Getting in line ...
If North American compounders are uncertain about the future. You can't tell by the way they're adding extrusion lines and growing their businesses. Here's just a sample of recent market activity:
* Ampacet opened a 40,000-square-foot color and additives concentrates plant in Queretaro, Mexico; added a new twin-screw extrusion line at its plant in Heath, Ohio; and is ``looking around in China and India,'' according to CEO DeFalco.
``We're not certain if we'll do grass-roots or acquisition, but we'll make a decision by the end of 2007,'' he said. ``There's a chance we could do both. We're doing it primarily for the domestic market in those areas.''
* GE's LNP is bringing idled small-lot lines back on in Thorndale, Pa., by the end of 2006.
``Using smaller lines opens up capacity on smaller machines,'' GE-LNP's Apte said. The unit is refitting a long-fiber line in Columbus, Ind., to make special-effects long-fiber products in 2007 and a small-lot line was moved from Exton to San Luis Potosí, Mexico, earlier this year.
* Washington Penn will add a line in Monterrey, Mexico, in the third quarter of 2007 to service the southwestern part of North America. Automotive and appliance markets are growing in Mexico, Cusolito said.
One of Washington Penn's sister firms - concentrate maker Uniform Color Co. of Holland, Mich. - will add 45 million pounds of capacity by 2008, with more equipment and a plant expansion.
* RTP opened a pilot plant in Winona in July. The ``customer-oriented'' site includes single- and twin-screw lines for new technology and product development.
* S&E will add new mixing equipment in Lunenburg in 2007.
* Lanier Color Co. spent more than $2 million to build a new, 40,000-square-foot plant in Gainesville, Ga. The plant houses five twin-screw extrusion lines, making colored compounds based on PVC, polyethylene, acrylic and other materials.
* North American market leader PolyOne Corp. spent more than $8 million to turn a 100,000-square-foot warehouse into a compounding plant and lab at its headquarters site in Avon Lake, Ohio. The building operates six extrusion lines making compounds based on specialty engineering resins and thermoplastic elastomers.
PolyOne also opened a small commercial line in Niagara Falls, Ontario, in mid-2006 to make specialty PVC compounds.
* Noveon Inc. announced plans for a 33 percent capacity increase for thermoplastic polyurethanes, also in Avon Lake. The new capacity will be operational in mid-2007.
* Polymer Resources Ltd. is boosting capacity by an unspecified amount in Rochester, N.Y. The firm makes specialty compounds based on polycarbonate, polybutylene terephthalate and other engineering-grade materials.
* Prime Colorants Inc. added three twin-screw extruders at its color concentrates plant in Franklin, Tenn.
* O'Neil Color and Compounding Corp. added a rail siding and a million pounds of resin storage in four new silos in Jasper, Tenn.
* ECM Plastics Inc. added a new extrusion line to make fluoropolymer compounds in Worcester, Mass.
* Bayer MaterialScience LLC is spending $6 million on a 15,000-square-foot expansion of its Hebron, Ohio, compounding plant, including new equipment.
* Americhem Inc. is investing more than $2 million to add 2,000 square feet to its headquarters and R&D operations in Cuyahoga Falls, Ohio.
The North American compounding field also has seen some capacity removed in the past 12 months. Spartech Corp. closed a compounding plant in Arlington, Texas, and Nova Chemicals Corp. closed a styrenics site in Chesapeake, Va., that included 170 million pounds of capacity for styrenic-related compounds.
In a lateral move, BASF Corp. transferred a line that makes compounds based on nylon 6, nylon 6/6 and PBT from Chesterfield, Va., to Altamíra, Mexico.
And a couple of brave entrepreneurs took the big step of jumping into the market for the first time.
Industry veteran Asis Banerjie opened Ovation Polymers Inc., a maker of specialty compounds based on PC, nylon, acetal and other materials in Medina, Ohio. Ovation operates a pair of twin-screw lines in a 55,000-square-foot plant. And in Lambertville, N.J., industry consultant Michael Gehrig started Aardvark Polymers, a producer of specialty compounds based on acetal and nylon 6.
Outside of the packaging and automotive realms, compounders continue to pound away at new opportunities.
``We've been investing in technology for last four years and now that's paying off,'' LNP's Apte said. ``The products we're now selling are more specialized. We're replacing a lot of glass-filled nylon and PP and not making as many grades of those products.
``That's not where our focus is.''
By mid-2007, GE's LNP also will launch Starflam-brand nonhalogenated filled and nonfilled nylon compounds in North America. The materials have been available in Europe since early 2006. Apte added that the use of LNP compounds in cell phones and hand-held devices ``is exploding.''
``We went from [sales of] zero to $10 million to $12 million in that market in a year,'' he said. ``Long-fiber nylon compounds are being used in cell phone housings, which allows for thinner parts. That's commercial now with Samsung and LG.''
RTP has commercialized some nanotech-based nylon products for food packaging and is working on taking that technology into polyolefins. Ampacet has increased its use of PP compounds replacing metal in bottle caps. At S&E, battery applications are strong, with consumers more aware of a need for uninterrupted power supply in the wake of last year's hurricanes.
Washington Penn is bullish on compounds that can mimic slate and wood in the construction market. PolyOne sees potential in that field as well, according to Rob Rosenau, vice president and general manager of PolyOne's PVC compounds business.
``There's been some softness in construction, but, by definition, that market is very broad,'' he said. ``Because of that diversity, [construction] is its own little portfolio. Residential numbers may have dropped, but that's been cushioned by commercial construction.''
So far in 2006, PolyOne has introduced several new grades of Geon-brand chlorinated PVC for high-temperature applications, such as injection molded pipe fittings and extruded vinyl windows.
Rosenau said the new grades, which are enhanced with extra chlorine to improve functionality, are being aimed at construction and industrial markets. A clear grade of the new material also is available.
Money still matters, of course, and it's got compounders grappling with some sensitive issues as 2006 approaches the finish line.
``A big question for us is the credit worthiness of customers,'' said Cusolito at Washington Penn. ``There have been a lot of bankruptcies [among plastic processors], including about 50 in automotive. We've had to take a hard line on credit. We've passed up tens of millions of pounds of business because of our concerns with some customers.''
And inventory continues to be an issue, especially with resin prices falling late in the year.
``Everybody's being cautious and watching the cost of gas and oil,'' Ampacet's DeFalco said. ``No one wants to be caught with high- cost raw materials, so you're not seeing much inventory buildup. People aren't taking chances on inventory.''
At GE's LNP, Apte has observed the impact of financial realities on market expansion.
``A lot of small companies are coming in with one or two lines,'' he said. ``But we've also seen some European compounders like Lati [SpA of Vedano Olona, Italy] leave the U.S. market because they couldn't achieve the scale they wanted.''
Elsewhere in the financial world, publicly held compounders Schulman and PolyOne each have enjoyed good years.
Schulman's fiscal year ended in September with the firm showing record sales of $1.6 billion. Schulman also set a fourth-quarter sales record of $421 million, even though annual profit essentially was flat at about $33 million.
At PolyOne, sales in the first nine months of 2006 were just over $2 billion - an improvement of 10 percent vs. the same period in 2005. The firm set a third-quarter sales record of $666 million and saw nine-month profit soar more than 300 percent to almost $109 million.
Rosenau said that PolyOne's PVC compounds business has seen some volume growth in 2006, but also has seen its revenue benefit from higher selling prices.
Color and specialty compound sales were up at publicly held Spartech of Clayton, Mo. The company saw sales in that segment rise almost 10 percent to $347 million in the first nine months of 2006. Nine-month operating earnings also soared almost 70 percent to $20 million.
Ultimately, compounders contacted for this story stressed the need to stay focused heading into 2007, casting distractions aside and zeroing in on what they do best.
``Compounders continue to supply more unique products to unique customers,'' Matrixx's Rodden said. ``It's not vanilla anymore and hasn't been for a long time. Our products are more and more specialized and more tailored to unique needs.''
``If you're committed to this business, you can't say you're not going to spend any money and just use your equipment until it dies,'' added John Manuck, president and chief executive officer of Techmer PM LLC in Clinton, Tenn. ``You have to upgrade and buy new equipment and make more complex products. You have to push yourself and increase productivity.''