Like all great philosophers, compounding and concentrates executives are capable of holding two conflicting thoughts at the same time.
For example, as we head toward the end of 2023 this group is uncertain about 2024, while also debuting new products and adding jobs and machinery. Economic indicators are good, but orders for compounds and concentrates have slowed in recent months for most companies.
Among economic indicators, U.S. gross domestic product growth in the third quarter of 2023 was a red-hot 4.9 percent, although a lower rate is expected in the fourth quarter of the year. GDP growth for full-year 2022 was just over 2 percent, down from COVID-fueled growth of almost 6 percent in 2021.
The Dow Jones Industrial Average began 2023 near 33,100 but was near 35,200 in late trading Nov. 20 for a gain of almost 6 percent. The broader S&P 500 has showed stronger growth, starting the year around 3,800 but trading near 4,600 on Nov. 20 for a surge of just over 20 percent.
Higher interest rates have played a key role in 2023 by increasing the cost of borrowing for acquisitions or to buy new machinery. The federal funds interest rate began 2023 at a low of 4.25 percent before four hikes sent it to as high as 5.5 percent. The rate had been 0.25 percent at the start of 2022, before the Federal Reserve began a series of rate hikes designed to slow inflation.
Those moves have met that goal. Inflation peaked at 9.1 percent in June 2022 and has declined since then, reaching 3.2 percent in October 2023. Inflation had averaged around a 2 percent annual rate for most of the 2000s and 2010s.
Among publicly held materials firms, sales at Avient Corp.'s Compounds, Additives & Inks unit were down 14 percent to $486.5 million in the third quarter vs. the year-ago quarter with operating income down 6 percent to $64.5 million. The firm's Specialty Engineered Materials unit saw a third-quarter sales loss of 3.5 percent to $267.9 million, with operating income also down 3.5 percent to $30.3 million.
At the Advanced Polymer Solutions unit of LyondellBasell Industries, third quarter sales were down 14 percent to $899 million, with the unit showing an operating loss of $6 million. The unit had reported operating income of $2 million in the third quarter of 2022. Sales volume in pounds for the unit — which ranks as North America's largest compounding business — was down more than 2 percent in the third quarter to just over 800 million pounds.
Plastics News recently checked in with several executives and market watchers in the compounding and concentrates world to see what their mindsets were as 2023 draws to a close.