Plastics processors are going to have to change their approach to resin buying if they want to prosper in the months and years ahead, according to a pair of speakers at the Plastics News Executive Forum.
The results of not changing could be especially dire in the automotive market, said Jeff Mengel, a partner with Plante & Moran PLLC consulting firm in Southfield, Mich. In late 2004, Plante & Moran surveyed more than 60 automotive molders with a variety of skill sets and roles in the industry. The survey found that only 17 percent had approached customers about increasing prices in 2004, even as major resin prices climbed 30-60 percent. Most of those that did approach customers did so at the Tier 1 level - not original equipment manufacturers.
Less than 8 percent of firms in the study said they experienced success raising prices last year, with one-fourth of that success at the Tier 1 level. But things are going to have to change pretty soon, Mengel said.
The upshot of inaction is that one-third of firms surveyed said they will face a liquidity or viability problem within a year if they cannot raise prices.
``Unless prices are raised, we're going to see some significant casualties in the next quarter,'' Mengel said. ``Are we going to move tools to China, or see some sort of price relief?''
At Dallas-based consulting firm Resin Technologies Inc., Chief Operating Officer Bill Bowie and his colleagues are trying to convince processors to expand their pool of resin sources.
``You have to teach your people how to deal with change,'' Bowie said at the Litchfield Park forum. ``You have to have an open mind and you have to grab it. But a lot of times we see companies that are closed to the ideas that change represents.
``Resin buying is an emotional issue, but you shouldn't use emotion when doing it,'' Bowie said. ``We tell our clients to talk to many and buy from a few. They have to, because the North American plastics market won't see $2.50 [per million Btu] natural gas again.''