Concentrate markets in North America and Europe should continue to grow at a 4 percent annual rate through 2009, but the going won't be easy.
The growth prediction comes from Andrew Reynolds, research director with Applied Market Information LLC, while the warning comes from Dwight Morgan, chief executive officer of Accel Color Corp., a concentrate maker with four U.S. locations.
Reynolds and Morgan each spoke at Thermoplastic Concentrates 2005, an industry conference hosted by AMI, Feb. 9-11 in New Orleans.
Concentrates growth in some other parts of the world should be higher in the period studied, Reynolds said. Southeast Asia - including China - will clock in at 11 percent annually, with India and other parts of the world at 10 percent.
In North America, color concentrates accounted for 35 percent of the 2004 market in pounds, but had a 56 percent market share in dollar value. The overall North American concentrates market was measured at 1.7 billion pounds and $2.6 billion in value in 2004.
Globally, polyethlene film again was the largest end market for concentrates in 2004, consuming 38 percent of total global output. Trendwise, Reynolds said recent strong volatility in the North American market - profitable in 2002 and 2004, down in 2001 and 2003 - is a cause for concern among concentrate makers.
``That type of volatility makes it hard to be confident about the future,'' he said.
Morgan most likely would agree, since his speech focused on concentrate makers ``surviving the global squeeze.''
``There's nowhere in this country you can go today without seeing molds moving to China,'' he said. ``I visited a customer recently who had only three of his 12 production lines running. He had decided to become a distributor of the products he used to make.''
The impact of higher resin prices on a company of Accel's size - with $20 million in annual sales - also was dramatic.
``It's virtually impossible for us to pass on these increases to our customers in a timely manner,'' he said. ``Our margins were down 5-10 percent in the last four months of the year. A half-million dollars of margin erosion for a $20 million company is a huge pit to manage through.''
The losses caused Accel to eliminate some jobs late last year. Shifting and unpredictable demand patterns - which no longer steadily build to a third-quarter peak - also create challenges for Accel and similar concentrate makers.
Morgan also cited an increasingly familiar list of advantages enjoyed by Chinese manufacturers - low-cost labor, devalued currency, lenient regulations and enforcement, easy access to capital - but he pointed out that more Americans still benefit from these conditions than are hurt by them.
China ``is helping the distributor and consumer while hurting the manufacturer,'' Morgan said.
Survival tactics for U.S. manufacturers, according to Morgan, include breaking several long-held ideas, such as an overemphasis on size, an underemphasis on proximity and the belief that military hierarchies are the most efficient.