July 8, 2018
Although Erie County has lost nearly 5,000 manufacturing jobs over the past 10 years, the region's plastics sector can be counted as an island of stability. After adjusting for an accounting change, employment in the plastics sector has held steady at 4,300 jobs.
Now, the construction of the $6 billion Shell cracker project two hours away in Beaver County holds the promise of securing those 4,300 jobs for years to come.
But there is an argument to be made that the cracker, capable of converting natural gas liquids into 3½ billion pounds of polyethylene a year, could do more than preserve an already healthy slice of the economy.
In fact, there's reason to believe this part of the Erie economy could be poised to grow larger and stronger.
The biggest reason is one of simple proximity.
Most of the polyethylene resin that is used by plastics producers in this area is hauled here by truck or freight car from the U.S. Gulf Coast, where much of it is produced as a byproduct of petroleum.
Producing those resin pellets two hours away will lower transportation and overall costs dramatically, said Amy Bridger, director of corporate strategy and external engagement at Penn State Behrend.
“Now our local producers have an opportunity to reduce supply chain costs,” Bridger said. “And we have an opportunity to attract more manufacturers to come to this area because of those benefits.”
Bridger said she sees an opportunity for injection molders to save money on resin, which often sells for $1,200 a ton or more, while gaining access to a large and potentially growing cluster of plastics-related businesses and one of the nation's leading training grounds for plastics engineering at Behrend.
The potential benefits aren't lost on the state Department of Community and Economic Development, which has selected Behrend as a lead partner for developing business and market opportunities that grow out of the Shell product.
In turn, Penn State has committed $250,000 to an Energy University Partnership for oil and gas strategy.
Denise Brinley, senior energy adviser with DCED, said in a statement that the department values its partnership with Behrend's school of engineering, which has graduated nearly 1,000 plastics engineering technology students since 1989.
“Penn State Behrend can provide critical connections to research support, materials, testing and a talent pipeline,” she said.
Shell, which is expected to create 600 permanent jobs - and 10 to 13 indirect or spinoff jobs for each of those positions - appears to recognize Behrend as a valuable resource. The school offers one of only six plastics engineering programs in the nation.
“We have a longstanding relationship with Shell that goes back many years,” Bridger said. “They sent an advance team here four or five years ago to look at our capacity.”
Bridger said the expectation within the industry is that construction of the Beaver County cracker, which has been in the planning stages for years, is expected to lead to the construction of other such plants within the region.
Jason Williams, an assistant professor of engineering at Behrend who has worked with a number of local plastics companies, has been traveling with DCED and consulting with the department on plastics-related issues.
He said northwestern Pennsylvania's plastics sector originally grew from the tool-and-die and mold-making business that was centered here. In later years, plastics graduates from Penn State Behrend have helped provide expertise for local companies.
What's been missing, he said, were the raw materials.
“We have all the tooling companies,” he said. “We have the plastics companies, but we have sort of built the tree without the trunk.”
The potential cost savings are significant, said Robert Guthrie, plant manager at Berry Plastics in Erie. The plant, one of about 90 Berry locations worldwide, makes billions of plastic bottle lids and caps each year.
“Resin is a big driver of our business,” he said, estimating that the plant uses 30 million to 40 million pounds a year - a full railroad car on most days - enough to account for 40 to 45 percent of the plant's total expenses.
“This will have a big impact on us,” he said.
Lower costs aren't the only benefit.
“Right now we buy all our resin from Louisiana or Texas,” he said. “Hurricane season is a big concern. This helps our prices and our supply chain.”
While Berry Plastics is in the midst of an expansion, Williams sees opportunities for other companies to expand and possibly relocate to what he said has “been traditionally a huge plastics hub.”
Industry statistics show that 70 percent of the North American plastics customer base is within 700 miles of Pittsburgh.
Producing plastic resins locally should make the case for plastic injection molders even more compelling, Williams said.
“If they locate close to the sources, it gives them a cost advantage,” he said. “A lot of companies are paying attention to this.”
Guthrie said he suspects other companies might find that access to students is a resource that is just as valuable.
“The internship program is a big deal,” he said. “You could have interns working with you through the entire process. You can't ask for anything more than that.”