More compounds and concentrates are rolling off extrusion lines in North America this year, but the bank accounts of compounders aren't getting any fatter.
That scenario was retold at many levels throughout the industry, from color concentrates to PVC to engineering compounds, in a round of recent interviews. High energy prices are lifting resin bills, but it's not quite as easy for compounders to follow suit, especially if they're selling to processors that work with automakers and megaretailers - especially megaretailers whose names rhyme with ``small art.''
There's still quite a bit of concern out there for loss of finished-part business to China, but whispers of a bit of backlash also can be heard. Let's head out to compounding country and see what we can find.
It's usually difficult to pinpoint exactly when a business turnaround begins, but Wayne Marquis, president of ECM Plastics Inc. in Worcester, Mass., has managed to do so.
``Business really started booming Jan. 2 at 8 a.m.,'' Marquis said. ``A majority of our customers' business is up. People who laid off shifts have called people back. But resin pricing doesn't help and neither does the Wal-Mart effect.''
In general, North American compounders are expecting their sales to be up 5-20 percent this year, as customers that have held back on buying for the last few years are returning to the market.
John Comanita, a vice president with Cleveland-based compounder Ferro Corp., said his firm ``is getting new business from the seeds we planted last year.''
``It's been in every market segment - auto, appliance, packaging, marine,'' Comanita said of the comeback. ``Boats are selling very well even though they're luxury items. You'd think that wouldn't be the case, seeing as how the economy has been.''
``Volume is definitely up,'' agreed Jean Sirois, North American marketing director with Clariant Masterbatches in Easton, Md. ``Everything had been beaten down so much it had nowhere to go but up.''
At polypropylene compounder Asahi Thermofil Inc. in Fowlerville, Mich., President Randy Rudisill has seen the impact of customers loosening their spending habits.
``In a weak economy, a lot of programs don't happen as quickly because people are tight on manpower and resources,'' he said. ``Now those programs have all broken through.''
Charles Crew, chief executive officer for the LNP Engineering Plastics unit of GE Advanced Materials, was equally optimistic about the information technology and automotive markets.
``The IT industry has been better,'' he said. ``There's a little pent-up demand. It's better than it's been in the last two years. The other piece is penetration into the auto industry. We've done a lot of work on market development, so as new car launches kick in, we're doing more business.''
Clariant's Sirois compared the resin situation with recent high prices for gasoline, saying that buyers ``are complaining a little bit more, but usage really doesn't go down.''
Compounders that focus on engineering resins might find the pricing environment even tighter.
``We're forced to pass resin increases on, and it's tough,'' said Crew. ``A lot of our products are very technical, so we can't buy recycled resin to offset our costs.''
There's also an underlying current that the resin market has changed for good, and that this new market still needs to define its limits.
``In the past, pricing would always run up then drop back to old levels, but it's not going back to the old baseline anymore,'' said John Manuck, president of color concentrate maker Techmer PM in Clinton, Tenn.
``Higher resin prices haven't impaired growth so far,'' added Keith Rodden, chief executive officer of Matrixx Group, an Evansville, Ind.-based compounder and recycler. ``But if it continues, it will reach a point where compounders won't be able to buy resin like they used to.''
All compounders have too much capacity - except for us
Capacity means different things to different compounders. That's why executives can follow up remarks that there's too much capacity with descriptions of the new capacity they plan to add.
``Despite demand growth, capacity utilization is still significantly below the effective capacity of the industry,'' said Lance Mitchell, vice president of plastic compounds and color for PolyOne Corp., the Avon Lake, Ohio-based firm that ranks as North America's largest compounder.
``There's so much offshore competition, so even with growth we haven't outpaced capacity.''
``If you look at the volume areas like black and white concentrates, you'd say capacity has an impact there, because they're looking to maximize capacity utilization on a 24/7 basis,'' said Andrew Reynolds, an industry consultant with Applied Market Information LLC in Wyomissing, Pa.
``But the color concentrate guys are very different,'' Reynolds added. ``Most of the good concentrate houses build in some overcapacity so that if a customer is desperate and says they need something in 12 hours, they can do it.''
Techmer's Manuck is fairly blunt in assessing market capacity.
``There's too much high-volume black and white out there, but not enough for specialty applications,'' he said. ``Think of how many white bags are being made in Asia now. That's a huge quantity.''
Lines forming here ... and there
Affordable extrusion equipment, readily available financing and a need for increased flexibility and new markets have combined to place new lines and other equipment at a number of North American compounding plants.
Recent projects include:
* Alloy Polymers Inc. adding a twin-screw extruder and retrofitting another in Gahanna, Ohio.
* Pro Ex Extrusion Inc. adding a new underwater pelletizing system in Oshkosh, Wis.
* CCC Plastics adding its sixth twin-screw line in Colborne, Ontario.
* Teknor Apex Co. adding new lines in City of Industry, Calif., and Pawtucket, R.I.
* ECM adding its eighth twin-screw extruder in Worcester. The line will be used for small production batches, product trials and product development.
* RTP Co. adding a new long-fiber compound line in Winona, Minn., by the first quarter of 2005.
* Asahi Thermofil adding a large twin-screw machine in Fowlerville by mid-2005. The line will boost the site's capacity by more than 20 million pounds.
* Clariant adding new twin-screw lines in Phoenix, Toronto and Naucalpan, Mexico, by the end of the year.
* Prime PVC Inc. spending $4 million to open a second 60,000-square-foot plant in Marion, Ind.
* Rajamaki, Finland-based Premix Oy opening a 25,000-square-foot plant in Milton, Wis.