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October 30, 2015 02:00 AM

Processors want new resin capacity to stay in the US

Frank Esposito
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    Wharton School of Business
    Quinn

    Chicago — Expectations of new polyethylene capacity had two U.S.-based major plastics processors showing their true colors of red, white and blue at a recent industry conference.

    “I don't want to put [the new resin] on rails and ship it over,” AEP Industries Inc.'s John Powers said Oct. 29 at Global Plastics Summit 2015 in Chicago. “I want to keep it here and grow demand and create new applications.”

    Powers is executive vice president of sales and marketing for Montvale, N.J.-based AEP, North America's sixth-largest film and sheet maker, according to a recent Plastics News ranking. AEP posted sales of almost $1.2 billion in its 2014 fiscal year. The firm employs 2,500 at 12 plants and is the region's largest custom films maker, said Powers, who joined the firm in 1988.

    He cited stand-up pouches and shrink film as growth areas for domestic film extruders. Powers also listed can liners, stretch film, T-shirt bags and car covers as markets where domestic products can replace imports.

    “New shale gas has created a huge opportunity and challenge for the industry,” Powers said.

    Similar comments in favor of domestic production were made by Chris Quinn, president and CEO of toymaker Step2 Co. LLC of Streetsboro, Ohio. Step2 is North America's largest rotational molder, with sales of $175 million.

    “We can keep resin in the U.S. and grow demand,” said Quinn. “Offshore labor costs are increasing and the supply chain can be complex. You've also got issues with intellectual property and geopolitical risks.”

    With billions of pounds of new PE resin set to come on, Quinn said Step2 “is moving from a transactional to a transformational relationship” with suppliers Nova Chemicals, Dow Chemical Co. and ExxonMobil Chemical Co.

    “You have to understand that it's a journey,” said Quinn, who held management posts with shoemaker New Balance and Procter & Gamble before joining Step2 earlier this year.

    He added that Step2 will increase its capital expenditures by 15-20 percent in 2016 — with all of the new funding going toward product innovation.

    The American Chemistry Council estimates that half of the new U.S. resin capacity will be exported. But the half that will stay at home will lead to new capacity in plastics processing, as well as production of compounds and additives, according to Martha Moore, ACC's senior director of policy analysis and economics.

    The investments in the United States will total $46.8 billion and create 127,500 direct jobs, she said.

    Since 2008, ACC has tracked almost 250 new shale-based U.S. chemical projects valued at $153 billion. The trade group also has compiled more than 500 plastic processor expansions since mid-2012. Of that list, 70 percent are expansions, with the remainder being new construction.

    “There's more of a desire for ‘Made in USA' products,” Moore said.

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