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Plastics Industry Bounces Back

Opportunities are growing as U.S. plastics manufacturers stay ahead of global competition with new processes and innovations.

Jun/Jul 06
The world may be getting increasingly flat, but the good news for the plastics industry in the United States is that we're learning how to compete. While that isn't always good news for everyone - automation is becoming a big part of the competitiveness of the industry - it bodes well for the industry as a whole.

Bill Carteaux, president of the Society of the Plastics Industry, recently gave an overview of the industry at the SPI Alliance of Plastics Processors in Columbus, Ohio, an auspicious location given that plastics continues to be big business in that state, with 19.1 percent of all non-agricultural employees working in the plastics industry. Overall, in 2004, the value of plastics goods shipped stood at $345 billion. The industry employed 1.3 million people in 18,800 operating facilities, 70 percent of those in processing plants. Some $8 billion was spent by these companies on new capital equipment. The total economic impact on the United States was $438 billion. "Plastics has grown at a faster rate than the total U.S. manufacturing industry," Carteaux told the audience.

While there have been some declines during the period of 2000-2004, the plastics industry continues to remain strong. Demand for plastics grew 6.7 percent in 2004. The top five states in order of industry employment are California, Ohio, Michigan (20.1 percent of non-agricultural employment), Texas, and Illinois. While global competition is still eating into some product and market categories, Carteaux noted that "products that are staying in the U.S. are those with high value-added processes."

Energy remains a huge challenge to the industry in the United States. One-third of the nation's total energy use is for manufacturing, and 10 percent of that one-third is in the plastics industry; "and with natural gas prices so high, we're at a significant disadvantage compared to the rest of the world," Carteaux reported. Those in the plastics industry suffered $15 billion in lost business and 200,000 lost jobs during the 2000-2004 period. And the "China factor" is still looming with a negative $25 billion trade deficit in plastics and plastic products, given the huge amount that is coming in from China.

So we have a mixed bag, some good news and some not as good, but the bottom line is that the U.S. plastics industry is holding its own in spite of the challenges. Attitudes among processors - the companies that turn pellets into products - are optimistic, even enthusiastic. In the big plastics states such as Ohio, many are seeing a revival of manufacturing. Granted, it's not the kind that the area was used to for so many years, but plastics companies are growing at a good clip and job growth is following.

Research and Education
Up to $200 million from the State of Ohio could be available in the near future for technology research and development projects, which should give the industry there a nice boost. Earlier this year, Governor Bob Taft signed Senate Bill 236, which authorizes and appropriates funding for two key components of the Jobs for Ohio Bond Issue: the Third Frontier Research and Development Project, and Job-Ready Site Development. The act authorizes the issuance of $100 million of obligations in fiscal years 2006 and 2007 for Third Frontier research and development projects.

The plastics industry is eager for participation in this, as the definition of R&D recognizes the intricacies involved in new technology development, and encompasses projects or activities in support of Ohio's industry, commerce, and business. The act is about job creation and the revitalization of manufacturing in Ohio. Companies in Northwest Ohio are ready to partake of their share of this funding.

Northwest Ohio offers an ideal location for business, with nearly 100 million people living within a 10-hour drive. The area also is doing an excellent job creating a skilled work force, one of the major concerns of the plastics industry. Northwest Ohio boasts of 180,000 students enrolled at one of the area's 49 colleges and universities and post secondary institutions that are located within an hour's drive.

Terra Community College (TCC), one of those educational facilities, has an excellent plastics program that is quite comprehensive, and includes the Center for Integrated Manufacturing Solutions supported by the Society of Manufacturing Engineers. The Society of Plastics Engineers supports the plastics programs, along with various partners such as Delphi, Whirlpool, and Motion Controls. TCC has a computer numerical control (CNC) center and a CAD lab with seats of AutoCAD, Solid Edge, Pro/E and Unigraphics - all the major software programs used in part/product design and mold design.

TCC even has a rapid prototyping lab, a plastics lab that focuses on colorants for plastics and is supported by A. Schulman, a successful and growing compounder in Akron, Ohio. Tom Kissell, dean of the Engineering and Industrial Technology Division at TCC, points to the primary problem that faces the manufacturing industry and specifically the plastics industry: "We have plenty of job openings posted, plenty of scholarships available, but we need students."

Plastics companies that are growing in Northwestern Ohio include Comfort Line Ltd. in Toledo, whose products include fiberglass windows and doors. With the boom in residential building, Comfort Line is adding more of its specialty "pultrusion" equipment designed by the company, and currently has a work force of about 175. Jeffrey V. Miller, president of the company, recently returned from trade shows in Europe and is excited about the market there for the company's products, something that will propel more growth.

In the U.S. Southeast, the automotive industry continues to offer opportunities for plastics companies, both molders and mold manufacturers, that seek out the region to support the "foreign domestic" automakers such as Nissan, Toyota, Kia, Mercedes, and BMW. Migration of automotive suppliers from the Rust Belt states continues, albeit not with the fervor of a few years ago. Foreign suppliers to these automotive companies also continue to site plants in the Southeast to serve their customers locally in the United States as they do in Germany, Japan, and South Korea.

While foreign competition is still a thorn in the side of the plastics industry, some products are a pretty sure bet to stay in the U.S., such as packaging - particularly food and beverage packaging, and pharmaceutical packaging. Demand for U.S. food packaging, both rigid and flexible, is expected to rise to $20.7 billion by 2009, led by plastic containers and bags, according to a market study by the Freedonia Group, a market-research group based in Cleveland. U.S. beverage container demand will approach the $20 billion mark by 2010, with plastics remaining the growth material in that segment as well.

Processors of plastic packaging are seeing their business remaining strong and even growing in some segments. Fortunately, prices for plastics used in the packaging industry (PS, PET, LLDPE, etc.) are falling - good news for everyone.

Polymer Packaging, maker of film used in reclosable food bags, recently invested $20 million to expand and relocate its headquarters and manufacturing operations from North Canton to Massillon, Ohio. And Alcan Packaging in Boscobel, Wis., a maker of flexible packaging for cheese and other dairy products, invested $10 million to add 64,000 square feet of space and new equipment to its facility. The plant also received $200,000 in training grants and development tax credits, according to the Wisconsin governor's office.

It's not just U.S.-based plastics companies that are interested in expansions. European companies are siting plants in the United States to serve their markets here. Groupe Lacroix of Bois d'Amont, France, announced plans to establish its first U.S. packaging plant in Le Mars, Iowa. The company's Canadian subsidiary, North American IML Containers, will set up the plant, called IML Containers Iowa, and make a $9.8 million investment to produce containers for the food and dairy industry, according to a news item in Plastics News. The North Carolina governor's office reports that a Biedenkopf, Germany-based rotational molder, Elkamet Kunstatofftechnik GmbH, will invest $4.85 million to build its first North American facility in Hendersonville, N.C. Elkamet received a $125,000 grant from the state to help finance the project.Recycling and New Products
Iowa, known to some as the Corn State, is also a prime area for the new business of biomaterials, which many predict will also be big business in the near future. A partnership between Metabolix Inc. and agricultural firm Archer Daniels Midland Co. announced the siting of a plant in Clinton, Iowa, to produce bioresin, a natural corn-based resin that the companies claim will be the first commercially viable, 100 percent organic plastic.

Plastic recycling, in spite of some challenges for that business in the past, still holds out hope for viability as "green" businesses begin to catch on again. A new recycling company, called Polymer Reprocessing Technology Center LLC, has been sited in Ottawa, Ohio, with operations expected to begin by year's end. The company will recycle PET, a packaging plastic. The parent company, Moving Expressions, is an injection molder and blow molder in Ottawa, and was looking for a way to develop a source of recycled PET, both for its own use and to offer for sale on the secondary resin market. The company has applied for a grant through the Putnam County Commissioners for $250,000 from the Ohio Department of Natural Resources Division of Recycling and Litter Prevention, which the company will have to match if it gets the money.

With California ranking number one in plastics, that state continues to play a major role in spite of the grass-roots consumer campaigns against plastic materials. To be sure, challenges still exist for the industry in that state, but its positive impact on the state's economy can't be ignored. While the exodus by manufacturers from California seems to have abated, plastics companies are looking outside California for additional sites.

For example, PWP Industries, an extruder and thermoformer of amorphous PET packaging for bakery goods and fresh-cut produce in Vernon, Calif., announced in March that it will invest $9 million-$12 million in a plant in Abilene, Texas. It will be the company's third manufacturing site. Ira Maroofian, PWP's president, cited work force quality, customer proximity, and support from the area's development corporation as reasons for locating the facility in Abilene. Operations are expected to begin in August.

Other areas in the Western region are attractive to plastics processors as well. Southern Idaho is home to several notable plastics manufacturers including Solo Cup Co., which purchased rival Sweetheart Cup in 2004; Hilex Poly, the largest manufacturer of plastic grocery bags in the United States; and Spears Manufacturing.

Hilex Poly, headquartered in Hartsville, S.C., celebrated the grand opening of their Jerome, Idaho, facility in September 2005, and will produce plastic t-shirt bags. Spears Manufacturing purchased a building in Jerome that had formerly been a Tupperware plant. Spears manufactures PVC pipe fittings, valves, and tubing, and today employs approximately 200.

"The opportunities they found in this region have enabled each of these manufacturers to build, grow, and expand their businesses, thanks to the area's low cost of operations and significant business incentives," according to the Southern Idaho Economic Development Corporation.

Electric power in many Western states is still economical, and Southern Idaho's power rates are among the lowest in the nation at approximately 3.0 cents per kW. Rates like this are attractive to plastics processing companies, for which electric power is a huge expense.

The U.S.-Mexico border area still can't be overlooked, and many companies that serve large U.S.-based OEMs in the automotive and appliance industries continue to site plants in that region. Venture Plastics Inc., an injection molding company headquartered in Newton Falls, Ohio, announced that it is expanding operations into the Southwest with a new molding facility located in El Paso, Texas.

"This strategic expansion has been driven by our commitment to meet the needs of our customers, some of whom have established a strong presence in the southwest and require services that are made more efficient by close proximity," says Steve Trapp, vice president of Venture Plastics. "Our positive, long-term relationships with those customers, combined with the fact that Venture Plastics has been growing at an annual rate of 12 to 15 percent, makes this an ideal time to extend the breadth and depth of our injection molding capabilities." The 50,000-square-foot plant will open with eight to 10 injection molding presses, and approximately 20-30 employees will be hired initially to service automotive parts makers and the appliance, consumer, and power supply systems markets.

The bottom line is that there continues to be opportunities for plastics processors to expand and grow their businesses in response to customers' demands, whether that means siting a plant on the U.S.-Mexico border or in any region of the United States that offers benefits to the customer and the supplier. The factors that matter to those in the plastics industry are the same today as they have been for many years: a skilled work force, cost-effective electric power, access to good transportation, a customer base located in the region, and, of course, economic assistance from the local development groups to provide good incentives to locate in a specific area. While competition from international companies and questions about energy supplies continue to challenge the industry, plastics are a good bet and good business all around.

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