Sales of some commodity resins to distribution channels outpaced overall market growth in the first seven months of 2014 — and distribution executives see that trend continuing through the rest of the year and on into 2016.
“We're still very bullish, regardless of what's gone on recently in the stock market and with China,” said Ed Holland, president and CEO of commodity and engineering resins distributor M. Holland Co. in Northbrook, Ill. “We're going gangbusters and aggressively going after high growth. Our growth has been very broad-based.”
John Dwyer is seeing similar results at Osterman & Co. Inc. in Cheshire, Conn.
“We're having a very good year,” said Dwyer, the firm's president. “At this point, we're well above budget and we had a pretty aggressive plan going into the year.”
Dwyer added that most of his firm's growth has been in polyolefins — where sales volume is up more than 20 percent — and engineering thermoplastics, which are up 8 to 10 percent.
“We've definitely seen growth in the business overall,” said Mike Pignataro, vice president of North American sales at Bamberger Polymers in Jericho, N.Y. “There's a service level that distribution can offer to processors because a lot of major chemical companies don't want to package anymore. If a processor wants [an order] smaller than a rail car, they have to go out and find it.”
In the first seven months of 2015, low density polyethylene, polypropylene and polystyrene resins were snapped up by distributors at a rapid pace. U.S./Canadian sales of LDPE into distribution mushroomed almost 39 percent, while the overall domestic LDPE market saw sales growth of only 3.5 percent.
North American sales of PP to distribution also jumped 14 percent in that period, more than double the overall domestic growth rate of 5.9 percent. Regional sales of PS to distributors and resellers jumped almost 8 percent, while overall domestic sales essentially were flat.
But sales of high and linear low density PE — as well as PVC — to distribution lagged the field in those seven months. Sales of LLDPE to distributors tumbled more than 14 percent, even as overall domestic sales were up almost 7 percent.
U.S./Canadian HDPE sales to distributors bumped up just under 1 percent, less than half of domestic sales growth of 2.1 percent. Regional sales of PVC to resellers slipped 2.2 percent, slightly worse than the overall domestic market sales loss of 1.6 percent.
Distribution executives say the North American resin market has recovered from sudden price drops that hit commodity resins in late 2014 and early 2015. The market also has moved on from supply issues that affected availability of some resins in 2014.
“Oil was at $90 to $100 [per barrel] and people never believed it would go to $40,” said Mark Crist, vice president of distribution at PolyOne Corp. in Avon Lake, Ohio. “That caught a lot of distributors flat-footed.
“Some companies had monster inventory, then prices fell like a stone. They did everything to buy only what they needed and to flush high-priced inventory out.”
Crist said he was “really proud” of his team at PolyOne.
“We were huddling as prices started to fall,” he explained. “We took action to only have inventory where we needed it.”
In the first half of 2015, PolyOne's distribution unit posted sales of $532.5 million, down almost 7 percent vs. the same period in 2014. Crist said that drop was a result of lower resin prices and not lower sales volume in pounds.
Based on sales, distribution was the largest of PolyOne's five operating units in the first half, generating almost 29 percent of the firm's total sales. PolyOne's distribution operating income for the first half essentially was flat at $34.8 million.
On the supply side, Ed Holland added that “it still boils down to [resin] production limiting flexibility.”
“Some producers were logistically challenged [in 2014], but things have improved,” he said. Marc Fern, M. Holland's sales and marketing vice president, added that supplies of some materials such as PP remain a bit tight, but that the firm expects business to be strong through the end of the year.
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