Sometimes, taunting a pit bull can be less hazardous than buying resin. But that didn't stop several industry pros from tackling the subject at the Plastics News Executive Forum, held Feb. 25-28 in San Diego.
Panel moderator Bill Bowie asked four resin buyers about the tricks of their trade. Bowie is chief operating officer at Resin Technology Inc., a resin-buying consultancy in Fort Worth, Texas.
The panelists responded that communication is key in a market that's often filled with confusion.
``We have three people involved in the strategy and purchase of resin, and each brings their own point of interest and information to the discussion we have every week,'' said Jack Riopelle, president of Wisconsin Film & Bag Inc., a polyethylene film and bag maker in Shawano, Wis.
``Everybody has to be on the same page with the same market information. We meet [weekly] and we make that as important as having a family meal at night.''
Having a dedicated resin buyer was ``a critical first step'' at Plano Molding Co., a custom injection molder in Plano, Ill. In the late 1990s, the firm ``had one purchasing guy doing everything - and he was all over the place,'' said Peter Henning, chairman, president and chief executive officer.
``Now, every two weeks, we have a conference call with several levels of management,'' he said.
Having a long-term strategy in place also can streamline the resin-buying process, said Bowie, whose firm aims to help resin users make purchases at below-market averages.
``The challenge is that purchasing often is isolated internally and externally,'' he said. ``Too many companies multitask, where one buyer is buying everything, not just resin.''
At Intertape Polymer Group, Jim Bob Carpenter, executive vice president of global sourcing, is in frequent contact with his firm's seven contract PE suppliers and three or four contract polypropylene suppliers. That's a necessity at Bradenton, Fla.-based Intertape, which has annual sales of $1 billion and buys 300 million to 400 million pounds of PE and PP each year. The company is a major source of adhesive tape and other film products.
``To make a little margin on a lot of products, you have to do a lot of things right, including buying resin,'' said Carpenter, who spent 20 years in resin at the former Fina Oil and Chemical Co. before joining Intertape. ``We're always working to get the price [of resin] down.
``If you think you're buying resin better than everyone out there, you're in trouble - but that's our objective in areas where we're the biggest. ... When we run heavy and when we draw inventory down is determined by the price of resin.''
Sorting out good information from bad is also part of the resin buyer's job. That's especially true at large buyers like global DVD giant Technicolor Home Entertainment Services in Camarillo, Calif.
``Our president hears prices and rumors every week and comes to me and says I'm paying more per pound than I should be,'' said Jerry Esposito, general manager and sourcing director for THES. ``Then, I have to find out what those people are buying and who they're buying from.
``Five years ago, a DVD cost between $25 and $40. Now a lot of them are $9.99, so if you can't get the price point to where it needs to be, you're losing money per unit.''
Buying of resin in advance of possible price increases is a valuable tactic for resin buyers. And knowledge of the secondary market - of wide-spec or off-spec material from resellers, brokers and distributors - also is a must.
Wisconsin Film & Bag looks at pre-buying in areas where it expects price increases, Riopelle said. Plano Molding has gone so far as to add silo capacity to give it more holding room if an opportunity to pre-buy presents itself.
``What we pay for resin and what we choose to buy means everything to our company,'' Riopelle explained.
``A 7 cent reduction in resin prices saves us more than if we fired all of our employees. So we take resin very seriously.''
Intertape sets aside 20 percent of its annual purchase - about 60 million pounds of resin - for the secondary market, Carpenter said. Since the material isn't prime, it's used in Intertape's nonspecialty products like woven fabric.
At THES, Esposito dedicates 45-50 percent of his polycarbonate purchases to ``dominant suppliers,'' while giving 25-30 percent to the secondary market, 10-15 percent for spot buying and 5 percent ``for testing the new guys on the block.''
Riopelle said, ``There are times when the secondary market might be appropriate. You can get a sense if prime [resin] is going up or down, because the secondary market will go up or down before prime.
``Whether we participate or not, it's good to have contacts you know and trust in the secondary market.''
But both Riopelle and Esposito stressed the importance of knowing what they're buying in the secondary market. Material sometimes can be misrepresented, since it's essentially material that resin makers are looking to unload.
Moving forward, Carpenter said resin buyers need to be prepared for some major changes that he believes will affect the market.
``In polyethylene, long-term, a lot of pellets are going to come [to North America] from Saudi Arabia,'' he said. ``The Middle East has a 15 cent-per-pound advantage on ethylene [feedstock], based on $1.50 [per unit of] natural gas, vs. $7 in North America. Polyethylene pellets are definitely a threat from overseas, but polypropylene will remain tight, since there's not much propylene [feedstock] made by crackers overseas.''
Those changes also will affect the way buyers physically access resin, since most overseas resin is packaged and delivered in large sacks, rather than the conventional North American method of railroad car delivery.
``A lot of large U.S. plastics companies are hung up on trying to get resin into rail cars - that's how 80 percent of companies in the U.S. and Canada get their resin, so if it's not in a rail car, they don't want to hear about it,'' Carpenter said.
``To get Asian resin into rail cars adds cost, so it's going to take a shift in the U.S. into supersacks or to intermodal transport by truck. We'll have to build ports and facilities as the railroads get harder to deal with.
``Rail cars aren't the long-term method for resin delivery in North America,'' Carpenter added.
``If you want the best price, you'll have to take delivery in different forms.''