Positive momentum for compounding firms

Most compounding and concentrates firms saw positive results in 2024. And in recent interviews, executives with those companies said they're hoping to keep those good vibes rolling into 2025.

"Many of our markets performed well this year," said John Richard, CEO of Americhem Inc. in Cuyahoga Falls, Ohio. "We have a global and well-diversified business model."

At Geon Performance Solutions in Westlake, Ohio, the firm's five major markets — including building and infrastructure — "continue to outperform," according to Vice President of Marketing and Business Development Renita Anderson.

"The trend line is getting better, but we're still cautious about the macroeconomic picture," said Suresh Swaminathan, chief operating officer at Teknor Apex Co.in Pawtucket, R.I. "There's some caution on the consumer side as consumers continue to hold back on spending. Their everyday spending hasn't changed much, but they're not doing as much large spending like on automobiles," he added.

Sales for 2024 are up by double-digit percentages at Polymer Resources Ltd. in Farmington, Conn., according to Vice President of William Galla.

"It's not just one market," Galla said of the firm's recent growth. "We've got new programs in electrical and medical devices and are getting back to our core business. Things are getting back to the norm post-COVID."

"We've had a strong year on our top and bottom line," said Kevin Putman Jr., president and CEO at Penn Color Inc. in Hatfield, Pa. "We're ahead of expectations by a decent amount. We've gained in new markets and in market share. Our core legacy markets, like building and construction and consumer packaging, are doing well."

Aurora Material Solutions of Streetsboro, Ohio, has had "a good year against the backdrop of a fairly choppy market," CEO Darrell Hughes said. "Building and construction was going along strong in the first half, but then the third quarter was choppier there and in other markets as well," he added.

At Plastics Group of America in Woonsocket, R.I., Executive Vice President Mike Rosenthal said sales at his firm "were stable and steady, and we were gaining new accounts, but it feels like we hit a wall recently." Ampacet Corp. of Tarrytown, N.Y., "had planned for some recovery [in 2024], and we saw confirmation of that in restocking," said Managing Director Christian Lindenhayn.

One distinction that some market watchers have seen in 2024 is better performance from independent compounders and concentrates makers than from similar units run by large resin companies. "It's definitely a mixed bag, but independent guys have done well," said Keith Rodden, owner of consulting firm Compound Solutions in Gallatin, Tenn.

"Resin producers want to run compounding like it's a chemicals business and that dictates lead times," he added. "Big independent compounders understand the key to their success is differentiating products in challenging economic times."

Market veteran Bill Ridenour agreed that privately owned independent compounders "can be more nimble and have more proprietary content." Ridenour, owner of consulting firm Polymer Transaction Advisors in Foxfire, N.C., added that although some firms are doing well, others "are in a disguised recession; they've lost revenue but not customers."

Sales at Star Plastics in Ravenswood, W.Va., are flat with this time last year, according to Business Director Chuck Hoop. "We started to see an influx of orders, but inventory isn't being consumed as quickly," he added.

Peak Performance Compounding Inc. in Leominster, Mass., has done well in 2024 by focusing on niche markets, but it has seen a slowdown in orders toward the end of the year, President Todd Marchand said.

On the economic front, U.S. gross domestic product growth in the third quarter of 2024 was 2.8 percent, down slightly from 3 percent in the second quarter. Full-year growth is projected at 2.6 percent, essentially flat with the 2.5 percent growth seen in 2023.

The Dow Jones Industrial Average began 2024 near 38,000 but closed at 43,200 on Nov. 18 for a gain of almost 14 percent. The broader S&P 500 has seen stronger growth, starting the year around 4,700 but closing near 5,900 Nov. 18 for a surge of 23 percent.

Drops in interest rates in late 2024 could help compounders and concentrates makers with future investments. Two drops totaled 0.75 points, bringing the federal funds interest rate down to 4.75 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.

Inflation in the U.S. peaked at 9.1 percent in June 2022, largely due to COVID-related business and consumer spending of government stimulus. It's declined since then, reaching a 43-month low of 2.4 percent in September before increasing to 2.6 percent in October. Inflation had averaged around a 2 percent annual rate for most of the 2000s and 2010s.

At publicly held materials firms, Avient Corp. had an impressive third quarter in 2024, while LyondellBasell's compounding unit struggled. Sales at Avient Corp.'s Compounds, Additives & Inks unit were up 7 percent to $521.5 million vs. the year-ago quarter with operating income up 17 percent to $75.5 million. The firm's Specialty Engineered Materials division saw a third-quarter sales jump of 10 percent to $295 million, with operating income up 20 percent to $36.4 million.

At the Advanced Polymer Solutions business of LyondellBasell, third-quarter sales were flat at $896 million, with the unit showing an operating loss of $5 million. Sales volume in pounds for the unit, which ranks as North America's largest compounding business, was down 2 percent in the quarter to just under 800 million pounds.

Avient division presidents Chris Pederson and Woon Keat Moh both cited health care among end markets performing well for the firm. "Globally, our health care business has continued to gain momentum," said Pederson, president of the SEM unit. "The consumer market has rebounded since 2023, and our building and construction market has grown with contributions from compounded fire-retardant solutions and the adoption of composites."

Moh said health care, packaging, and building and construction sectors "have significantly contributed to year-over-year growth" for the CAI unit. "Health care saw robust demand driven by increased usage of drug administration and monitoring devices," he said. "Packaging recovered strongly as destocking concluded … with personal care products leading the way. Building and construction experienced notable restocking, particularly in North America, with a strong recovery in pipes and fittings."

Health care also has seen "a significant rise" at Americhem, according to Vice President Matt Miklos, who cited home glucose monitors and surgical instruments as applications seeing volume growth. Miklos added that aerospace products have "a strong outlook" because of a backlog of commercial air travel.

"Medical is very important," said Phil Karig, principal of consulting firm Mathelin Bay Associates in St. Louis. "It might not be large in sales volume, but it has a lot of stickiness once products are approved."

Star has seen growth in polycarbonate compounds for solar panels and electric boxes. Geon's Anderson said her firm is making progress with new recycled-content compounds and lightweight under-hood applications in the automotive sector. At Peacock Color in Addison, Ill., sales have grown in caps and closures and in industrial products, according to CEO Andy Ubhi.

Teknor Apex is seeing some sales movement in electric vehicles, where its Sarlink TPVs are being used in coolant hoses and battery applications. Penn Color has been able to enter new markets with engineering resin compounds for health care, EVs and appliances, Putman said. Peak is selling TPU compounds into catheters and other medical devices, according to Marchand.

Growth markets for Techmer PM in Clinton, Tenn., include consumer products, sporting goods and synthetic turf, said CEO Mike McHenry. The firm also has seen higher sales in EVs, 3D printing of large parts and aerospace.

In the packaging market, Ampacet has added new PFAS-free products. "As long as GDP grows, there's going to be a need for more packaging," Lindenhayn said.

At Aurora, Hughes cited consumer products, electrical/electronic, and wire and cable as areas where his firm is outperforming the market. Black colors in CPVC window lineals also are giving Aurora customers an option outside of paint or capstock.

"Some packaging companies have done a great job with increased recycled content," Rodden said. "[Recycled content] had been for cost savings, but now they're bragging about it."

Sustainability continues to play a growing role for compounders and concentrates makers. Customers are coming to them in greater numbers, requiring recycled content or bio-based products to meet the environmental goals of their own customers.

"We're seeing a push for sustainability, and we're using recycled materials to support this initiative," said Tom Stevning, owner of ATC Plastics in Indianapolis. "It's really about what the customer wants and the pricing they're willing to pay."

Although some brand owners have reset sustainability goals that had been set too high, there's still "a lot of conversation" on the topic, according to McHenry at Techmer. Peak is offering a larger selection of bio-based PLA and PHA compounds for agricultural and consumer products.

"[Sustainability] is a very fluid space," said Putman at Penn Color. "We have the infrastructure to go into bio-based or recycled-content materials or to be prepared for what the customer wants."

Some of Ampacet's customers "have been talking about integration of recycled content for a long time, but now they're taking action," Lindenhayn said.

"Sustainability is here to stay," added Swaminathan at Teknor Apex. "Reducing carbon footprint is more than just something for processors to feel good about."

At Star, Hoop agreed that sustainability "isn't a fad." His firm is working with OEMs on specifications that require sustainable materials. "These are global initiatives," Hoop said. "Customers want the same performance in recycled grades as they get in prime grades."

"Customers are definitely asking for recycled content," said PGA's Rosenthal. "We can provide it to them at whatever percentages they need." According to Karig, a growing number of firms that do in-house compounding now are doing in-house recycling as well to access recycled content. "Sustainability is big, and it continues to get bigger," he said.

"Sustainability is a growth driver for us," said Moh at Avient. "It has an increasing share of sustainable solutions in our product mix." He added key focus areas include recycling and lightweighting, which align closely with customers' evolving needs and sustainability priorities. Sustainable solutions make up one-third of Avient's total overall sales.

Pederson agreed that sustainability is part of Avient's culture and central to its innovation programs. "We continue to see interest in and adoption of [post-consumer, post-industrial] and bio-based materials," he said. "The market hasn't transitioned to recycled or bio-based products as fast as some projected because these solutions are more costly in many cases. But momentum continues to grow, as does legislation and consumer preference."

Expansions have taken place across the compounding and concentrates market as suppliers look to keep up with demand and produce the materials customers want.

"We just expanded our health care offering in Asia with the capacity to produce catheter materials in that region, like we've done in the U.S. for decades," Avient's Pederson said.

At Peacock, the firm has installed four new extrusion lines in Elgin, Ill., in the last year and plans to add another for toll compounding in early 2025. Americhem recently added clean room production in Morrisville, Pa., and in Denmark. In Mexico, Geon recently added a TPE production line in Ramos Arizpe. Officials described the new line as "a milestone in our commitment to invest and expand in Mexico."

PRL recently installed a new blender and shredder and plans to invest more in its R&D capabilities, President and COO Scott Anderson said.

Penn Color recently added production in Thailand, installed a development and design lab in Singapore and next year will enact "a significant expansion" at its headquarters site, Putman said. The firm expects to add 50 jobs during 2025 as well. "We're bullish on the business, so we're reinvesting heavily," Putman added. "Our ownership structure allows us to make decisions quickly and add new capacity for new markets."

Looking to 2025, PRL's Anderson said his firm expects to see continued growth, with a focus on new product introduction. At Ampacet, Lindenhayn said, "We might not see an explosion of demand [in 2025], but we'll see an increase."

"The U.S. is outperforming the rest of the world, so we should see a positive uptick," said Swaminathan at Teknor Apex. Geon's Anderson said she was optimistic and hopeful of growth in the second half of 2025. Star's Hoop said 2025 will be an improvement over 2024 "if consumers get out there and start consuming."

At Americhem, Richard said the firm expects an improved 2025 because of its involvement in "a lot of recession-proof markets."

"We believe 2025 will be a growth year for our business," said Pederson at Avient. He added keys to 2025 growth include continued growth in health care, adoption of more composite solutions and growth of sustainable material choices. Also at Avient, Moh said sustainability "will remain a key focus" for the industry in 2025. "Our innovation launches around sustainable solutions will be a driver for us to outpace GDP growth rates in the coming year," he added.

For Stevning at ATC, he's seeing caution from customers in late 2024 but added that most of the industry "is hoping for a better year next year."

"We see our business staying very consistent in 2025," Stevning said. "The markets we serve fit our business model and we continue to provide high-quality products and services for all our customers."