Color compounders and concentrate makers are feeling the raw materials sting, both from higher resin costs and increasing price levels for pigments and colorants.
``Energy is the common denominator,'' said Rick Addiss, North American sales director for Americhem Inc. in Cuyahoga Falls, Ohio. ``We're seeing everything impacted, from pigments to resins to transportation.''
High resin and additive costs - prompted by lofty prices for crude oil, natural gas and chemical feedstocks - played a role in compounder A. Schulman Inc.'s recent announcement that earnings for the final quarter of its fiscal 2004 will be only half of what the company had expected. Fairlawn, Ohio-based Schulman also shut down two production lines in Nashville, Tenn., earlier this year.
The story is similar at other color compounders, even if their actions have not been as public as Schulman's.
``Resin increases by themselves would be difficult, but now materials like titanium dioxide are starting to climb,'' said Robert DeFalco, president and chief executive officer of compounder Ampacet Corp. in Tarrytown, N.Y. ``Until polymer prices stabilize, it will be hard for us to get caught up.''
Compounders in general struggle with the timing of price increases, typically needing one to three months or longer to pass higher costs on to their customers. This year has been even more difficult because of the frequency and magnitude of the resin jumps - more than 30 percent on some commodities - and because of the extra whammy from additives.
At Accel Color Corp., a compounder based in Avon, Ohio, the firm was able to hold off on raising its prices in the first half of the year, but since then has needed to raise prices 10-15 percent in some cases.
``We've had to surrender quite a bit of margin this year,'' Accel President Dwight Morgan said. ``It's almost absurd how quickly resin prices have gone up.''
Ampacet and Accel each have pricing systems that take into account pricing changes for individual resins, additives and pigments. As a result, those firms don't implement companywide price increases.
Clariant Masterbatches in Holden, Mass., also has raised prices on some of its stock white and black grades, but has been able to avoid a wider price increase initiative, according to regional Vice President Steve Snow.
``Historically, we've held the line in passing on costs to our customers, but it's becoming increasingly difficult,'' Snow said.
PolyOne Corp. also has been able to raise prices on its larger-volume white and black concentrates, which ``tend to move in concert with titanium dioxide and resin costs,'' said Lance Mitchell, vice president of plastic compounds and color for the Avon Lake, Ohio-based firm. Price increases for PolyOne's specialty products are more complicated and are done on a product-by-product basis, Mitchell added.
Prices for titanium dioxide - a common additive used in white and color concentrates - are up 10-13 percent this year, according to Ann Lopez, North American plastics sales manager for DuPont Titanium Technologies of Wilmington, Del.
Energy costs and a tight supply/demand balance have sent titanium dioxide prices up after they had dropped 15-20 percent in 2002 and 2003, Lopez said.
Further titanium dioxide price increases are set for Jan. 1. Plastics-related uses - including PVC siding, fencing and window profiles - account for 25 percent of the overall titanium dioxide market.
Americhem now is working to raise prices of its products by an average of 7 percent, Addiss said, but that's well off the 15-20 percent increase the firm has taken on resin prices.
``We don't expect to see any decrease in business,'' he added. ``But we are looking at ways to redesign our products to reduce costs. We have to look for innovation.''
Americhem is looking into higher pigment loadings to reduce its resin costs and achieve better dispersions to reduce pigment use. PolyOne is looking to consolidate pigment suppliers, to buy more effectively.
At Ampacet, higher costs haven't slowed down the company's efforts to market new concentrates for the injection molding and blow molding markets, even with prices in constant motion.
``It's difficult for compounders and masterbatch makers to get in front of price increases,'' DeFalco said. ``We can't get our prices up unless out customers see the broader resin prices increasing, so we have to wait for [the resin increases] to take hold.''
One company with an unusual take on the resin market is E-Z Color Corp., a concentrate maker in Fremont, Ohio. E-Z uses additives such as ultraviolet inhibitors as carriers for pigments, bypassing the resin step entirely.
``We ask our customers why they'd want to buy resin from a color house,'' said sales and marketing director Mark Grant. E-Z's 2004 sales are expected to double, finishing at around $8 million to $10 million, he said.
That sales success - some of which, Grant said, may be attributable to the firm's lower rate of price increases - also is prompting E-Z to add a second location in Fremont. The firm will open a 70,000-square-foot site in early 2005, in a $2 million move that will double its capacity and create eight to 10 jobs.