North American rotational molders were generally optimistic going into this year, despite signs of higher resin prices and more competition from industrial blow molding to make large hollow parts, according to an updated study by Plastics Custom Research Services.
``Despite the dark mood prevailing among U.S. economists with respect to the prospects for recession in 2008, U.S., Canadian and Mexican rotomolders are on the whole bullish with respect to continuing or recovering their growth momentum this year,'' wrote Peter Mooney, president of PCRS in Advance, N.C.
The research firm issued the report, ``Emerging Growth Strategies Among North American Rotational Molders'' in March. The study said 58 percent of rotomolders surveyed are bullish, and 25 percent bearish, expecting 2008 sales to remain flat or decline. Another 17 percent are taking a wait-and-see attitude.
After experiencing double-digit growth in the volume of goods produced, the momentum of the North American rotomolding industry has slowed down since the mid-1990s, to a rate of 2-3 percent from 2002 through 2007, according to the report. PCRS got that ``normal'' volume growth rate by taking out the boom years of 2005 and 2006.
Mooney thinks that growth of 2-3 percent will continue in the 2008-10 time frame.
The report points to several reasons for the slowdown.
* Rotomolded toys have declined, squeezed by domestic retailers, changing tastes in toys and brutal competition from China. According to the study, in the mid-1990s the toy sector accounted for 43 percent of the entire output of the North American rotomolding industry. Today that share is less than 10 percent, as China supplies 85 percent of all toys sold in the U.S., Mooney said.
* Rotomolders face greater competition from industrial blow molders, which are getting more aggressive since many have lost key Big Three automotive business and have excess capacity.
* Globalization has caused some customers to move work away from North America.
As rotational molding matures and competition heats up, rotomolders have expanded geographically through mergers and acquisitions and by adding new plants. Officials of private equity firm Olympus Partners of Stamford, Conn., which bought a majority stake of tank rotomolder Snyder Industries Inc. in July, said they want to buy a smaller rotomolder in the near future.
The study said there are about 400 total North American rotomolders some 300 in the U.S., 50 in Canada and 50 in Mexico.
Those rotomolders had average annual sales growth of 7.4 percent from 2002-07. Some of that came from passing along higher resin costs to customers.
After recording slow growth in 2003 and moderate decline in 2004, the industry experienced a revival in 2005 and 2006, spurred by expansionary fiscal and monetary policy measures, said Mooney, an economist.
One strong trend is the growing importance of secondary operations, as companies move beyond simply molding parts to making final products ready for sale or subassemblies.
The study also analyzes major markets and gives detailed profiles of more than 100 rotomolders.
PCRS also reports:
* In 2007, North American rotomolding consumed 1.23 billion pounds of resin.
* Spending on rotomolding machinery is holding up, even as other plastics equipment sectors have been hit hard. Fourteen percent of all rotomolders surveyed have invested in one or more new rotomolding machines in 2007, or plan to do so in 2008. ``This suggests that rotomolders as a group are weathering the stormy conditions in the overall economy better than other processors,'' the study said.
* Large hollow parts remain resistant to imports. PCRS did not find many rotomolders saying imports from outside North America are a serious threat. On the flip side, few companies also reported exporting products. PCRS thinks the ``shipping air'' principle will remain, given the soaring cost of crude oil that has pushed up the price of transatlantic transportation, although the steep decline in the value of dollar ``presents historic export opportunities for U.S. rotomolders.'' Streetsboro, Ohio-based Step2 Co. LLC is one rotomolder that has reported growing exports to China and the Middle East, in part because of the weak dollar.