Pinnacle Polymers is going it alone in the polypropylene market - and that suits the Garyville, La.-based firm just fine.
``We believe there's an inherent disconnect between the expectations of the customer base and the capabilities of the [PP] supplier base, which is mostly publicly held oil companies,'' Pinnacle sales and marketing director Mark Potemans said in a recent telephone interview. ``The way we approach the business is fundamentally different than if we had shareholders to please every month.''
Pinnacle does not release annual sales figures, but Potemans said its volume should finish up around 10 percent in 2002, its second full year of operation since being acquired by Polychim SA, a PP maker in Dunkerque, France. Jerry Theys serves as the firm's president and chief operating officer, while Andre Declercq holds the title of Pinnacle chief operating officer as well as managing director of Polychim.
Pinnacle had been owned by the Bouckaert family, which runs the Beaulieu of America carpet business, since splitting from Epsilon Products in mid-2000. Epsilon had been formed in 1994 via a partnership between the Bouckaerts and compounder Washington Penn Plastic Co. The owners used some of Epsilon's production - from a plant in Marcus Hook, Pa., and the Garyville plant, which opened in 1999 - in their own businesses and sold the rest on the open market.
Beaulieu, the world's third-largest carpet maker, remains a strong customer for Pinnacle. Washington Penn merged the Epsilon business into Sunoco Inc., which had built the Epsilon plant as a research project and had been Epsilon's main propylene supplier.
Pinnacle's long-term propylene supply agreement with Marathon Oil, which operates a refinery adjacent to the 850 million-pound-capacity Garyville plant, is a key factor in allowing it to remain competitive. Potemans described the Pinnacle/Marathon relationship as ``mutually beneficial.''
Sales into the fiber market - including nonwoven, carpet backing, staple fiber and carpet face yarn - make up about one-third of Pinnacle's business, with housewares representing another third and a variety of midsize PP users in various markets bringing in the remaining third. Its product mix consists of homopolymer, block copolymer and random copolymer grades of PP.
Pinnacle, which employs around 100, essentially is the result of an experiment in which plastics processors Beaulieu and Washington Penn tried to back-integrate into resin production. Such arrangements were more common in the early days of the plastics industry.
``Vertical integration is more fashionable in parts of the world like Eastern Europe and South America and Asia, where resin supply isn't always secured like it is in North America,'' Potemans said. And I believe resin [processors] realize that operating a resin plant requires a completely different skill set than what is needed to operate an extrusion, compounding, film or molding operation.''
Pinnacle can prosper if it can maintain a wide enough margin between PP selling prices and its monomer costs via Marathon, according to industry consultant Bill Kuhlke. Kuhlke, president of Kuhlke & Associates in Houston, added that Pinnacle has a logistical advantage by being located in ``the heart of the textile industry.''
Kulhlke added that he's unsure if end users will try to back-integrate into resin production in the future.
``You can buy into the chain anywhere, any time at the right price,'' he said. ``But if you build a plant, you need to build a world-scale plant. Then it becomes a question of how much [resin] you'll use yourself and how much you can sell.''
With 850 million pounds of annual capacity, Pinnacle represents only 5 percent of the North American market. But Potemans is quick to point out that size doesn't always matter.
``We target companies with long-term purchasing and partnership philosophies, and we give these companies the attention they deserve, not only when resin is readily available, but also when supplies tighten,'' Potemans said.