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Market Report: Plastics Industry to Follow Manufacturing's Growth Trend

Although hit hard by the recession and long-term consolidation trend, the plastics industry has been one of the economy's largest and fastest-growing industry sectors. According to Michael Taylor, senior director of International Trade at the Society of the Plastics Industry (SPI), the U.S. plastics industry accounted for 876,000 jobs and $341 billion in shipments during 2010; when adding in suppliers, that number soars to 1.4 million jobs, and total shipments grow to $417 billion.

April 2012
Taylor noted that since plastics manufacturing is interwoven with manufacturing in general, the news that economic indicators expect manufacturing to continue to grow in 2012 at a rate of 3.5 percent also is good news for plastics.

Plastics' physical characteristics tend to guide location strategies. "Plastics products are often hollow or have shapes that are not conducive to packing and long-distance shipping," says Taylor. Also, manufacturers prefer that their processors be located nearby for better service and delivery.

"Made in America, Again: Why Manufacturing Will Return to the U.S.," published by the Boston Consulting Group in August 2011, noted that the Southern States have lower labor costs that are somewhat competitive to those in China. Other areas of the United States are witnessing reshoring as well. For example, two years ago, toy manufacturer Wham-O, producer of Frisbees and hula hoops, reshored some of its products from China to California.

Privately held-firm Saunders Mfg. Co. based in Readfield, Maine, has relocated some manufacturing from China to Mississippi, pledging to make as many of its products in the USA as possible. John Rosmarin, president and CEO, says, "We have been manufacturing our aluminum and plastic storage clipboards, binders, and other office supplies in the U.S. for over 65 years. Reshoring our plastic manufacturing increases our offering of `Made in the USA' value-priced, high-quality products. Also, this allows for a shorter supply chain that reduces lead times, and offers pricing stability to our customers."

Taylor notes plastics categories are often interconnected with other industry clusters:

  • The plastics materials and resins niche is concentrated in Texas, due to abundant raw materials and the excellent petrochemical infrastructure. Other similar situations can be found in Ohio, Illinois, South Carolina, Michigan, California, Indiana, Pennsylvania, West Virginia, and Kentucky. Taylor adds, "Pennsylvania, Illinois, Indiana, Ohio, and Michigan's rankings probably result from proximity to major end users - manufacturers located in the Midwest. New shale gas deposits being developed in or around those states are expected to spur more plastics materials and resins facilities there.

  • Plastics machinery is concentrated in the manufacturing belt, near plastics processors. Ohio has the highest number of employees in plastics machinery, followed by Michigan, Illinois, New York, Pennsylvania, and Massachusetts.

  • The plastics mold industry is drawn to concentrations of machinists and other skilled laborers. Michigan has the highest employment in the molds for plastics subsector, followed by Ohio, Illinois, California, Wisconsin, and Pennsylvania.

  • California, Texas, and Illinois are touted as the largest states for plastics wholesale trading.

  • Captive plastics products operations are found at manufacturing sites, such as automobile assembly plants, that are large enough to produce their own plastics products or that require plastics products that are expensive to transport (such as milk jugs). California has the most captive plastics products activity, followed by Michigan, Ohio, Texas, and Indiana.

Over the five-year period from 2005 to 2010, the Pennsylvania plastics industry appeared to be "recession-resistant," says Taylor. C&J Industries, Inc., contract manufacturing and plastic injection molding company, completed its largest $6.8 million expansion to its Meadville, Pa., facility in 2012.

"C&J Industries' ties to northwest Pennsylvania and the city of Meadville span five decades - so the decision to move forward with our building expansion at our current facility was an easy one," says Mark Fuhrman, director of sales and marketing at C&J Industries. "C&J was able to take advantage of extremely favorable finance rates through First National Bank of Pennsylvania, in conjunction with the Crawford County Industrial Development Authority.With the recently completed expansion project, C&J has increased its manufacturing capacity by approximately 50 percent. We anticipate adding up to 20 new manufacturing jobs over the next year."

Overall, business in 2011 for International Plastics Equipment Group (IPEG) and subsidiaries Conair and Rapid Granulator "was much better than we anticipated," comments Chris Keller, president of Cranberry, Pa.-based IPEG. "We planned cautiously because it was very difficult to foresee business levels much beyond 30 or 60 days out, but month after month, throughout the year, our markets stayed strong, and we routinely beat our forecasts by substantial margins."

Conair, tripled its downstream extrusion equipment facility space after moving from Bay City, Mich., to Pinconning, Mich. "Since the middle of 2010, when the manufacturing sector really began to recover from the recent recession, we've seen a huge up-turn in our extrusion business," notes Ernie Preiato, Conair's vice president of extrusion sales. "Throughout 2011, we ran steadily at 30 to 40 percent ahead of plan. As we enter the second quarter of 2012, we see those rates holding or even increasing slightly. A lot of that business is in the medical market, where we supply some of the most advanced downstream sizing and cooling systems for precision tubing; but the large-diameter pipe market is also hot, and our extruder OEM customers are also busy. All this together has stretched our existing capacity to the limit."

Keller says Conair and Rapid have budgeted conservatively for the coming year, acknowledging the apparent fragility of the global economy. However, they remain committed, he says, to investing in new people and infrastructure.

Newell Rubbermaid announced plans in January to invest more than $25 million in its manufacturing facility in the Village of Mogadore, Ohio. A major factor in the project was a 75 percent, 15-year refundable Ohio Job Retention Tax Credit offered by the Ohio Tax Credit Authority. "With a little more than 15 percent of the 300,000 employees in the Akron area working in rubber, plastics, and manufacturing, it is fitting that Newell Rubbermaid should choose to expand operations at [its] Mogadore facility," explains Summit County Executive Russ Pry. "This expansion is the result of hard work and collaboration between the County of Summit, the Village of Mogadore, JobsOhio, Team NEO, and the Greater Akron Chamber. This expansion means the retention of more than 700 jobs and the attraction of more than 130 new jobs to the Newell Rubbermaid facility and the Summit County region."

SPI notes that plastics firms encompass niches from "health and well-being, nutrition, shelter, and transportation to safety and security, communication, sports, leisure activities, and innovations of industry." As the third-largest manufacturing industry in the United States, this sector continues to contribute significantly to the nation's economy.

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