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IEEFA: CMD’s bag initiative raises questions for future of oil, gas and plastics industries

May 13, 2021
Tom Sanzillo

May 13, 2021 (IEEFA)—In the world of plastics, sometimes one company’s story crystallizes the “life and times” of the industry. Plastics News, an industry weekly, recently covered the CMD Corporation’s efforts to publicize its latest plastic bag manufacturing innovation. The company’s initiative shines a light on industry trends and raises interesting questions for the future of the plastics industry, as well as the oil and gas industries with which it has long been aligned.

CMD, located in Appleton, Wisc., is demonstrating that lower-carbon plastic bags can be produced commercially using a mix of plant-based polymers and traditional linear low-density polyethylene (LLDPE) fossil fuel plastics resin. Given that the company currently manufactures 90 percent of the world’s drawstring plastic bags, this is a substantial initiative.

CMD’s plan brings a number of critical industry and public policy questions front and center.

The plant content used in the resin mix is developed by Idaho-based BioLogiQ from corn, potatoes and cassava. The mix reduces fossil fuel content by 35 percent. Plastic bags with lower carbon content mix are mandated in Europe and California. CMD is working to deepen its market share in Europe and introduce the new mix more broadly in the United States. CMD sees the future in plastic bags moving toward 100% plant-based resins.

CMD recognizes that the U.S. is not generating much demand for greener trash bags. Tim Lewis, the company’s vice president of global sales and marketing, makes note of the fact that most of the public’s attention is on retail bags, so drawstring trash bags have drawn limited consumer and governmental attention. The company nevertheless says it is ready to lead the industry if the market turns.

If the industry is slow to grow green, then CMD may simply have a stronger, cheaper product to market. The company claims the product is not only environmentally better, but also of higher quality. It asserts that the product is thinner, stronger and cheaper. The new mix, moreover, does not require substantial redesign of the manufacturing system.

CMD’s plan brings a number of critical industry and public policy questions front and center.

  • Do plastic bags made out of a mix of plant-based and fossil fuel resins represent progress or not?
  • Does it take mandates like those in Europe to drive shifts in production, or can product differentiation and consumer behavior be altered by simply making a stronger, cheaper and more climate-friendly product?
  • Does CMD’s innovation support stronger low-carbon content laws?
  • While governmental content regulations are often seen as impairments to new investment, does CMD’s example demonstrate that government intervention might speed up a cost-saving innovation that can attract investment and create jobs?
  • In the face of current market conditions, where price volatility has spiked LLDPE resin prices, does a broader set of feedstock choices and lower production costs point the market away from fossil fuels and toward a less costly type of feedstock?
  • Are the interests of oil and gas producers splitting from petrochemical producers, as the development of broader options for resin content alters business models and strategic business alliances?
  • What are the implications for large oil and gas majors and state-owned integrated operations as feedstock choices broaden beyond ethane and naphtha—both made from fossil fuels? Do the current oil and gas industry leaders have the capital expenditure muscle to advance beyond fossil fuels?
  • As cost-conscious plastics manufacturers find that alternatives to fossil fuels are commercially viable, does the potential diminution of demand for fossil fuel resins undermine margins for fossil-based merchant cracker plants, existing ethane-driven petrochemical complexes and proposed fossil fuel-integrated facilities?

On the public policy side of the equation, two more questions emerge:

  • Do strategic policy positions calling for a complete ban on plastic bags contradict or undermine those attempting to advance new law governing product content?
  • Do efficiency measures that can reduce costs, improve product quality and result in lower carbon emissions create conditions for an increase in plastic bag production—and with it, a potential for greater amounts of plastic bags in the waste stream and oceans?

While not all of CMD’s strategic shift contributes to the broader discussion, the company is making its move against a backdrop in which short- and long-term science, technology, law, finance, business and customer choice changes are afoot.

Tom Sanzillo ([email protected]) is IEEFA director of finance.


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Tom Sanzillo

Tom Sanzillo is Director of Financial Analysis for IEEFA. He has produced influential studies on the oil, gas, petrochemical and coal sectors in the U.S. and internationally, including company and credit analyses, facility development, oil and gas reserves, stock and commodity market analysis, and public and private financial structures. He also examines such areas as community and shareholder activism, institutional investment, public subsidies and Puerto Rico’s energy economics.

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