(Nov. 7, 2008) — As the United States embarks on a new era in its national politics, plastics industry companies are left to make sense of how to do business. This includes companies with headquarters based in other countries that operate units within the United States and those companies with headquarters in the United States that have a great portion of their operations stateside. This would have been the case whether a Republican or a Democrat was elected to the highest office in the U.S.
Plastics News managing editor Don Loepp posed the question Nov. 5 in his blog, asking “What will Obama mean to manufacturers?” He cited Oklahoma oilman Aubrey McClendon's quote from a Bloomberg story, “A Democratic administration is more likely to pursue the use of [compressed natural gas] as a fuel.”
Loepp says diverting natural gas to automotive fuel could have an indirect impact on plastics manufacturers, since natural gas is an important feedstock for plastic resins. Chemical companies surely can adapt to the change in Washington, but how will plastics processors handle the challenges?
It's a question that will only be answered over time. It goes without saying many executives will be evaluating their businesses differently in the face of such anticipated changes and bracing for those changes no one can predict.
For now, we can look back on what we've discovered in analyzing data we've collected over the years and point to trends in the blow molding sector. Before the results of the Nov. 4 election, we had completed an analysis of blow molding data from 1996 through 2007. From ranking 189 companies in 1996 with a total of $8.4 billion in blow molding sales to 158 firms ranked in the 2007 analysis with $16.5 billion in sales, we see an increase of roughly $8 billion in sales but a decrease of 31 firms.
The numbers alone likely won't surprise anyone who makes their living in the plastics industry or has watched the progression. Even the 2007 numbers show six fewer companies than in 2006, when the 164 blow molders ranked had $16.1 billion in sales.
There are fewer and fewer, and that means the industry players have to be more skilled at how they play the game. This is not just for handling rudimentary business transactions; this requires a new view, a higher level of sophistication in running one's business. The blow molding sector is a microcosm of the trends outlined in former Secretary of Labor Robert Reich's book, Supercapitalism: The Transformation of Business, Democracy and Everyday Life.
Indeed, politics and economics always have intersected, but we're experiencing the convergence even more in the 2000s, and we're forced to make sense of it when substantial changes occur in a high and powerful office such as the United States presidency. The effect of politics and the laws of economics will constantly challenge the many facets of business, especially as emerging economies rise up with their voracious appetites.
What does that mean for blow molding? Some other notable trends, anecdotally, are that blow molders serving the industrial sector are finding more work in fuel tanks under Environmental Protection Agency standards. But other environmentally focused changes include the light-weighting of plastic beverage bottles — a trend that has significantly reduced the amount of PET resin demand in the North American market by as much as 165 million pounds. Senior reporter Bill Bregar's Page 1 story this week on Heise Industries Inc. in East Berlin, Conn., illustrates a company that exclusively served the U.S. market for years, until that market's slowdown prompted Heise to become a global player.
Separately, I interviewed a machinery executive who said quoting is brisk at his firm for the second half of the year. When combined with the strengthening of the U.S. dollar, the signs are positive, the vice president said. Equipment sales at his company are up worldwide, which he attributed to investments the firm made in new-machinery development.
“Companies are investing in new machines, but only with dedicated new projects,” the vice president said. “Speculative purchasing for improved efficiencies are at a minimum.”
Dedicated new projects mean customers are willing to make a commitment — and that can be hard to come by in certain scenarios. The take-away is that you must know your own business and what you are willing and able to do, especially under the strengthening influence of politics and global economics.
Angie DeRosa is a Plastics News correspondent who is working on her master's in economics at the University of Oklahoma in Norman, Okla.