The feeling among exhibitors at Plastics Encounter Southeast in Charlotte could be summed up in three words: Every pellet counts.
The corollary, of course, is that the number of companies seeking recycled materials has increased - and prices for those materials will escalate with the uptick in demand.
Auxilliary equipment makers agree that the uncertain resin market is forcing processors to rethink sloppy practices that leave even a trickle of pellets on the factory floor or toss scrap out the back door with the trash. The new processing mantra means a boost in North American sales for blenders, granulators and the like. Processors are making, or planning to make, capital equipment investments in recycling, automation, vision systems and other areas, to improve efficiency and mitigate the rising costs of raw materials.
Cumberland Engineering Corp.'s equipment sales have grown 10-15 percent, mainly from private firms actively pursuing recycling, national sales manager John Farney said in an Oct. 20 interview at the show. Officials with Wittman Inc. of Torrington, Conn., put the U.S. granulator market at $37 million in 2004 and annualized that to $42 million for 2005.
Conair was displaying its TrueBlend gravimetric batch blender, designed with an enclosed chassis to prevent pellet loss. ``We have to handle the material like the gold that it is,'' said Ben Martin, sales and marketing director for the Pittsburgh-based firm.
Like several other suppliers, Conair is helping its customers in the devastated Gulf region get back on-line. The hurricanes and their aftermaths are forcing a reshuffling of suppliers' roles. ``This is a precedent for us,'' Martin said.
Processors say they are finding themselves between a rock and a hard place, paying more for resin to manufacture products for larger customers - often struggling automakers - that, in some instances, refuse to pay more for their products. Even additives suppliers have announced a series of price increases that they say are necessary.
``We are raising our prices, not as a general price increase, but as a result of raw materials,'' said Salvatore Monte, president of Kenrich Petrochemicals Inc. in Bayonne, N.J. Kenrich received notice of a new fuel surcharge Oct. 18, he said. ``I have to pass them through. We have to get a fair profit.''
Ray Burns, president of Mack Molding Co.'s southern division, hasn't seen anything like the current combination of wide-spread materials shortages and price increases. Even in the mid- to late 1970s, the issue was more about availability than price, Burns said.
Mack's southern division uses mostly polycarbonate/ABS blends, thermoplastic olefins and polypropylene, and Burns said, so far the firm has been able to get materials. ``We have no outages and we have never gotten to a situation that we would shut anything down,'' he said. Mack had enough resin ordered to cover its needs, and even when suppliers allocated only 75 percent of the orders, ``we were able to make ends meet.''
Burns said the firm still is working with its customers on accepting price increases, which are a fact of life for the foreseeable future, with molders facing constant per-pound increases as well as energy and other surcharges.
But not all processors are passing on the rising costs. Scottsburg Plastics Inc. of Scottsburg, Ind., has been hit hard by the volatility of polypropylene pricing and also has had to turn away work because of an inadequate resin supply, said President Joe Wolf. The custom injection molder recently lost a $2 million account because a customer would not accept a price increase for its parts. Now, Wolf said, that customer is shopping around for a Chinese or Mexican processor.
During the past six years, Scottsburg's operations have been a microcosm for what's been happening industrywide, as foreign competition steadily has crept up on U.S. manufacturers. In that time, Scottsburg has reduced its workforce from 135 to about 45.
``We've invested heavily in automation in the last three to five years,'' Wolf said, adding ``it's tough to compete with overseas.''
Automation is a trend that has become more common as manufacturers struggle to stay profitable in an ever-changing marketplace, said Troy Nix, executive director of Mid-America Plastics Partners Inc. in Indianapolis.
``Companies using lean principles have become more profitable in general,'' Nix said. He said MAPP members are becoming more frugal about recycling and resin waste.
``We have at least one molder that's getting out of the materials business altogether,'' he said. ``They're telling their customers to buy it themselves and shifting the risk. So there's a little innovative thinking right there.''
Plastikos Inc., a 27-press custom injection molder in Erie, Pa., has invested heavily in automation. The firm is somewhat vertically integrated, getting most of its molds through sister company Micro Mold Co. Inc., also in Erie.
``Nearly all our machines have a robotic arm,'' said Micro Mold regional sales manager Mark DeHaven.
Also, because Plastikos uses liquid crystal polymer in about 80 percent of its applications and LCP prices have seen little fluctuation, material price spikes have had little impact on its bottom line, said co-owner Bill Fogleboch.
The entire industry is struggling not only to handle the short-term spikes, but to move forward in the long run, said Brad Davis, marketing manager at Jarden Plastic Solutions of Greer, S.C. To that end, processors are going for long-term efficiency with their equipment purchases.
Industrial Control Vice President of sales Mark Ermatinger touts camera-inspection systems as being able to reduce defects to zero, resulting in greater profitability. Manufacturers that require greater accountability, in markets that include automotive, pharmaceutical and medical, can't afford to be without a machine vision system, said Ermatinger, also owner of the Zeeland, Mich.-based equipment distributor.
``Building scrap was acceptable in the past,'' he said. ``Not anymore.''
