Dancing on the edge
Compounders know they need to take chances, and continue to fine-tune their operations, seeking any kind of edge.
At the LNP Engineering Plastics business of GE Plastics, turnover times have dropped 50 percent through Six Sigma management practices, according to General Manager Nitin Apte. The unit's technology budget also grew 20 percent in 2005, with some of that amount being spent on new testing equipment.
LNP also is winning business in applications such as data storage and electromagnetic shielding, Apte said. GE Plastics is based in Pittsfield, Mass., with the LNP operations in Exton, Pa.
Schulman has improved its setup times by 30-50 percent by reviewing its methodology and making small layout changes. Operations manager Ronald Andres said the company ``is putting creativity before capital.''
PolyOne is looking to reduce stock-change-related downtime as well as lower its use of purging compounds and creation of off-grade material and scrap, according to Mitchell.
New projects at Ferro include Duragrip-brand TPV compounds for overmolding that have been commercialized in the last year. Comanita said Ferro also is working on new patents on PP alloy systems for under-hood auto uses, as well as for power tools and other and lawn and garden products.
Ampacet also is doing more specialty-color and engineering work, sometimes in quantities as low as 250-500 pounds, DeFalco said. Ferco Color in Ontario, Calif., has hired a technical director and has added two employees to focus on the company's growing liquid color business, President Jennifer Thaw said.
At Clariant, work at its color lab in Holden is focused on determining the effects colorants can have on finished parts.
``Besides appearances, customers want the ability to see if a colorant will contaminate a part or cause it to degrade,'' Clariant's Snow said. ``Color suppliers previously hadn't involved customers in this process.''
Top of the line
Even with margin blues being sung far and wide in the compounding world, a number of firms continue to add new equipment. The past nine months have seen:
* Jerico Plastic Industries Inc. double in size with a new plant in Minerva, Ohio.
* Royal Group Technologies Ltd. add PVC compounding capacity in Milford, Ind.
* National Vinyl Products LLC add PVC compounding capacity in Nephi, Utah.
* Vi-Chem Corp. add TPE compounding capacity in Grand Rapids, Mich.
* HiTech Polymers Inc. add TPE compounding capacity in Hebron, Ky.
* O'Neil Color & Compounding Corp. add a total of 20 million pounds of capacity in Jasper, Tenn., and Garfield, N.J.
* U.S. Fence Inc. add PVC compounding capacity in Bulls Gap, Tenn.
* Chroma Corp. add 1.5 million pounds of capacity in McHenry, Ill.
* Spartech Corp. add new equipment in Donchery, France.
Additionally, PolyOne earlier this year bought the PVC compounding business of Novatec Plastics Corp. in Eatontown, N.J.
``Everyone had starved their facilities for a while, so new capacity could be pent-up demand,'' Morgan said. ``There's still [production] overcapacity in the market.''
Washington Penn will add 50 million pounds of capacity with a new line in Frankfort, Ky. Cusolito said the line will start up in the third quarter and will produce a broad mix of the company's compounds. Schulman plans to install a second line at its Chinese operation by the end of the year.
By year's end, Ferco will add continuous mixers in California and Tennessee, with the Tennessee plant getting a lab-scale extruder as well. Teknor Apex will add TPE compounding capacity in Singapore by mid-2007, according to Lederer, who added that his company ``is looking more to add capability than capacity.''
In Farmington, Conn., Polymer Resources Ltd. will add a single-screw extrusion line by the end of the year. Farmington-based PRL had added a twin-screw line at its plant in Rochester, N.Y., earlier in 2005. The Farmington line will replace an older line and will do color compound work in lots of 1,000-10,000 pounds, PRL President Greg Bruno said.
The moves will add 8 million pounds of capacity and 5-10 employees at PRL by year's end. Bruno said PRL had 2004 sales growth of 25 percent and should match that this year.
He chalked up PRL's success to ``being in good niches.''
``We're not in auto or appliance, which are areas that tend to move offshore,'' Bruno said. ``We've also grown in types of consumer goods that don't need much assembly and in houseware displays and other areas where aesthetics are important.''
And just when it seemed like private equity money had steered clear of the compounding market, New York Investment firm Barington Cos. Equity Partners LP acquired a share of almost 6 percent in Schulman. Barington didn't waste any time making its presence known.
On June 6 Barington made a required filing with the Securities and Exchange Commission because of the size of its holding in Schulman. Then the firm made a second filing July 1, including a letter to Schulman's Haines in which Barington officials recommended the 77-year-old compounder be sold to maximize shareholder value.
Trading old for new
Some recent marketing examples look like evidence that compounding runs in cycles.
At PolyOne, PVC business director Rob Rosenau has seen renewed business and strong sales in wire and cable and automotive - two areas that seemingly had turned their backs on PVC compounds.
``From 2000-03, wire and cable saw a lot of competition from offshore finished products,'' Rosenau said. ``But in 2004, world prices came to parity and a lot of the competition disappeared, and the business came back. Now, I think customers will think twice before making the switch again.''
The company also has seen ``some reacceptance of PVC'' where suppliers had gone to other materials for economic reasons, he said. When the materials didn't work, suppliers returned to PVC for dashboards, armrests and other parts.
Schulman's Haines confirmed: ``The image of PVC isn't as tainted as before, and auto systems now are looking at PVC again.''
A similar market move helped Ferco post its fourth straight record-sales month in June.