Plastics Pipe

SIC 3084

Companies in this industry

Industry report:

This category covers establishments primarily engaged in manufacturing plastics pipe. Establishments primarily engaged in manufacturing plastics pipe fittings are classified in SIC 3089: Plastics Products, Not Elsewhere Classified.

Industry Snapshot

Establishments manufacturing plastics pipe shipped an estimated $1.25 billion worth of product in 2008. Of the total shipments, a majority was water pipe, followed closely by drain, waste, and vent pipe. Pipes themselves comprised most of the shipments, followed by fittings and unions and related items.

In the mid-2000s plastics pipe as a commodity maintained a large advantage over competitors in nonplastics piping. Although markets stagnated in the 1980s and 1990s, plastics piping markets grew at a rate four times faster than that of nonplastics markets. In addition, research and development spurred new products and cheaper methods of production. The continuing advancements in processing technology opened new markets and applications throughout the world.

In the mid-2000s, an estimated 437 establishments were engaged in the production of plastics pipe. In 2005, 19,958 people were employed by the industry, 15,166 of whom were production workers earning an average of $15.78 an hour. California and Texas had the largest number of establishments. These states also had the most employees in the industry, followed by North Carolina and Ohio. About 47 percent of the establishments in the industry had 20 to 99 employees, and 39 percent had fewer than 20. Only 14 percent of establishments reported over 100 employees.

Background and Development

Plastics pipe was first manufactured commercially in the United States in 1940, when the Southern California Gas Company used a type of plastics pipe, butyrate pipe, to distribute natural gas. Prior to that, polyvinyl chloride (PVC) pipe was used in Germany as early as 1930. At the time, plastics pipe was produced as well by several U.S. companies for use in chemical services. Plastics pipe production in the U.S. commenced in 1948 with the development of polyethylene pipe for water services. Initial applications of the new pipe included use on farms for drainage and various applications in the petroleum industry.

Plastics pipe and tubing is the final stage of value-added production into consumer or industrial products. In general, plastics manufacturing includes plastics materials (monomers), which are chemically altered to produce polymers that are then mixed with certain materials to impart characteristics such as durability, flexibility, and chemical resistance. Other manufacturing processes are then used to produce final products such as plastics pipe. The production processes specific to plastics pipe manufacturing, including a variety of methods such as coating, extrusion, molding, and laminating, allow the continuous production of piping. Plastics pipes have various functions for long- and short-distance transportation of fluids. In addition, plastics pipes have various intermediary purposes for final use in building construction.

Plastics soften but do not melt when heated, so they are able to change shape without losing cohesion. Before the 1930s, industrial products were largely based on coal as the basic chemical feedstock. The surge and rapid expansion of the production and consumption of plastics was directly related to the advent of petroleum as the main chemical feedstock. Thus, the petroleum and plastics industries are intrinsically related, and petrochemicals provide the basis for the mass production of plastics. In turn, plastics provided petroleum with its main downstream market.

The post-World War II boom in plastics piping was intertwined with the boom in plastics manufacturing, which has a close relation to the advance of the consumer society in the United States, most notably the substitution of plastics material for other materials such as copper, aluminum, and steel. This enabled the use of plastics products to seriously challenge metal or alloy applications in such fields as aerospace, transportation, electricity, and engineering industry. In general, the plastics industry is the single most important "downstream" industry in the petrochemicals value-added chain. Plastics products are produced by various chemical processes that allow the formation of usable products by heating, milling, or extrusion.

Retail sales of plastics pipe for various applications were up to $500,000 by 1948, and annual sales volume grew to $10 million by 1952. The major classes of rigid thermoplastics pipe, acrylonitrile-butadiene-styrene (ABS) and polyvinyl chloride (PVC) were introduced in 1949 and 1950, respectively, and became widely used in new markets, competing effectively with other materials such as steel and copper piping. Plastics piping started to be widely used in drain, waste, and vent applications; in natural gas distribution; and in the chemical industry. Styrene rubber pipe for sewer and drainage services became common material around 1956. This was followed by other successful materials, including thermoplastics piping, acetal, polypropylene, and polyvinyl dichloride. Sales grew to $25 million in 1957, $75 million in 1963, and $120 million in 1965.

Applications became very widespread in construction and building as piping of all sizes pervaded the post-World War II economic development in the United States. New standards for municipal building codes were written, and new standards were adopted to provide for the now dominant use of plastics pipe. In addition, the competitive effect on other materials products, such as steel and copper pipe producers, was such that manufacturers sought to protect their markets by acquiring manufacturers and distributors. This was especially important in oil piping, where hundreds of miles of tubular goods are involved.

The competitive advantage of plastics pipe over various metals was the result of many factors, not the least of which was low cost. In addition, plastics pipe offers other advantages to users in that it is lightweight and resistant to varying environmental conditions. It is also relatively easy to install, minimizes solid deposits, has low frictional losses, and has self-insulating characteristics. However, metal pipes exhibit superior performance in some applications where temperature and pressure are significant factors.

Specific among plastics pipe's many applications are water supply and distribution, including water utilities; municipal water treatment plants; chemical feed lines, sludge lines, and water distribution; natural gas distribution; drain, waste, and vent services, where plastic is resistant to chemicals; industrial uses, including food and beverage piping, acid and corrosive drain lines, chemical, electric and communication conduits, water and gas service, and general drainage; and irrigation of farm and ranch systems, including movement of water, gas, fertilizer, and insecticide.

The 1960s and 1970s were boom times for plastics in general and plastics piping in particular. Approximately 55 companies were engaged in the manufacture of plastics pipe by the mid-1970s. From 1964 to 1970 total sales more than doubled from 150 million pounds to 345 million pounds. In 1967, sales were 320 million pounds valued at $240 million dollars. By 1969, plastics pipe accounted for 1 to 2 percent of the $5 billion per year pipe market, and the industry was growing at a rate of about 15 percent per year, about two times as fast as the chemical industry. Sales topped the $500 million mark by the mid-1970s. Steel lost 5 percent of its market to plastics pipe--over $100 million in sales--while copper lost 50 percent, and aluminum lost 20 percent.

A major issue in the mid-2000s in the plastics pipe industry was the debate about which kind of pipe was better for residential plumbing: plastic or copper. At that time about 70 percent of all residential plumbing was copper, but several contractors in California were calling for state legislation allowing the use of plastic pipe in homes. The group asserted that an improved version of polyvinyl chloride, called chlorinated polyvinyl chloride (CPVC), was environmentally friendly, corrosion resistant, and cost effective, and that use of this type of pipe instead of copper could save the state $100 million a year. In 2007, despite the objections of environmental and consumer groups, California code was changed to allow for the unlimited use of plastic piping in its construction code, after years of being the only state that restricted the use of plastic piping.

A related issue was that more cities were switching from chlorine to chloramines as the primary disinfectant for their water supplies, due to tightened Environmental Protection Agency water regulations. Chloramines were thought to keep water bacteria-free longer than chlorine but were believed to erode copper. Another strike against copper occurred when prices increased significantly in 2005. Concrete is also a competitor of plastic pipe and also experienced a large price increase in the mid-2000s.

A study done by the Freedonia Group of Cleveland, Ohio, predicted that the demand for plastic pipe in the United States would reach 16.4 billion feet by 2009 due to highway and street construction, tighter water regulations, and needs to replace old water systems. According to this study, PVC pipe would remain the dominate pipe resin with more opportunities for large-diameter drain and sewer uses. High density polyethylene (HDPE) was expected to rise at the fastest pace, with growth areas in corrugated drain, gas, and potable water pipe. Freedonia stated that U.S. demand for plastic pipe would grow at an annual rate of about 2.5 percent. Others were even more optimistic, like Michael Porter of Coastline Plastics Inc., who predicted in a 2006 Plastics News interview that the market for CPVC market would continue to grow at least 10 percent annually. Others in the business concur that the plastics pipe industry was bound to see significant growth through the late 2000s, especially in the large-diameter pipe sector.

Significant recycling advances were made in the industry, but the portion of total plastics recycled remains low compared to total production or consumption. The industry responded to public pressure to develop environmentally safer products and to advance recycling into all its product areas. Efforts were made between the industry and federal, state, and local governments to evaluate the merits of various policies.

While new technologies are expected to further the trend to replace non-plastics materials with plastics, there is some concern over the feasibility of plastics recycling. From the production side, industry efforts to implement computer-aided design and manufacture (CAD/CAM) is expected to lead to drastic reductions in costs and turnover time, and to decrease some of the environmental concerns by minimizing material waste. These continuing advances in process technology remained the key factors behind the plastics piping products' success and future growth.

Current Conditions

According to industry statistics, there were an estimated 342 establishments engaged in manufacturing $1.25 billion inplastics pipe in 2008, with industry-wide employment of 17,224 workers. The majority of establishments were located in Texas, California, and Ohio. On average, each establishment had 55 employees and generated an estimated $11.5 million in revenues.

Worldwide PVC demand fell significantly throughout 2008 with the earliest rebound not expected until late 2009 or early 2010. Even then, PVC manufacturers do not know how strong the recovery will be. U.S. PVC producers have relied heavily on exports, especially to China, to offset sluggish demand in North America. Those exports "have largely kept the PVC business going here" over the past year, Kevin Boyle, a petrochemical consultant for the Gerson Lehman Group, told Purchasing magazine in August 2009.

Recycling efforts remained an industry concern. "Seventy percent of the 100 billion plastic products produced annually end up in landfills in less than six months," Bill Carteaux, president and CEO of the Washington-based Society of the Plastics Industry Inc. told Plastics News in March 2009, adding that "We need to design for the next life, not end-of-life."

Global demand for plastic pipe was projected to increase 4.6 percent annually from 2007 through 2012 to 8.2 billion meters, or 18.2 million metric tons. Demand to upgrade sewer, drainage, and municipal water systems will fuel demand. The construction and energy markets were expected to create the majority of opportunity, whereas plastic pipe would grow at the fastest pace, with PVC remaining the resin of choice.

Industry Leaders

Market concentration was relatively high in the plastics pipe industry. Dominant players in the plastics pipe industry were Chevron Phillips Chemical Company of The Woodlands, Texas, with 2007 revenues of $12.9 billion and 5,500 employees, and the plastics division of Tyco International of Princeton, New Jersey, which employed 113,000. Total revenues for all divisions of Tyco were $20.1 billion. Following Tyco's CEO, Dennis Kozlowski, being sent to prison for stealing millions from the company, Tyco was split into three publicly traded companies in mid-2007, in which one included Tyco International. In 2005, Hancor was acquired by regional rival Advanced Drainage Systems of Hilliard, Ohio, in a deal that created the largest plastic pipe company in North America. Advanced Drainage Systems had 2007 sales of $1.2 billion and 4,000 employees.

Workforce

Except for a blip in the mid-1990s, employment in the plastics pipe industry rose steadily in the last decade of the twentieth century, from 19,790 in 1997 to 23,071 in 2000. Employment declined thereafter, reaching 19,958 in 2005.

In the mid-2000s, 74 percent of industry employees were craft workers, operatives, laborers, or service workers. About 14 percent were officials, general managers, or professionals, and the remaining 12 percent were technicians, salespeople, or office workers. A large majority (82 percent) were men, and 72 percent were white. The percentage of production workers within total employment started to drift downward slowly in 1972, from about 80 percent to about 77 percent in the mid-2000s.

While average hourly earnings of production workers in plastic pipe production rose from $3.30 in 1972 to $15.78 in 2005, the purchasing power of these money wages actually declined over the same period. General payroll per employee, adjusted for inflation, actually fell over this same period. In terms of value added per production worker, wages per hour rose about two and a half times while the value added per hour by these production workers increased more than three times, indicating a shift in income distribution away from wages and toward profits. (When comparing industry figures for plastic piping over time, plastic piping was included as part of SIC 3079: Miscellaneous Plastics Products in 1972, and the workforce figures were calculated on the 1972 SIC basis.)

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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