Atlanta-based Atlantis Plastics Inc. is seeing demand grow for value-added products like pre-stretch film, used in places like Wal-Mart distribution centers, where employees demand lighter-weight rolls with which to work.
In August, the firm started a new Battenfeld Gloucester blown film line at its Tulsa plant and will add four employees to its base of 74 there.
``Our strategy is to grow in value-added products because it enables our customers to offer cost-reduced products to their customers,'' said Kevin Keneally, vice president and general manager of Atlantis' linear stretch film business.
``As resin continues to increase, there's a continuing drive to reduce packaging costs. These value-added products are designed to reduce overall costs per load,'' he said by telephone Aug. 28.
During 2005, Atlantis installed its first five-layer coextrusion line to strengthen its presence in the converter films market.
In 2006, the stretch film unit is focused on boosting market share with, among other things, new product development and low-cost nationwide production locations. Its custom films division is geared to higher-value-added coextrusion films for converter, lamination and protective masking film markets.
The firm this year also purchased a seven-layer Varex blown film extrusion line that will be installed in early 2007 at its plant in Mankato, Minn. Atlantis bought the line to make barrier films and expand on its custom film division's capacity of five layers, according to supplier Windmoeller & Hoelscher Corp. of Lincoln, R.I.
Throughout the industry, officials have been outspoken about mitigating resin costs.
In Tredegar Corp.'s second-quarter 2006 earnings release, President and Chief Executive Officer John Gottwald said polyethylene resin is 100 percent higher than it was in 2002. Tredegar businesses have offset some cost pressures, but the films business management team is planning more-aggressive cost reduction this year, he said.
Nonetheless, the Richmond, Va.-based firm reported that its film products division continues to expand capacity to support growth in new products.
Capital expenditures were $21.7 million in the first six months of 2006 and are expected to total $45 million for the year. Roughly half of the forecasted capital expenditures are for expanding production capacity in surface-protection films, the company said.
At ISO Poly Films Inc. in Gray Court, S.C., expansion is all demand-driven, said Jon McClure, CEO and founder.
With its $25 million upgrade last year to food and medical films operations, McClure said ISO based the construction of new infrastructure on the projected overall cost of power per pound.
``Our bigger fear is, are our customers going to move to China to make their product? Our cost [of] power per pound, overall, will be lower, based on how we've built this plant,'' he said in an Aug. 24 telephone interview.
``We built it lean and mean so we can stay in the game. Every year, we've put in a line. Today, we're really focused on technology, leading-edge technology, incremental improvement that separates us from competitors,'' he said. ``It's built so you can install lines really rapidly. Our philosophy is wide and fast. We like bigger lines. We've got to be competitive with the world.''
AEP Industries Inc. of South Hackensack, N.J., is adding capacity at five U.S. facilities in 2006 in order to grow into new product categories. The plan includes expanding a newly acquired site in Bowling Green, Ky., that will mean growth into print, laminate and bag-pouch markets.
In the company's second-quarter conference call, officials discussed the expansion.
``We've put on about 100 million pounds of capacity in one year's time,'' said Brendan Barba, AEP's chairman and CEO.
``Just to give you an update on that, about half of that capacity is on stream already,'' he said.
The other half began coming on stream in June and will be complete by September, he said. Barba said he expects the expansions to lower manufacturing costs substantially, improve quality and expand AEP's product range, as well as its markets in specialty films.
``A lot of the investments we have made have been in specialty films businesses, which are higher margins and we'll also be offering new products in these higher margin businesses. We feel real good about what we're going to accomplish in 2006. We feel even better about 2007,'' Barba said.
Some of AEP's work has involved modernizing equipment and consolidating. AEP in April sold its Edmonton, Alberta, plant, which was on the grounds of a Borden Chemical Inc. resin production facility.
John Powers, executive vice president of sales and marketing, said it was a small plant with only two lines, which were moved to AEP's facility in Toronto.
AEP also sold a building in Gainesville, Texas, that it had used as a warehouse for the past few years to focus on its operation in nearby Waxahachie, Texas.
``We shut down Gainesville and sold that building, and we also had a leased warehouse in Waxahachie. We consolidated into two locations from three, and we now own the 100,000-square-foot building in Waxahachie, which will be our distribution point,'' Barba said.
But challenges remain with resin prices.
``We are still faced with resin volatility,'' he said. ``A price increase has taken place May 1 that was a 6 cent increase in the marketplace. It stuck. AEP has raised its prices 8 percent, effective June 1, on all products. There's also a June 1, 7 cent increase and a July 1, 5 cent increase - both of those are being evaluated by us right now. We're not sure where that's going yet.''
A report from Freedonia Group Inc. of Cleveland said that U.S. plastic film demand in terms of volume will reach 15.2 billion pounds in 2010, and is growing 2.6 percent annually.
Dollarwise, plastic film demand, which includes resin, additives and processing and other costs, will expand 4.5 percent annually to $28.6 billion, Freedonia said.
Low density polyethylene film will remain the leading film, accounting for 64 percent of the total in 2010, with polypropylene presenting the best opportunities. That material is expected to expand the fastest with 3.4 percent annual growth through 2010, driven by produce, grain mill, dairy product and other food packaging applications.
LDPE will keep its position as the most-used resin for packaging film, fed by opportunities in stretch and shrink wrap, trash bags and produce and snack packaging. HDPE will see good growth based on opportunities in segments like baked-goods packaging and retail bags, according to Freedonia.