Emissions standards for small fuel tanks - used in golf carts, lawn mowers, watercraft, snowmobiles and all-terrain vehicles - are tightening, and having an impact on industrial blow molders.
The new rules are coming from the Environmental Protection Agency and the California Air Resources Board, and they relate to hydrocarbon emissions. The rules apply to tanks made beginning next year.
Fuel tanks remain the leading application among the industrial segment of the blow molding market, according to industry consultant Peter Mooney, principal of Plastics Custom Research Services in Advance, N.C.
``The technologies are changing for CARB and EPA compliance,'' Mooney said. ``Therefore, it's affecting not only blow molders, but also rotational molders.''
Both groups of processors are trying to figure out the best way to comply with the new regulations.
Right now, Mooney said, there is not enough capacity to meet demand for fuel tanks that meet the new regulations.
``It's a real concern now for equipment makers and suppliers,'' Mooney said.
Small fuel tanks are one of the few bright spots for industrial blow molders. In an Oct. 17 telephone interview, Mooney said that overall growth for the industrial blow molding sector was not very robust during the 2001-05 period.
The average annual growth rate for the segment was 3.9 percent, based on an analysis of 62 companies ranked by Plastics News. Some 35 percent of those companies had either no average annual growth or negative growth from 2001-05. The other 65 percent reported zero to 5 percent growth. Most of the rest reported 5-10 percent growth.
In a recent telephone poll of those companies, 57 percent said they are likely to grow in 2006.
``2006 has not been a recovery year if you look at all these companies,'' Mooney said. ``We're having a worse year this year in terms of distribution of growth.''
There are a lot of markets, like toys, that have been getting steadily worse. This also will be a down year for automotive fuel tank producers, because of factors affecting the overall automotive industry, he said.
``They definitely as a group will have negative growth this year in real terms. So, what's growing?'' he asked.
The picture is not all gloom. Mooney did report finding growth in several segments, including under-the-hood parts, especially for heavy trucks. Heavy-truck demand will see a nice pickup this year because of a format change taking place next year.
``Agricultural equipment is doing really well,'' he said. ``The lawn and garden segment is doing pretty well, as consumers purchase equipment for those new home purchases.''
Medical and hospital markets perform consistently well. In a segment like toner bottles for printers, the U.S. has lost a lot of market share to overseas. The sports and recreational products category is growing, ``not spectacularly, but growing.''
Additionally, he said, there's tremendous interest in what's going to happen to nonautomotive fuel tanks.
The segment is not necessarily a growth area, but a technological change area. But the move into multilayer technology can be a precipitous investment to a small molder, Mooney pointed out.
Machinery manufacturers featured products at NPE 2006 to address the market demands.
For Kautex Maschinenbau GmbH, the company is facing more requests from customers for equipment to make small low-emission plastic fuel tanks, said Kautex Chief Executive Officer Olaf Weiland.
``Those customers are at the same time asking us to minimize the additional cost for the reduced permeation,'' he said in an e-mail interview.
``In order to provide the best possible solution to each of those requests, we have thoroughly filled the past-time gap between small coextrusion systems and bigger coextrusion systems for full-size fuel tanks. As a result, our actual program allows us to tailor coextrusion fuel tank production equipment for every practical tank size and machine output.''
Bekum America Corp. has been promoting the new, large six-layer coextrusion development machine in the firm's applications lab in Williamston, Mich. The $1.5 million machine on display at Bekum's NPE exhibit in June was moved to the lab. Coextrusion structures and materials can be tailored to address the current interest in flexible fuels such as E85, officials have said.
On the bottle side of blow molding, that sector experienced buoyant growth during 2001-04, when the volume of plastic material consumption grew at an average annual rate of 6 percent and the value of sales grew at an average annual rate of 8.75 percent, according to Mooney's report, ``Recent Patterns of Growth and Technological Change in the Bottle Blow Molding Business.''
``The growth in volume terms is genuine as plastic bottles continue to replace glass bottles and metal containers in diverse food, beverage and nonfood end-use markets,'' Mooney wrote in his report. ``However, the growth in value terms is misleading since the bottle blow molders have been unable to offset the unprecedented resin price increases of 2003 and 2004 by passing them along to their customers.'' He noted that the market for bottled water is helping, however.
The entire North American blow molding market has seen its share of investments during 2006 and also its share of plant closings, with overall market consolidation via mergers and acquisitions.
Mauser Corp. announced the closing of a blow molding plant in Nitro, W.Va., where it molded products for the industrial drums market. In the housewares market, Rubbermaid Home Products Inc. of Fairlawn, Ohio, announced in June it would close its blow molding plant in Centerville, Iowa.
Still, there are a number of expansions on the horizon. Bottle blow molder Alpha Packaging Inc. of St. Louis will open a blow molding plant in Jacksonville, Fla., at the start of 2007.
``We would not do this unless we felt strongly that we were going to continue to grow,'' Alpha President and Chief Executive Officer Dave Spence said recently.
``We are generating the types of profits necessary to replace older equipment. It has been a tough environment in the last year. For some reason, some of the bigger names in the industry have been downsizing some of their plants,'' Spence said.
Blow molder Fortco Plastics Holdings Inc. of Portland, Ind., basically has doubled its operational footprint during 2006, all of that in blow molding. That company makes concentrate containers for Pepsi and molds containers for industrial applications, including for shipping hazardous materials.
Poly-Tainer Inc. of Simi Valley, Calif., is opening a plant in Greenwood, Ind., as it expands eastward to make extrusion blow molded and injected stretch blow molded PET containers for personal-care and industrial markets.
That firm will buy new Nissei equipment and move some Bekum blow molding capacity from the two existing plants in Simi Valley, according to a recent Plastics News report. Machinery relocated from California will be replaced and upgraded.
Companies still report they are struggling in the face of inflation run-ups. In early September, Graham Packaging Co. LP of York, Pa., took pricing action and cut cost structure because of continued energy-related inflation.
``Energy-related costs are up 22 percent from the start of last year and this is well beyond what we are able to offset even through aggressive cost and productivity improvements,'' Philip Yates, chairman and CEO of Graham, said at the time.
``Every year we have been able to deliver better pricing and products to our customers by investing heavily in new technology and utilizing our manpower to maximum efficiency,'' Yates said in the Sept. 1 news release. ``The current economic conditions require a much more conservative strategy and the need for additional pricing actions, along with a greater focus on the use of all existing assets. This includes a significant scaling back on projects that don't provide margin protection during periods of inflation and economic downturns.''
Amid all that, Mooney said consolidation is affecting both the industrial and bottle sides of the blow molding market, and that will continue through 2007.
During 2006, the industry saw Ball Corp. make its move into barrier polypropylene bottles when it bought those assets from Alcan Packaging. Consolidated Container Co. LLC of Atlanta acquired the assets of MAB Group LLC, a blow molder of beverage bottles based in Louisville, Ky.
``There's a world of liquidity out there,'' Mooney said. ``There's a lot of money sloshing around looking for a home.''
According to Blaige & Co. of Chicago, there were 15 global plastics mergers and acquisitions deals in the first half of 2006, compared with nine for the same period in 2005.
Tom Blaige, chief executive officer, said that the surge in blow molding deals is a notable trend among the entire plastics industry activity for that period.
His firm expects a strong second half, with continued involvement from financial participants that will drive the industry further toward consolidation as private equity groups increase their investments.
``International and domestic competition, coupled with higher production costs, will push small and midsized firms to consider selling or recapitalizing their middle-market businesses to compete and survive,'' Blaige said.