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Market Report: Plastics Focuses on Diversification to Thrive

The plastics industry is focusing on diversifying the industries it serves - and the locations it selects - to grow.

March 2011
The plastics industry has slowly started coming back from the recession but several obstacles stand in the way of another 1990s boom time. For one, rising raw material prices for resins are impacting consumer prices for plastic items and those goods packaged in plastic. In fact, it's been a wild ride for plastics processors as they've struggled to keep up with the near constant price increases. The industry overall, however, is seeing decent growth. New injection-molding machines are beginning to sell, as the newer used equipment that flooded the market during the first recession (2002-2006) was picked over and bought up. Processors are expanding, albeit more cautiously, as they become more "market centric."

Medical Device Market
Specific market segments are becoming more attractive to plastics suppliers across processes including injection molding, extrusion, and thermoforming. Medical is one of those that remains particularly appealing, as there will continue to be good demand for medical devices due to the aging of the U.S. population. Processors are investing in cleanrooms and FDA certifications as they gear up for what is perceived as a lucrative market segment for plastics components and devices.

For example, Mastercraft Companies of Phoenix, Arizona, has grown its medical business from under 50 percent of its custom molding business a few years ago to approximately 70 percent today. Among its 33 molding machines ranging from 50 to 500 tons clamp force, the company has installed 12 of what it calls Clean Environment Manufacturing Cells (CEMCs) - portable acrylic enclosures that fit around the back half of the molding machine to create a Class 8 (100,000) clean environment to accommodate medical molding. The CEMCs help keep costs down while meeting the demands of Mastercraft's medical device customers.

The medical market has also been good for custom molders Ven-Tel Plastics Corp. of Largo, Florida, which recently purchased 13 injection-molding machines from one of its medical customers that is shuttering its in-house molding operation. Medical accounts for about 60 percent of Ven-Tel's business.

M&As/Consolidations
Mergers and acquisitions are also picking up steam in the plastics industry. Most recently, medical molder Phillips Plastics Corp., a Hudson, Wisconsin-based manufacturer of engineered injection-molded plastic and metal products with annual sales of over $250 million, was acquired by Kohlberg & Co. LLC, a private equity firm based in Mount Kisco, New York. The company employs 1,300 people in 14 locations throughout the United States, including at design centers in Wisconsin and California.

The recession has also resulted in a number of consolidations, particularly in the automotive supplier segment of the plastics industry. For example, Key Plastics LLC, a major automotive supplier based in Northville, Michigan, announced in January that it plans to close its Hartford City, Indiana, site and consolidate that injection molding plant's operations within its other North America manufacturing sites over the next year. Automation Is Key
Nevertheless, automotive is making a comeback for the plastics components suppliers that managed to survive the recession, and some are gearing up for the future. Automation is key to serving the automotive industry profitably. To meet the growing needs of the heavy-duty truck, lawn and garden, and recreational vehicle markets it serves, Mack Molding's facility in Inman, South Carolina, invested $3 million to install a fully automated, Class A paint system.

"This is the next logical step in a plan we launched nine years ago to transform the Inman plant into a super-large part molding and manufacturing center," says Ray Burns, president of Mack Molding's Southern Division. "While we have been painting for years, this new system applies a quality finish comparable to that of the automotive industry, which is critical to the recreational vehicle and large truck markets we are now pursuing."

To better serve these markets, and take on complete molding programs, Mack's Statesville, North Carolina, molding facility installed four all-electric Milacron molding machines ranging from 72 to 198 tons clamp force. Since the company's Southern operations focus on very large parts, adding the smaller presses allows Mack to take on large molding packaging that includes smaller components for these markets, adds Burns.

Targeting the Southeast
Heading Southeast has been a popular move for plastics processors over the past decade and continues to be so. Union City, California-based Jatco Inc., a custom molder that specializes in larger parts, will do what many plastics parts suppliers have done over the years: put a molding facility near a customer for better service and to reduce shipping costs. The 38,000-square-foot facility in Greenwood, South Carolina, will initially have four injection-molding machines with up to 720 tons clamping force.

Magna Composites LLC, another automotive supplier, announced in June 2010 it would invest $10 million in three North Carolina facilities: Lenoir, Salisbury, and Newton. Magna added the three North Carolina plants to its holdings when it purchased portions of Meridian Automotive Systems' composite business in June 2009. The plants will add about 327 new jobs over the next four years. With the movement of processors to the Southeast, materials companies are following suit. Whitmore Lake, Michigan-based RheTech, Inc. recently announced that it would open a new plastics compounding plant in Blacksburg, South Carolina, that will be operational by June 1.

Other Moves
Other materials companies are also making moves toward expansion. St. Louis, Missouri-based Spartech Corp. - a producer of plastic sheet, compounds, and products for packaging - opened a new 90,000-square-foot technology and innovation center last summer in Maryland Heights, Missouri. The facility "will significantly expand our existing research facilities and offer us greater capabilities and resources," says Janet Mann, senior vice president of Custom Sheet and Rollstock, and Chief Technology Officer. Innovation continues to be the name of the game in the plastics industry.

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