Energy issues are making some California processors skittish about new investment and prompting others to protect their operations.
Economic and energy issues are intertwined in California, said Michael Smith, general manager for Husky Injection Molding Systems Inc.'s western region in Costa Mesa, Calif.
``Because of the uncertainty of energy costs, several customers have put purchases on hold until [the issue] gets better defined,'' Smith said in a telephone interview.
One custom molder planned to buy equipment before July 31 to expand in the housewares market, but has placed the order on hold, he said.
``We are helping them conduct audits'' on ways to conserve energy, Smith said.
Molders with captive markets can face a stiff challenge if locked in to long-term agreements that make it difficult to pass those costs through, said Smith, who on June 1 became chairman of the Society of the Plastics Industry Inc.'s western region.
CCL Industries Inc.'s container division in Compton, Calif., is among processors in the region that have taken steps this summer to avoid energy problems. The company installed 3,000-megawatt diesel-fuel generators July 9 - enough to power the whole plant.
The generators will be used when the company gets a shutdown notice, Rami Younes, division president, said in a telephone interview from his office in Don Mills, Ontario.
Back in January, the Compton plant experienced 14 power outages, averaging four to six hours each.
``You can't run a business like that,'' Younes said.
The division retained consulting firm Rand Corp. to detail power alternatives.
``We went with the backup option,'' Younes said. ``We decided to stick with the existing power grid. We should not feel any more interruptions. At least now we are in control of our own destiny.''
The 300,000-square-foot Compton plant makes personal-care and food closures, deodorant sticks, custom dispensing components and cosmetics tubing using 26 injection molding presses and 19 extrusion lines.
Not all processors in California have experienced energy problems. The Riverside area, for example, is attracting business with reasonable electric and water utility prices and a program to manage heavy user consumption.
``We have electric prices from 40-60 percent below'' Southern California Edison and with high reliability of service, said Tom Evans, public utilities director. New projects can receive additional Riverside discounts of 40 percent in the first year and 20 percent in the second year.
Plastics processor Sabert Corp. of Sayreville, N.J., is constructing a Riverside facility to produce high-end, food-related products for West Coast customers. Sabert's application for utility discounts is pending before the city's economic development commission.
Still, Riverside Public Utilities signed agreements effective June 1 with about two dozen businesses, schools and government agencies to reduce energy consumption, as needed, on 30 minutes' notice.
Program participants with Riverside polymer processing operations include Toro Co., Bourns Inc., Consolidated Container Co. LLC packaging unit California Plastics, Luxfer Group Ltd.'s gas cylinders division and Alliance Corp.
Some companies that experienced power problems earlier this year have not been hit this summer. UPM Inc. of Baldwin Park, Calif., has accelerated production to run its injection molding presses on a seven-day 24-hour basis.
In the midst of 16 power shutdowns in January, the firm, on short notice, adopted a Wednesday-through-Sunday production schedule with down time on Monday and Tuesday.
For the most part, that schedule is history.
Recently, UPM received a Stage 2 emergency notice but has ``not been impacted to date,'' Don Ashleigh, vice president of sales and marketing, said July 10. A Stage 2 notice is declared when operating reserves may fall to less than 5 percent. A Stage 3 notice in advance of a possible rolling blackout was declared 38 times in California during 2001 through May 22.
UPM bought some latitude by backing away from an interruptible power plan that the company found was impossible to manage.
``Now, they give us a basis to run four to six machines even if there is a call for a shutdown,'' he said.
UPM is incorporating four coinjection machines that it acquired in a June 5 auction and adding business from several custom molding plants that have ceased operations since May 2000.
``Our older customers are down 10-25 percent,'' but UPM had its highest sales volume in March, Ashleigh said. ``And every month has been better.''
Sales are ``at least 15-18 percent above last year,'' he said. UPM had sales of $21 million for the year ended Sept. 30.