ROSEMONT, ILL. — It is not here, but it may well be on the way. That's how U.S. rotational molders feel about the damage the economic downturn may bring to their sector.
Rotomolders are cautiously taking measures to fend off the ripple effect from weak markets and turn challenges into opportunities.
Attendees at the Association of Rotational Molders International annual meeting and the concurrent Rotoplas '08 exposition, held Oct. 21-23 in Rosemont, had mixed responses regarding the business environment, with a good amount of optimism arising from efforts to improve processes and products.
Solar Plastics Inc. of Delano, Minn., the 23rd-largest rotomolder in Plastics News' ranking, has not seen any direct impact from the dragging economy ``just yet.'' But Rick Carlsen, vice president of sales and marketing, advises companies to closely monitor changes in the industry, such as new regulations on vehicle emissions, and take advantage of them.
``We need to innovate and develop new products,'' added Doug Von Arb, Solar's vice president of operations. Custom rotomolders are in a more vulnerable position than manufacturers of proprietary products, he said, but one of the barriers for custom molders to switch to proprietary products is the required distribution channels.
Hedstrom Plastics of Ashland, Ohio, also doing business as Ball, Bounce and Sport Inc., makes 90 percent of the world's PVC play balls, rotomolded by its majority-owned Chinese joint venture. The company aggressively is leveraging its retail knowledge and background accumulated in the ball business for its custom molding division, sales manager Dave Yochheim said.
Even for custom molders, diversified end markets help buffer the dragging economy's impact.
While housing and recreational vehicle markets are pretty much ``dead,'' agriculture, mining and pallets still generate strong demand, according to David Smith, president of New Paris, Ind.-based Rotational Molding Technologies Inc., or Romotech.
The agricultural market has worked out to be safe harbor for Green Leaf Inc. of Fontanet, Ind., an injection molder that makes nylon and polyethylene fittings, valves and couplings for rotomolded tanks and storage containers.
``We haven't seen any impact at all,'' said Teko Goda in sales and marketing. Green Leaf is doing very well these days, he said, thanks to the strong agricultural sector. ``Commodity prices have been on the upward trend.''
During the 2001 recession, Green Leaf was not as lucky. Company sales dropped 15 percent in 2001, following the fall of crop prices. But this time, crop prices are holding, thanks to the growing ethanol industry, Goda noted.
Charles Industries Ltd. of Rolling Meadows, Ill., has added rotomolded products to its portfolio. Bruce Dilling, vice president of manufacturing, said the company has acquired a product line: rotomolded outdoor pedestals that house TV cables, etc. The product was made in Mexico before Charles Industries took it over, and is now being made in the United States.
``We've been very conservative and financially sound,'' Dilling said. ``Such companies get stronger during down times.''
Among other businesses, Charles Industries operates a plastics plant in Canton, Mo., using injection molding and extrusion processes to make proprietary products including telephone housings.
Bruce Muller, owner of Plastics Consulting Inc. of Palm City, Florida, echoed that rotomolding still attracts investment.
``I helped start a rotomolder six months ago who makes floats for crab pots,'' he said. The rotomolding industry has remained healthy in the economic storm because of the versatility feature of the process. ``Molders are still busy, and people want to get into this business.''
Despite the conventional idea that rotomolded parts are not economical to export, Romotech's Smith said shipping is not the deal breaker.
``The world market is still there, if you make the right product at the right price,'' he said. Romotech sells to overseas clients, including in Japan and China, with about 10 percent of sales generated from exports.
Solar Plastics is also diversified into the Asian market, in the form of a 10-year technical partnership with a rotational molder near New Delhi that makes fuel tanks, Carlsen said.
But tougher times may be around the corner.
``Personally, I think 2009 will be a worse year than 2008. The bottom has not been reached,'' said Smith. ``I keep cautioning my people to be very conservative. Before you see yourself in trouble — having too much material, having too much work in the process, having too many employees — make the moves and tighten up your belt early. That's all you can do.''
Terry Gillian, a consultant with Paladin Sales LLC of Uniontown, Ohio, also warned about the rocky journey ahead. ``In the next 18 months, we'll see slowdown across the board.'' Equipment suppliers will be under pressure, especially as more used machines may be put on the market.
New ARM President Daven Claerbout, sales director and co-owner of Dutchland Plastics Corp. of Oostburg, Wis., said: ``It's not that anyone is losing business to another rotomolder, it's just that customers are slow. Even if the part prices were lower, the demand is not going to be there.''
What rotomolders can do is ``be very clearly monitoring their costs and efficiencies, implementing process improvements,'' said Rick Church, ARM's executive director. ``When time slows down, you do a little less work. It's time to focus on improving the business, for two reasons: one is to be more efficient, so we can make the same profit with less business, and No. 2, we know the economy will come back out. When that happens, we will be positioned to grab market share.''
``Don't forget the pain when the economy turns back,'' Claerbout added. The pursuit of efficiency and technical advancement should be a sustained, ongoing process, he said.