Processors think higher resin prices and interest rates may rain on the plastics industry's pecuniary parade in 1995. Resin pricing and availability were the top factors affecting processors' outlook for 1995, according to a recent Plastics News fax poll of processors.
``The resin situation is going to catch up with a lot of companies in 1995,'' said Dave Spence, president of Alpha Plastics Inc., a St. Louis-based blow molder.
``You are going to see the casualty rate go up. There is going to be a lot of equipment auctioned off for sale,'' he said.
Processors are bullish about the economy in 1995, but less enthusiastic about their own businesses. While most expect their companies to be more profitable this year, the number has slipped significantly since last year - from 63 percent to about 58 percent.
Resin pricing was the key factor affecting many processors' attitudes. Prices for some raw materials have climbed 40 percent in 1994, and some processors are perplexed about the situation.
``Raw material price increases are coming with such speed and magnitude they cannot be passed on to the customer fast enough. Customers want the molder to absorb some of the increase,'' said Ron D. Douglas, president of Technical Plastics Corp., a Poplar Bluff, Mo., custom injection molder.
A majority of processors said they had to absorb most of the 1994 price increases, and 43 percent expect resin shortages in 1995.
``As an automotive supplier, margin pressures will persist as the Big Three attempt to force their suppliers to absorb all raw material price increases,'' said Mark Hoddinott, financial analyst for Standard Products Co., a profile extruder based in Cleveland.
A.W. Seavey, president of Plastech Corp., a Branford, Conn., custom injection molder, said his firm is currently requoting all customers with price increases of 5-10 percent.
``Any who resist will require careful consideration to discontinue molding for them,'' Seavey said.
Processors of all types expressed concern about competition from other raw materials, including paperboard, metal, concrete, glass and wood.
``Engineering resin price increases have forced several customers to revert back to sheet metal. New programs are being quoted in plastic and sheet metal,'' said Ed Ott, director of sales and marketing for Reiss Corp., an Englishtown, N.J., custom injection molder.
``If plastic pricing continues to escalate, there is a possibility that dairy customers may switch to cardboard,'' said Charles Breau, president of Southeast Packaging Inc., a Hanahan, S.C.,blow molder.
``I hope resin manufacturers will remember that a lot of the business they have was a result of us selling the customer on the fact plastics could be more economical than metal or wood,'' said Ed Heavner, president of Plastics Manufacturing Inc., a Harrisburg, N.C., custom injection molder.
Interest rates were ranked second among the factors cited by processors affecting their outlook for 1995. Many processors were concerned about whether interest rates will continue to rise, and what affect that would have both on key end-markets and on their own business.
``We are constructing a new building and from loan approval to final loan close I expect interest rate hikes to push monthly payments up by 40 percent,'' said Walt Sargi, general manager of Pro-Gram Plastics Inc., a Willoughby, Ohio, blow molder.
Despite the hoopla following the November election - the poll was taken in early December, just after the landslide that brought a Republican majority to Congress - only about 23 percent of processors cited the election as a major factor affecting their outlook for 1995.
``If the new Congress succeeds in rolling back tax rates, especially capital gains, then I would expect to see a tremendous increase in economic activity,'' said Art Harris, president of Product Engineering Labs Co. Inc., an Orange, N.J., thermoformer.
However, many of the factors cited by processors in last year's poll that may have been influenced by President Clinton's political agenda have slipped substantially. For example, health-care reform, which last year was the second-most frequently cited factor, this year tied for ninth.
Recycling and environmental issues, which ranked fifth last year, finished in eighth place this year. Some firms that depend on PVC, however, continue to worry about legislation that could limit or ban chlorine chemicals.
The unscientific poll was faxed to 925 processors in the United States and Canada on Dec. 5. A total of 357 companies responded. Processors were selected from those included in Plastics News' rankings of injection and blow molders; film and sheet manufacturers; and pipe, profile and tubing extruders; plus some thermoformers that were sent surveys for a February ranking.