Compounders report strong 2018 despite challenges sourcing some materials

North American compounders and concentrate makers are reporting solid results for 2018, even as supply chain issues have caused some bumps in the road.

Executives with most firms contacted recently by Plastics News said they're seeing sales growth in the mid-single digits for the year, with these increases coming from a wide variety of markets.

“It's been a good year with good top-line growth,” said Ryan Howley, president of Techmer PM in Clinton, Tenn. “Our biggest challenge has been increasing raw material costs for additives and pigments.”

2018 “has met our expectations,” added Pete Prusak, North American marketing head for Clariant Masterbatches in Holden, Mass. “We've seen growth in auto and medical and consumer electronics. We're putting more resources into those areas.”

At Americhem Inc. in Cuyahoga Falls, Ohio, 2018 has been a strong year, with good growth in health care, transportation and film and sheet. The firm's custom manufacturing approach is focused on helping customers solve problems, according to CEO Matthew Hellstern. “We add value beyond supplying materials,” he said.

“The compounding space has had a competitive growth rate for the past several years, and we've 
seen good growth in 2018 as well,” said Jim Guilfoyle, executive vice president of Advanced Polymer Solutions for LyondellBasell Industries in Houston. LyondellBasell roughly doubled the size of its compounding and concentrates business when it acquired A. Schulman Inc. earlier this year.

Guilfoyle cited automotive as a 2018 growth area, with increased sales into the automotive market through exterior parts such as front grilles, as well as soft-touch internal applications.

LyondellBasell also is working to assimilate Schulman's 54 production sites with its own 18 compounding locations. Many market watchers have speculated on the chances of all of those sites staying open.

Guilfoyle declined to comment on specific locations, but he said that his unit “has a lot of integration ahead of us, but we also have platforms for growth.”

He pointed out that LyondellBasell still plans to achieve $150 million in cost synergies from the Schulman acquisition through several steps, including better logistics and procurement.

“We're still working through the plants,” Guilfoyle said. “We need to optimize the footprint. We're looking at LyondellBasell sites as well as Schulman.”

For the Specialty Engineered Materials unit of PolyOne Corp. of Avon Lake, Ohio, transportation has been the top growth segment, Chief Commercial Officer Michael Garratt said. The firm has leveraged its EMI/RFI shielding solutions for advanced driver assist technology, he added.

PolyOne's SEM unit also has seen strong demand outside of automotive for our thermoplastic composite technology, primarily in marine, trucking and off-road vehicles, according to Garratt.

Elsewhere at PolyOne, its Performance Products & Solutions unit — including PVC compounds — has seen “significant growth” in wire and cable, electrical and consumer, unit president Don Wiseman said. This growth has been driven by geographic expansion of manufacturers in these markets and deeper collaboration with key customers, he added.

Mark Crist, PolyOne Color, Additives & Inks unit president, said that, by industry, packaging remains extremely strong for his unit. He explained that's because PolyOne “has a number of sustainability-enabling products that ensure our customers are at the forefront of the recycling and re-use initiatives.”

Crist added that in health care, his unit “has seen excellent growth,” particularly in North America and China, as customers gravitate toward combined colorants and additive packages.

In the first nine months of 2018, PolyOne's Color, Additives & Inks unit racked up impressive sales growth of just over 20 percent. The firm's SEM unit saw sales grow more than 4 percent in the period, while Performance Products & Solutions' sales improved by almost 3 percent.

At Modern Dispersions Inc. in Leominster, Mass., “almost every market is seeing growth,” according to Jan Kozma, sales vice president. The firm is especially strong in custom colored black concentrates for auto interior parts such as door panels and dashboards. But sales also are up in high density polyethylene pipe used in construction and oil and gas exploration, Kozma said.

2018 has been the second consecutive year of very strong growth for Polymer Resources Ltd. of Farmington, Conn., Chief Operating Officer Scott Anderson said. “Our focus is on electronic, noninvasive medical and industrial,” he added. “There's space for a U.S.-based high-service company.”

“We've had a decent year across the board,” said Jean Sirois, strategic planning and acquisitions director at RTP Co. of Winona, Minn. “We've done a lot of expansion ourselves into masterbatch and elastomers for consumer and construction. Automotive is still strong for a lot of polypropylene and nylon.”

For Teknor Apex Co. of Pawtucket, R.I., 2018 “has been very good from a volume standpoint,” according to William Murray, the company's president. “We had some weakness for a little bit there, but things rebounded in October and November. The big difference vs. 2017 has been the big difference in the price of oil, which has increased prices for a lot of our raw materials.”

Overall volume for 2018 also has been strong at Asahi Kasei Plastics of Fowlerville, Mich.

“The year has lived up to expectations because of volume, but the market has been a little dynamic in raw material availability and pricing,” Ramesh Iyer, the company's president and COO, said. “That impacts our margins as prices go up.”

The Plastics Group of America has added new customers in what Executive Vice President Mike Rosenthal has described as “a very busy, very good year for the Woonsocket, R.I.-based firm. TPG in 2018 has seen growth in filled PP materials for recreational vehicles, gun stocks, housewares and other products, he said.

Flexible and rigid packaging has provided growth for Tarrytown, N.Y.-based Ampacet Corp. this year, according to marketing and global business vice president Michael Gaudio. The firm also has seen solid results from blown film and is looking to branch out into pipe and wire and cable, appliances, electronics, he said.

Top growth markets in 2018 for Penn Color of Doylestown, Pa., have been in building and construction and packaging/consumer goods, market development director Bob Kaminski said. Both of those markets have shown growth of more than 10 percent, he added.

Star Plastics of Ravenswood, W. Va, has seen strong results from the electrical, communications and housing markets in 2018, according to President and CEO Doug Ritchie.

Pipe, reprocessed materials and sales to compounders have been top growth areas this year for ATC Plastics of Indianapolis, managing partner Tom Stevning said. The firm has seen double-digit growth in those markets, he added.

“Almost everyone in compounding is busy and optimistic,” said Keith Rodden, a longtime market veteran who opened up his own consulting firm — Compound Solutions LLC of Lebanon, Tenn. — earlier this year. “There's broad economic growth and business in general are good. It's been a solid year.”

Even with results positive overall, availability of raw materials has been a source of tension. Every year typically has supply chain challenges, but the bumps in the road for 2018 have seemed more extreme.

Short supplies of nylon 6/6 resin topped the list of concerns. The material is used in many auto parts but was in short supply because of reduced availability of adiponitrile feedstock.

Nylon 6/6 “has far and away been the biggest single issue,” said Murray at Teknor Apex. “We've been able to supply all of our customers, but we've had to be very creative and we've had more inquiries about nylon 6.”

“We've seen some companies looking at shifting away from nylon 6/6 because of the shortage and going to nylon 6 or long glass polypropylene,” RTP's Sirois added.

At Americhem, Hellstern said that where customers have flexibility, materials other than nylon 6/6 might be a solution. Tightness in nylon 6/6 and in nylon 6 in some cases have led some of Clariant's customers to ask about about re-engineering, according to Prusak.

Penn Color was challenged this year by “a major supply disruption” that caused a shortage of solvent dyes. The shortage was caused by environmental cleanup efforts in China, Kaminski said.

“With some foresight, we stocked up on some of the key dyes before the real shortage,” he added. “Through our corporatewide raw material qualification program, we had prequalified multiple sources for each dye chemistry.”

“Those initiatives helped to delay and minimize the impact to us and our clients, but there's no doubt that dye shortage has created disruption in the market, especially from a regulatory compliance standpoint.”

Tight supplies of numerous pigments and additives also have presented challenges for compounders and concentrate makers in 2018.

Rodden said that compounders this year have been affected by tight supplies of flame retardant additives, as well as shortages of pigments that in some cases are unique to one manufacturer. “There are concerns about supply availability,” he said. “But the cost of requalifying a material can be prohibitive.”

Polymer Resources “has done a fantastic job sourcing resin, but pigments and additives are a different story,” Anderson said. The firm has faced supply and price challenges on several of those materials.

AESSE Sales & Distribution, a supplier of additives and concentrates in Sheboygan, Wis., has worked this year to find supplies of chlorinated polyethylene and similar materials, according to business unit manager Mike McCormack. TPG this year has faced higher prices on glass materials brought in from China, Rosenthal said.

Like Penn Color, Clariant also has faced supply issues on solvent dyes and other products, Prusak said.

“There have been some shortages, so we've had to transfer stock from one site to another,” he added. “We've worked hard to mitigate these issues by using our network of sites.”

The ongoing trade fight between the U.S. and China also has been an obstacle in 2018 because of tariffs on pigments and additives that North American firms need to make their products.

“Having a global footprint works to our advantage, but we are seeing some impact from the tariffs with higher prices,” said Hellstern at Americhem. Modern Dispersions has seen price increases on antioxidants and other additives and pigments, according to Kozma.

For Star Plastics, the tariffs have increased additives costs, delayed the firm's supply chain and hampered the firm's sales to Asia as well, Ritchie said.

“We also believe it stalled sales overall with the unknown start and stop of tariffs,” Ritchie added. “The timing of shipments based on when we thought [the tariffs] would take effect and when they actually did take effect was pushed out.”

At Asahi Kasei, Iyer said the tariffs “aren't helping. ... They're impacting our business perspective and increasing lead times on imported goods.”

In addition to higher prices, Teknor Apex has seen “some uncertainty” from customers who ship products back to the U.S., according to Murray. The firm's garden hose business also has been impacted by higher prices on fabric imported from China.

Tariffs are affecting compounders and concentrate makers in the areas of price and availability, Rodden said. In some cases, additive prices have increased 20-30 percent from a combination of those factors, he added.

At PolyOne, Crist said the color, additives and inks unit “has seen evidence of Chinese manufacturers revisiting their production and export strategies as the tariffs start to have an impact.” Wiseman added that for PolyOne's Performance Products unit, “there are signs of tariffs impacting consumption and flow globally, but we remain in a strong position to manufacture our products and supply our customers.

PolyOne's Garratt said that although only a small percentage of the firm's sales are reliant on exports, “the same isn't true for the customers that we serve.”

“Tariffs have caused some customers to rethink their supply chain and manufacturing locations, and that does affect PolyOne,” he added. “Thankfully...we're well-positioned to serve the needs of our customers, regardless of where they operate.”

Compounders and concentrates makers always are on the lookout for new market opportunities. At Techmer, Howley sees the firm doing more work in medical and hygiene applications in 2019 as well as in the agricultural market in uses such as mulching and greenhouse films.

Clariant's Prusak envisions an uptick in automotive lightweighting, particularly with hydrocerol foams. Next-generation products for Americhem include specialty alloys with improved lubrication in health care and surgical devices, Hellstern said, as well as a concentrate that improves the performance of recycled PET and another that offers improved stain resistance in nylon 6 fibers.

New R&D work with nanocarbon materials such as graphene is on tap at Modern Dispersions, Kozma said, adding that the firm is looking to grow conductive compound and concentrate sales into the electrostatic discharge market.

“Our new production is focused on application development,” William Galla, national sales vice president at Polymer Resources, said. “Our customers are driven to enhance their UL portfolio. ...We also can offer impact-modified [polybutylene terephthalate] PBT for electrical and health care and polycarbonate/ASA blends with UV resistance.”

New high-heat compounds have “a prominent place” at RTP, according to Sirois. He added that those materials can help customers replace metal or more expensive resin. On the concentrates side, RTP is offering new materials for film, pipe, elastomers and more consumer applications.

Teknor Apex is continuing to work on “higher-level compounds,” Murray said, incorporating TPEs and extending the operating temperatures of some nylon resins. Asahi Kasei is also offering higher fillings and higher heat performance as well as looking at using some new resins, Iyer said.

More use of recycled content material is underway at the TPG, according to Rosenthal. Other firms are also taking a closer look at using recycled materials to meet sustainability requirements, although performance of those materials remains a concern.

“With recycled content, there's always a battle between price and performance,” John Moyer, Asahi Kasei chairman and CEO, said. “There's a sweet spot there if you can hit it.”

“You can't be in the business and say you're not aware of the environment,” said Gaudio at Ampacet. “That's why we offer products for sustainability and environmental care, like antioxidants to help with recycling.”

Ampacet also now is offering black concentrates that don't use carbon black, which can be difficult to recycle in some applications. ATC wants to move more into specialty black materials, Stevning said, and to increase its focus on film grades and automotive products.

LyondellBasell is working with makers of consumer batteries — such as AA and AAA sizes — on a nylon 6/6 material that can replace nylon 6/12 and reduce leakage, Guilfoyle said. At Star Plastics, Ritchie said the firm is developing flame retardant and color technology and working to meet customer-focused needs based on market movement and availability of materials.

Penn Color continues to develop and expand technologies for building and construction, including next-generation temperature-reduction technologies for exterior applications and enhanced woodgrain effects for extruded profiles, Kaminski said.

For packaging, Penn Color is launching its patent pending pennaHOLT-brand technology for white PET bottles. This technology offers the whitest bottles available in the industry with maximum opacity and light blocking, Kaminski added.

At PolyOne, Cathy Dodd, vice president of marketing, said new materials, additives and colorants are being developed in response to customer needs. Those needs include lightweighting, sustainability and flame retardance across environments that feature heat, harsh chemicals and structural loads.

PolyOne's SEM unit is expanding its specialty presence in the auto and transportation markets, and expect that to continue into next year, Garratt said. The firm's Color, Additives & Inks unit sees fibers and textiles as a strategic platform because of pressure to make the dyeing process less harmful to the environment, Crist added.

PP&S at PolyOne continues to make advancements in vinyl solutions for electrical applications, both indoors and outdoors, according to Wiseman.

“We're seeing more interest in scratch and mar performance in auto interiors,” said McCormack at AESSE. “Wire and cable also is doing well in construction because of an increase in infrastructure spending.”

Multiple compounders and concentrates makers are finishing up growth projects in 2018 or prepping for additional ones in 2019 and beyond.

Techmer is adding new extrusion lines both at its headquarters in Tennessee and its new plant in Mexico. AESSE is looking to add geographic coverage and technology — “We want unique, growing markets,” McCormack said — and is discussing the addition of new production capacity as well.

Three projects are being juggled by RTP. The firm recently reopened a plant that had been shuttered in Nevada and opened a plant in Poland in October. RTP also plans to add production capacity in Wisconsin early next year.

New twin-screw extrusion lines and continuous mixers are being planned for Modern Dispersions. Polymer Resources will add at least one new production line at each of its locations in 2019.

Teknor Apex recently broke ground on a new production plant in Germany that's set to open in early 2020. The firm also will add a major new PVC compounding line in mid-2019 in South Carolina. Officials said the new line is needed to meet demand for flexible PVC in wire and cable, building and construction and automotive.

In 2019, Asahi Kasei plans to hire more sales reps and add to its R&D team as well. Ampacet recently opened a new production plant in Dubai, United Arab Emirates. ATC is also looking to add equipment in 2019 to keep up with growth.

Construction is underway on an expansion at Penn Color's manufacturing plant and development center in Venray, the Netherlands. The expansion will roughly double the firm's footprint and enhance its capabilities there. The project includes additional capacity for manufacturing, warehouse and R&D. It's scheduled to be complete in the spring of 2019.

Penn Color is also planning a new concentrates plant in Asia. The plant would cover at least 50,000 square feet and should be completed by the end of 2019. The firm is also nearing completion on a 150,000 square-foot expansion at its Hatfield site, which includes new warehouse and manufacturing capacity as well as a Global Technology Center to support new product development.

Most compounding and concentrates executives contacted by Plastics News expect the solid growth rates of 2018 to continue into 2019.

“The environment is positive,” said Howley at Techmer. “We anticipate growth for the next year.”

“In 2019, the breadth of solutions that we can bring to bear for our customers will continue to expand,” PolyOne's Garratt added. “It's an exciting time for this business.”

At Penn Color, Kaminski said that the firm's core markets “continue to see solid growth that surpasses market growth rates.”

“The strong U.S. economy should benefit all of us,” he added. “We're looking forward to a prosperous 2019 for us and for the entire plastics industry.”