After several difficult years indicated by upturns in production and numerous price increases, the global plastics additives market appears to be on the road to recovery. The key issues affecting the additives market include feedstock costs, increasing global competitiveness, the growing importance of China in the global market and continuing environmental and regulatory issues. Globally, plastics use is growing as polymers continue to replace traditional materials. Additive growth is driven by growing plastics use in developing regions, where per capita plastics consumption is still far below that in developed nations.

The global plastics additives market was about 9.9 million tons in 2004, valued at US$19 billion. North America, Europe, China, and the rest of the Asia-Pacific region consumed 21-23% of additives by volume, with the remainder going to India, South America, the Middle East, Africa and Eastern Europe outside of the European Union. Overall, the additives market is expected to grow at 4% AAGR from 2004 to 2009. While Europe, North America, and Asia-Pacific (excluding China) are growing at about 3%, China is predicted to grow at 8-10%. The other smaller market regions are also poised to grow at 5-6% through 2009. India could be the next big growth area. Rapid growth in the demand for plastics in the Chinese market is driving a shift of additive consumption and production to the Far East. While China is an exporter of consumer goods, it continues to be a net importer of both plastics and plastic additives. Low-cost suppliers in China and the Asia Pacific region as well as global additive companies setting up facilities in China (primarily through joint ventures with Chinese companies) are striving to meet this supply shortfall.

Feedstock has been a key issue for the plastics additives industry particularly since 2004, when both energy and feedstock prices witnessed huge increases. Additive companies began increasing their prices from Q4-2004. Additive price increases have allowed companies to keep up with feedstock price increases, but have generally not resulted in increased margins. Increasing competition from Asia in end-use applications adds to the need for product differentiation.
Some companies have improved margins by cutting costs and consolidation, whereas some additive suppliers continue to add value by assisting in developing products that solve problems for specific applications. Additives offer innovative solutions for qualities like durability, aesthetics, low-maintenance and biodegradability. While cost continues to be an important component, most processors now consider a total system cost rather than unit cost of additives and at improving processing efficiencies that allow them to get more output out of existing equipment. For example, additives are used to increase the properties of lower-cost polymers such as PP, allowing them to compete with higher-cost engineering resins. Cost-effective additive solutions may include high-efficiency additives or customer-specific additive blends to avoid over-engineering of properties. High-growth applications where additives can add value include wood-plastic composites (WPC) and long-fiber reinforced thermoplastics (LFRT).

Consolidation and globalization of additives customers has increased global competitiveness by creating customers with purchasing leverage. Globalization of OEM specifications in industries such as automotive and electronics has contributed to the globalization of the polymer additives industry. Resin suppliers continue to simplify their grade-slates, which drives additive use downstream to compounders and converters.

Regulatory issues and sensitivity to environmental issues continue to drive developments and changes in the polymer additives market. The industry is working towards compliance with the European Union's RoHS [Restriction on Hazardous Substances] directive for electrical and electronics equipment, which takes effect in 2006. RoHS restricts lead, used as a PVC heat stabilizer, and polybrominated diphenyl ethers (PBDE), used as flame retardants. Other EU policies, such as the WEEE [waste electrical and electronic equipment] directive and the end-of-life vehicle (ELV) directive, also restrict heavy metals and halogenated materials. Anticipation of these directives has driven growth of lead replacements and non-halogenated flame retardants, particularly in Europe. In plasticizers, Europe is replacing diethylhexylphthalate (DEHP) with other phthalate alternatives. The industry is keeping its eye on future requirements because product development needs to stay ahead of current regulations.