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March 25, 2002 01:00 AM

AMI studies facets of compounding industry

Frank Esposito
Senior Staff Reporter
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    Although 2002 looks to be challenging for North American compounders, a study of the market released late last year anticipates total volume growth of more than 23 percent between 2000 and 2005.

    Color concentrates should fare the best during the 2001-02 downturn because of their use in packaging applications, according to the report from Applied Market Information LLC, the Wyomissing, Pa.-based branch of consulting firm Applied Market Information Ltd. of Bristol, England.

    AMI LLC was formed in mid-2001 when AMI Ltd. acquired the plastics business of PenResearch Group, a research company also based in Wyomissing. LLC President John Jones, a longtime PenResearch veteran, said AMI had worked with PenResearch in various projects since the early 1990s.

    The North American compounding market has shown some small signs of coming back in early 2002 and could be enjoying moderate growth by the end of the year, Jones said in a recent interview in Akron.

    ``We've seen more little swirls of activity recently in a broad number of markets,'' he said. ``Hopefully that's an indication that people are doing things again.''

    Compounding consolidation should continue in end markets where multinational customers require compounders to be both large and efficient, Jones added. Rollups that combine several smaller firms also could occur more often.

    Low capacity utilization should continue in the near-term for North American compounders, while some may have to consider ``right-sizing'' measures such as giant compounder PolyOne Corp.'s decision to close more than a dozen plants and restructure its operations.

    ``These moves are good for the long-term of the industry, but in the short-term, it hurts people,'' Jones said.

    The AMI LLC study estimated the North American compounding market at 14.2 billion pounds in 2000.

    The study predicted the market will hit 17.5 billion pounds in 2005, a 23.2 percent hike.

    Future demand growth will be driven by continuing replacement of traditional materials in electronics, appliances and automotive applications, the study said.

    PVC compounds topped AMI's 2000 market estimate with a share of just under 26 percent.

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