The Colorfully Opaque World of Plastics (Part 2)

An tariff and geopolitical interlude to Part 3

A few months ago, you might recall how I was standing in a toy store in The Netherlands, marveling at shelves stacked with plastic dinosaurs, action figures, and building blocks. And I wondered: Who makes all this stuff? Where does it come from? That curiosity led me down a rabbit hole of oil rigs, steam crackers, and polymer pellets, which I wrote about in Part 1 of this series on plastics.

A lot’s happened since.

There is a trade and tariff war going on that I don’t need to summarize here. But, notably this morning, reports suggest China is considering lifting its retaliatory tariffs on US ethane imports. This has now been confirmed, with ethane exempted from the 125% tariffs, though propane and butane (LPG) remain subject to these levies, likely because China can more readily source LPG from other countries like the Middle East. This is a major development for reasons too deep and esoteric for mainstream commentary — especially since the negative real GDP headline dominated talking head discussions instead. We’ll get into why this is important in a minute.

The other thing is that I spent some time with Chinese import/exporters in Germany a couple of weeks ago. I was at a paper product trade show, and it was right in the middle of the tariff headlines. Trump announces this, China retaliates with that. In between meeting clients and prospects walking the expo floor, folks seemed glued to their phones looking for updates (and exemption hints) about whatever latest tariff was announced. Then, over schnitzel and beer, I got quite an education on how complex this global supply chain is for paper, let alone the bit more complicated world of plastics.

So, Part 2 is timely, but it’s an interlude of sorts. We need to contextualize what’s going on before diving into more company and product specifics. China and the US are at the heart of it.

Plastic Geopolitics —

There is so much talk of “rare earth” materials now, how China extracts over 50% of global supply and handles over 80% of global processing. It’s believed that 45% of global supply — the vast majority of what China controls — is actually extracted from a single mine — the Bayan Obo mine in Inner Mongolia. Rare earths are unique elements with fascinating properties that make them critical in the highest-value manufacturing processes and products in the world — like smartphones, electric vehicles, and wind turbines — because of their exceptional magnetic, conductive, and luminescence properties. In the economy of the future, they’re literally irreplaceable, so it makes sense why the US and other countries would want to reduce their heavy reliance on one country, let alone a single location like the Bayan Obo mine.

But plastics are the essential materials of today. The entire world depends on them in ways perhaps not even fully realized. They’re in packaging, medical devices, automotive parts, consumer electronics — everywhere. Of course, and it’s not like extracting rare earth elements from ores and processing them is easy — there’s an entire dirty and complicated process of doing this — but plastics aren’t elements. They’re derived from elements — carbon and hydrogen mainly, hence hydrocarbons — and rely on a global supply chain beginning with raw gas extraction, to cracking, to polymerization as discussed in depth in Part 1.

Green = elements in hydrocarbons, the feedstocks of plastic Red = rare earth elements

Plastics are perhaps a bit less sexy than the more exotic and mysterious “rare earths.” But consider the following: