The state of the thermoforming market is a mixed bag, but for 2006, several officials agree that bio-based materials will be a major thrust for packaging, and capital investments will pick up in both industrial and packaging sectors.
The packaging and industrial sectors are affected by the three-headed dragon that's challenging the plastics industry as a whole, with increases in resin prices, foreign competition and continued consolidation.
Industrial thermoforming has been affected less by consolidation than has packaging thermoforming, according to Plastics Custom Research Services of Advance, N.C. The number of global plastics packaging mergers and acquisitions more than doubled from 61 in 2002 to 125 in 2003. Of those deals, almost two-thirds involved a foreign buyer or seller.
In the industrial sector, the infrastructure of regional thermoforming business has undergone little substantive change during the past few years, with the exception of the total number of employees, according to the PCRS report ``The Industrial Thermoforming Business: Review and Outlook.'' There have been few new entrants, and there has been only moderate corporate consolidation. Among the officials surveyed, few could cite technological changes of importance to their companies and their customers, which is a cause for concern, according to PCRS President Peter Mooney.
Looking at the entire picture, thermoforming is facing several challenges, according to Mooney. In packaging, thermoformers are up against a new resin pricing regime, including the volcanic eruption of styrenic resin pricing at the start of 2005, Mooney wrote in his report, ``New Market Dynamics in Thermoformed Packaging.''
Thermoforming's packaging sector will grow in value from $8.88 billion in 2004 to $11.6 billion in 2009, Mooney said. That sector's primary domestic challenge is to innovate, including creating new package designs, to test and introduce new materials, to invest in new machinery and equipment to ultimately become more efficient.
``Capital investment has been almost disastrous, very weak,'' Mooney said in a recent telephone interview. ``This is an opportunity for them to become more efficient. This is the year we should see a pickup.
``We're going to really see those companies that are investing for the future. It will be a good way to see futuristic thinking of these companies.''
Expect bio-based materials to become a growing factor in 2006 and beyond, officials said, especially in packaging. Several companies are developing products using such material, including Fabri-Kal Corp. of Kalamazoo, Mich., which introduced dome lids and a 7-ounce cup under the Greenware brand name in January.
Andy Fitzsimmons, chief executive officer of packaging-focused Fitzpak Inc. of Cranbury, N.J., said polylactide is his firm's biggest challenge. His firm is sourcing PLA sheet from Mexico.
``In this year, whether it's warranted or not, people are desperate to know about it, how it performs, and pricing differences,'' Fitzsimmons said.
The industry is seeing interest in the market from major retailer Wal-Mart Stores Inc., which announced in October its intent to use Minnetonka, Minn.-based NatureWorks LLC's PLA material in more than 100 million produce containers.
Jim Throne, president of Sherwood Technologies Inc. in Dunedin, Fla., said bio-based materials will gain more than 10 percent market share during the next 10-15 years.
``There are many, many, many alternate materials out there,'' Throne said, besides PLA. ``Are they economically practical? Not really. Will they make [polyethylene] obsolete? Obviously not. It will be interesting to see how the materials shake out.''
Fitzpak's Fitzsimmons agreed that this year is a time for many firms to ramp up capital investments, however. His firm is looking for a building within a 20-mile radius of its site.
``The future is looking better than the past,'' he said.
Turnaround times are accelerating, an expectation of globalization that has Apogee Designs Ltd. of Baltimore setting up a team to monitor continuous change.
``It takes a different type of management system,'' said Kevin Barnes, vice president of sales for the custom thermoformer. ``Continuous change is a requirement now. We're setting up a team to do that. It's constantly evolving.''
In Mooney's survey of more than 100 processors serving the industrial thermoforming market - published in November 2004 - he found that the industry as a whole was just beginning to recover from a recession. The growth rate for the heavy-gauge thermoforming industry is below the plastics industry in general, he said.
Mooney said finding no growth in the value of industrial thermoformed output from 2000 through 2003 is ``hardly surprising.'' The processors serve customers across the whole range of manufacturing and service industries, he wrote in his report. The gross value of U.S. industrial production peaked in the second quarter of 2000, bottomed out in the second quarter of 2003, and only in the second quarter of 2004 did it marginally exceed the level of three years earlier.
Through 2009, industrial thermoforming's growth in volume terms will track the North American economy, Mooney said. He expects 3½ percent annual growth made up of 1 percent labor force growth and 2½ percent productivity per worker. That is roughly 1 percent lower than the likely average annual volume growth of the overall North American plastics industry, which Mooney projects at 4½ percent.
``I see a tremendous amount of new materials and innovation in large parts,'' Mooney said. ``There are a lot of interesting things going on in the large-part arena. It's one of the more interesting parts of the plastics industry. There are more people looking over and saying, `Hey, it's always been made of fiberglass. Let's do thermoforming.' ''
The industry will see that played out in Mooney's phenomenon of ``infringement zones,'' where processing groups are facing increased competition from alternative processing groups. For example, yacht firm Azimut-Benetti SpA of Italy is converting its fiberglass hand lay-up system to core infusion molding for one of its yachts.
Throne said it is surprising that acquisitions and consolidations were not major occurrences among industrial thermoformers during the recent recession. He also expressed concern that backward integration, diversification and technical improvement were not pursued by domestic industrial thermoformers, and the time for that probably has passed.
``My concern is not the survival of the industry,'' Throne said. ``My concern is that the next generation of people coming along need to step up to the plate technically.
``They can't rely on their wits anymore. The issue is to educate the next generation of people out there. ... The thermoformers will survive. They'll continue to grow.''