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December 03, 2020 10:38 AM

Compounders write a business survival story in 2020

Don Loepp
Editor
Plastics News Editor
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    Rich Williams

    When Frank Esposito put together his special report on the compounding sector last year, he called 2019 a confusing year.

    Some companies did quite well, but others fell short of expectations. Economic uncertainty remained a concern as companies looked ahead to 2020.

    Their concerns last year seem almost quaint today. The automotive market might be slow? No, in fact it shut down completely for much of the second quarter. Tariffs and Brexit might put pressure on the global economy? It turns out that trade was a significant issue — because travel restrictions and COVID-19 crippled global supply chains.

    Obviously 2020 didn't turn out like anyone expected. Still, looking back at the 2019 report, there were plenty of comments that were on the money.

    PolyOne Corp.'s Chris Pederson talked about how he expected the health care market to be among the company's strongest. Plenty of medical compounding customers faced issues in 2020, but overall you'd have to say that demand has been very strong.

    Phil Karig of Mathelin Bay Associates LLC was on target when he urged compounders to focus on recycled plastics and a circular economy. Major resin makers were starting to recognize opportunities in recycled content resins, he said. With brand owners racing to meet aggressive recycling goals, what had been a niche for some compounders was on the cusp of becoming a major business.

    But let's not sugarcoat this: 2020 has not been a great year for most compounders. At least not so far. Sales volumes were down almost 3 percent through the first 10 months, according to the American Chemistry Council.

    Still, the market was up 1 percent in September and 2 percent in October. Could we still see a big enough uptick in business to wipe out the terrible second quarter?

    Think about your company's performance over the years. Think back as long as you can remember. Which years stand out: the best ones, or the worst?

    If you've been on the job for at least a decade, you'll remember the Great Recession. A decade from now, you'll remember 2020, too. You'll remember the sudden shutdowns, and the way the industry came together to help rebuild — or create — supply chains for personal protective equipment, nasal swabs, ventilators and shielding. You'll remember how most plastics companies were deemed essential businesses and found ways to safely continue to operate during a pandemic.

    Maybe you'll remember a V-shaped recovery that started in the second half of the year and — hopefully — continued to build momentum into 2021 and beyond.

    Take some time to carefully study what the experts told Frank this year. After all, he talked with nearly every big player in the compounding sector. They can teach you a lot about where they think the industry is heading.

    2021 should have a stronger economy and a lower unemployment rate than 2020, according to Bill Ridenour of Polymer Transaction Advisors Inc.

    Pederson, who's still at PolyOne, except now the company is called Avient Corp., says 2021 will see continued demand for sustainable consumer and automotive products, as well as more growth for health care devices and pharmaceutical packaging. He also cited a recovering automotive market starting to focus on electric vehicles.

    I liked it so much, I'm tempted to steal Frank's closing comment, which came from John Manuck, chairman and CEO of Techmer PM. But I won't, because I think it's worth reading all 3,348 words of Frank's story to get to Manuck's inspiring words of hope.

    I will say this: If your company survived 2020, you should feel pretty confident about being able to handle whatever challenges come in 2021.

    Loepp is editor of Plastics News and author of the Plastics Blog. Follow him on Twitter @donloepp.

    Plastics News editorial cartoon by Rich Williams. Cartoons are available for purchase at www.plasticsnews.com/data-lists/cartoons

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