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HANOVER, MD. — Grafco Industries L.P. plans to spend $10 million on a new Midwestern facility, a 150,000-square-foot factory that will be the firm's third and allow it to continue expanding beyond its eastern U.S. base.

The PET injection blow molder also has commercialized a ``warm-fill technology'' that uses nitrogen to dramatically raise the temperature at which liquids can be poured into unreinforced PET bottles. The method is not quite capable of challenging the more- expensive heat-set process traditionally used for high-temperature filling.

The new facility should be operating by mid-1998 in an undecided location in Illinois, Iowa or Missouri, President Timothy Frank said April 7 in Hanover.

The plant will be similar in size and have the same makeup of machines as the company's two other plants, in Hanover and Morrow, Ga., which will allow it to

continue serving its customers from any of its plants.

The Midwestern plant will have 10-12 production lines and about 80 employees, but could become the company's largest because one-third of its busines currently is shipped to the Midwest and West, Frank said.

While the firm still is debating buying an existing site or building a green-field plant, it will expand, he said. Grafco hired a site consultant, he said.

The firm was 51st in the 1996 Plastics News ranking of North American blow molders, with $26 million in sales. The ranking was published in November; Grafco's actual full-year sales were $30 million.

The warm-fill process raises the temperature at which liquid can be poured into PET containers without the bottle collapsing or losing its shape when the liquid cools, said Dale Behm, director of engineering at Grafco.

Now, liquids as hot as 175 F can be poured straight into containers, up from about 130 F previously, he said. The bottles are strengthened by adding a precisely measured drop of nitrogen when they are filled.

Improvements in dosage systems in the past few years have made it possible, he said.

Food processors have long used nitrogen gas to drive off oxygen.

Grafco officials said they are very close to an agreement with Reynolds Can Machinery, part of Reynolds Metals Co., in Richmond, Va., to be the exclusive representative of the nitrogen process that Reynolds has developed.