While sales of PET products in packaging and consumer goods increase, other plastics will trudge gamely on in what economists are predicting will be a ``normal'' market, with growth in the 4-5 percent range in 1996. A number of economists, asked about the near-term future of the plastics processing industry, indicated the world market will see a decline of manufacturing capacity utilization accompanied by a softening in the use of resins.
Yet, despite this cooling of the plastics industry from record highs in 1994 and pleasing results in 1995, other materials, especially metals and glass, will witness more dramatic drops.
What is coming for plastics already has been foreshadowed in federal government statistics. According to the Federal Reserve's Division of Research and Statistics' Industrial Production and Capacity Utilization, industrial production of plastics materials from October 1994 to October 1995 was down 4 percent, compared to the December 1993 to December 1994 period, which was up 17.8 percent from the previous annual period.
Similarly, production fell. Operating capacity in December 1994 dropped from an index of 100.1 to 83.1 in October 1995.
For 1996, processors should look for growth in the 4-5 percent range, said Earl Kemper, manager for polyolefins for market researchers Phillip Townsend Associates Inc. in Houston.
``The part of the converter economy that will be suffering is automotive,'' Kemper said.
Consumer nondurables, medical, outdoor furniture and industrial plastics markets will see greater growth than that of the automotive sector, he said.
Michael Paslawskyj, vice president for business development and economic research at CIT Group Inc. of Livingston, N.J., also predicts 4-5 percent growth in the plastics processing industry in 1996.
``If anything, the industry will be a bit slower than 1995, but not a lot,'' he said.
If growth is to be seen anywhere in the plastics processing industry, it will be in electronics, health care, and household plastic ware, he said.
But ``the economy's soft and processors are beginning to feel it,'' Paslawskyj said.
Growth will still be a factor, though it will not be as fast as analysts would like, in the automotive and food-products sections of the economy, Paslawskyj said.
``We're still looking for growth in the foreign market,'' he added. ``In the overall scheme of things, the export market should be 7.5 percent of that shipped from U.S. plastics manufacturers.''
Stan Norwalk, a plastics industry consultant in Holly Springs, N.C., also noted the plastics processing industry will see growthabout 11/2 times that of the gross national product, or about 5 percent, in 1996. PET will lead the pack, with 15 percent growth in the United States, and even greater overseas, Norwalk predicted. PET is knocking PVC out of a lot of applications, he said.
A survey done for recycler and resin maker Wellman Inc. of Shrewsbury, N.J., by MGT Information of Jacksonville, Fla., has bottle makers predicting demand for their PET wares will increase 30 percent during the next three years.
Other factors also are at work, Kemper said:
New technology will come on stream that requires processors to update their equipment to remain competitive.
Materials competition will be on the rise, both within the individual converter's operation and among companies whose equip-ment determines the types of resins they use.
For example, ``polypropylene thermoforming will compete with thermoformed polystyrene,'' Kemper said.
``And polyethylene metallocene technology will allow downgauging ... that will be limited more by outmoded equipment than materials.''
Kemper predicts a soft landing for the economy in 1996, as opposed to outright recession. Why a soft landing?
``We haven't seen the overheating and the heavy boom in the construction industry'' that usually comes in advance of a recession, he said.
Processing in the United States also may receive a boost from recovering economies abroad. John Lonski, vice president and senior economist for Moody's Investors Service in New York, said manufacturing output performance has been uneven in most of the world during the past two years.
``My sense is that things have been so flat for so long in Japan and in most of Europe, especially since there is a great decline in borrowing costs - both debt and equity capital - for those nations, that they must rebound.
``We may also be seeing the end of major restructuring [in American companies], which tends to limit the powers of the economy to recover,'' he said.
One longtime plastics market watcher who asked not to be identified said the industry, even after 40 years, has a lot of growth potential and during the next 20 years should grow at an average rate of 4-5 percent.
Plastics use in the Third World could explode, he said.
In plastics, ``the efficiencies in technology are overwhelming, relative to the technology available to the Third World [for competing materials]. Machinery and tools are more user-friendly than those used for corresponding metalworking,'' he said.
``The use of plastics will allow competitors to the United States to produce more products.
``But [U.S.] salary erosion ... is not going to stop. And small operations, owned in some cases by the people they supply, are going to have to get creative'' to compete, the observer said.
Processors also should be aware that softening prices for the petrochemicals they use may be only a temporary boon.
``There is a global supply exceeding demand. Producers of ethylene will see the prices they get drastically dropping,'' said Seth Moshman, a researcher for Dean Witter Reynolds Inc. in New York.
Buyers of petrochemicals will see a benefit immediately, but that will change when they find prices for their own goods dropping, Moshman said.
On the other hand, Joseph Princiotta, senior chemicals analyst for Moody's, said downstream prices of ethylene-based products are not necessarily driven by the availability of raw materials, but by how compounders and molders differentiate their products.
``Compounders occupy niches in the business and their prices for finished goods will not be solely dependent on what those manufacturers pay for the raw resins they use,'' he said.