom duties on Raw Material

•Local Market Penetration by regional competitors.

•High Quality Standards.

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PROBLEMS• Sales Tax for the organized sector is 15 percent, whereas the unregistered

buyers can get any amount of the Plastics materials by paying 16.5 percent sales tax.

• Export Promotion Bureau needs to enhance its cooperation with the manufacturers in international exhibitions.

• Lack of information on potential export markets is an impediment to export growth.

• Interrupted power supply is not only affecting production but also damaging the expensive machines.

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• Incentive for deletion is limited to a few components.

• Lack of adequate training institutes.

• PSI is not playing its due role for better quality control.

• There are no export ware houses particularly for capturing South African market.

• Lack of financial assistance.

• Sales tax on import of moulds is not adjustable against output tax.

PROBLEMS (CONT)

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• Tariff on High Impact Polystyrene (HIPS) has been reduced to 10 percent from 25 percent that is hurting the local industry.

• Intellectual property and copyright laws are not strictly enforced.

PROBLEMS (CONT)

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SUGGESTIONS• Creation of a plastics desk in the Export Promotion Bureau (EPB).

• Establishment of plastics website providing information on imports, exports, international associations, plastics processors in Pakistan.

• Export ware-houses in target markets.

• Holding national and international exhibitions.

• EPB should ensure participation of genuine exporters.

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THANK YOU!!