Strong economic rebound expected -- eventually

By Steve Toloken
PLASTICS NEWS STAFF

ATLANTA (Nov. 21, 2001) -- Manufacturing is likely to be in a recession for another eight or 10 months, according to the head of a key U.S. business forecasting survey -- but then should rebound strongly. Meanwhile, a new plastics industry survey finds steep drops in business in the past year, and mixed expectations for the next 12 months: decreased shipments but increased profitability.

At least that's the view from two speakers at the recent Plastics Encounter Atlanta conference.

NAPM's Ore: hopeful but realistic on economy (Plastics News photos by Leland Holder)

Norbert Ore, who has headed the National Association of Purchasing Management's manufacturing business survey since 1996, said the economy was emerging from recession in August, but the Sept. 11 terrorist attack led to a record drop in the index of purchasing activity.

"It fell off the shelf in October -- the largest one-month decline since we've been tracking the index," said Ore, group director for strategic sourcing and procurement at Georgia-Pacific Corp. The survey started in 1931. "Everything was poised for recovery, and then we had this setback."

The one-page survey, mailed monthly to selected purchasing managers, is a leading U.S. economic indicator. According to the poll, manufacturing began dropping in July 2000, then hit its low point in January before starting to climb out slowly before the terrorist attacks.

Still, Ore predicted that Sept. 11 will be a temporary blip, and that the economy will "go from an event-driven economy back to the business cycle." Employers have cut about 1 million jobs, and need to cut between half a million and 750,000 more before growing, he said.

He said a tax cut would not help because the economy probably will be growing by the time it would take effect.

Ore believes the economy will grow quickly, once it climbs out of recession: "I think the economy comes back strong."

He predicted 3-5 percent annual growth in the overall economy, and struck an optimistic tone. He said the United States in the coming decade could surpass the record of 116 consecutive months of growth that began in April 1991.

That growth, which continued until 2000, did not always mean growth for manufacturers, however. Manufacturing had growth in only 85 of those months, Ore noted.

SPI launches business-confidence survey
Meanwhile, a new business-confidence survey from the Society of the Plastics Industry Inc. found low expectations for the next year.

The survey, which is not statistically valid, is based on responses from chief executives of as many as 70 plastics processors, equipment manufacturers and materials suppliers closely involved with SPI, said Lori Anderson, the Washington-based trade association's senior director of economic and international trade affairs. The respondents' companies account for $4.7 billion in annual sales.

Those companies expect shipments to continue to drop through the third quarter of 2002, with processors seeing a 0.8 percent drop, machinery companies predicting a 16 percent decline and materials suppliers down 2.7 percent.

Perhaps indicating the effects of belt-tightening and layoffs, the companies told SPI they generally expect higher profitability, capital expenditures and raw material purchases in the next 12 months.

The last year clearly has been tough. The survey indicated business was down about 15 percent in the third quarter, compared with the same period in 2000. Processors had the smallest drop -- about 2 percent -- while machinery companies had the largest - with business down about 35 percent.

Generally, the Sept. 11 terrorist attack by itself did not seem to be having a significant impact on the industry's bottom line, Anderson said. Three-fourths of survey respondents reported no effect in the aftermath, while about 20 percent said business was down slightly.

The survey also found that equipment manufacturers had the biggest capacity problems. More than 20 percent of them reported capacity utilization of less than 50 percent. For processors, the largest number had capacity utilization of 51-60 percent. Materials suppliers fared best -- the largest number of them had capacity utilization of 71-80 percent.

U.S. machinery sales take another hit

By Bill Bregar
PLASTICS NEWS STAFF

ATLANTA (Nov. 15, 2001) - Double-digit declines continued to hammer plastics machinery sales in the third quarter, down from the second quarter, with the lone bright spot being auxiliary equipment, according to figures released Nov. 14 by the Society of the Plastics Industry Inc.

SPI also released for the first time capacity utilization numbers for machinery makers. The low numbers reflect weak U.S. demand for injection molding machines, extruders, blow molding machines and other equipment.

Anderson

Machinery sales began their decline in the second half of 2000, according to Lori Anderson, senior director of economic and international affairs for Washington-based SPI. Anderson reported the third-quarter machinery numbers Nov. 14 during the Plastics Encounter Atlanta show.

Capacity utilization numbers came from a survey of machinery makers on SPI's board. SPI weighed the responses by the size of the company, measured by domestic sales volume.

Of that total, Anderson said, equipment manufacturing representing 58.3 percent of the dollar volume is running at between 61 percent and 70 percent of capacity. But nearly one-fourth of the total -- 22.8 percent -- is under 50 percent capacity, said said.

Industry sources say several makers of injection presses this year have severely cut back production to stop piling up inventories of unsold machines.

The statistics from SPI's Committee on Equipment Statistics report machinery shipments -- defined as sales by U.S. manufacturers (comprising machines sold domestically and exports), plus sales of imported machinery.

The numbers indicate the embattled machinery sector still has not hit bottom.

Injection presses
SPI reports that third-quarter shipments of injection presses totaled 699 units, down 31 percent from the second-quarter number of 1,009 machines. Measured in dollar volume, sales declined to $137.1 million, a 26 percent decline from $186.1 million in the second quarter.

The picture looks even worse when analyzing shipments in a year-to-year period: Third-quarter shipments of injection molding presses fell by 56 percent in units (1,581 units in the third quarter of 2000). Measured in dollars, the business dropped by 51 percent, from $280.8 million.

Blow molding
Blow molding machines also declined in all measurement categories.
Third-quarter shipments consisted of just 29 blow molding machines, down 46 percent from 54 machines in the second quarter. The $14.8 million volume represents a 32 percent reduction from the second-quarter amount of $21.7 million.

Comparing the third quarter of 2001 to the same quarter of 2000, shipments of blow molding machines dropped 24 percent in units (from 38 units). In dollars, the decline was 42 percent (from $25.5 million).

Extruders
SPI is reporting only units - no dollar amounts - for extruders, both single- and twin-screw machines. After showing a slight increase in the second quarter to reach 234 machines, extruders fell back in the third quarter, dropping by 30 percent, to 163 units.
Measured on a year-over-year basis, extruders plunged 48 percent, from 314 units, in the third quarter of 2000.

Auxiliary equipment
Auxiliary equipment also declined in the third quarter - but only by 2.3 percent. Shipments totaled $68.9 million, down from $70.5 million in the second quarter. But compared with the year-ago period, auxiliary equipment is hurting, down 32.6 percent in the quarter (from $102.1 million in 2000).

Screws and barrels
Barrels appeared to be about to stop their fall, while single screws continued to suffer.
SPI said injection barrels improved by 4 percent, to 815 units (from 783 units in the second quarter). Barrels overall fared better than single screws - extrusion barrels declined by 8 percent in the quarter. SPI reported double-digit percentage declines for screws.



Great debate: Suppliers argue all-electric vs. hybrid

By Bill Bregar
PLASTICS NEWS STAFF

ATLANTA (Nov. 21, 2001) -- Which injection press wins the hybrid-vs.-all-electric debate? The answer, according to a debate at Plastics Encounter Atlanta, may depend on demands of the specific molded part -- and which machine supplier does the talking.

"Which is best? The easiest answer is, `It depends a great deal on the application.' There is no correct answer," said Michael Urquhart, vice president of service and sales at Canada's Husky Injection Molding Systems Ltd. Husky, which does not make an all-electric press, favors hybrid techology that use both hydraulic powers and electric motors.

Ultimately, the decision will be made one molder at a time, said M. Barr Klaus, Milacron Inc.'s vice president of technology and a champion of all-electrics. Customers can run a mold on competing machines "and let the chips fall where they may," he said.

"I fully agree with you," Urquhart said. "We put one of those energy meters in every one of our regional offices where there are machines on the floor, and we recommend the customers do exactly the same thing. Some applications are good for all-electric. Some are better for hybrid."

Ube's Tawarada: sees all-electric machines dominating

The third panelist, Taku Tawarda of Ube Machinery Inc., came down squarely in favor of all-electrics. Asked to predict the market in 2012, he said: "Of the total machines sold in the market, more than 90 percent will be all-electric. Hybrid will be there for some applications that absolutely demand it."

Tawarada, marketing and sales manager for the Ann Arbor, Mich., company, said that nearer term, hybrids and traditional machines will survive in larger-tonnage machines.
Klaus said all-electrics command a 75-85 percent market share in Japan.

"In North America, we're looking at market penetration of about 25 to 30 percent currently. But that's double what it was last year," he said.

Panel moderator Jack Avery, manager of operational assets at GE Plastics, set the stage for a debate when he repeated claims by some electric-press advocates of 60-80 percent energy savings.

"The 2000-'01 energy crisis drove the all-electrics as a cost-saving solution," he said.
Urquhart said the 60-80 percent number is unfair because it compares all-electrics to older machines totally run by hydraulic fluid. Hybrid machines are much more energy efficient, and the technology is still evolving, he said.

Urquhart said that plasticizing is the biggest energy user. Adding an electric screw drive can reduce energy consumption. Variable-speed drives also reduce energy use.
Klaus presented charts showing all the parts to a hydraulic drive, including tubing, valves, filters and pumps.

"Every time you do that, you lose a little bit of operating efficiency," Klaus said, claiming that 50 percent of the power used on a hydraulic machine is wasted energy.
All-electric presses, on the other hand, boast a much shorter, simpler drive train. Klaus said mechanical connections of an electric press are more precise than fluid-based power.

Urquhart said energy is only a small part of the cost of a molded part. But Klaus countered by saying that depends on local electricity costs. He also pointed out that, unlike resin prices, energy is one cost a molder can control.

Tawarada -- whose company makes and markets all-electric, hydraulic and hybrid models -- can argue both sides.

"I completely agree with Mr. Klaus, what he talked about with the electric advantages. But there are limitations with all-electric machines. That's the reason why I cannot rule out - right now, maybe only for a couple of years down the road - I cannot rule out the hybrid."

Current motor and ball-screw technology limits the size of all-electric machines. Ube has made the biggest all-electric so far, a press with 1,550 tons of clamping force that ran at NPE 2000 in Chicago. Ube gets around limitations on motors by synchronizing two motors together.

Milacron's biggest all-electric so far is a 935-ton press.

Panelists also talked about why Japan and the United States embrace all-electrics, while Europe does not. Tawarada's off-the-cuff analysis drew laughs:

"Japan's been known for electrical gadgets. It's a closed market. Europe has history, and it's also a closed market. The U.S.? It's open, and it'll take whatever comes. I think that electric machines grew up in Japan. So that's why Europeans didn't care about it. Americans didn't know about it. But after awhile, Americans thought, 'Oh -- great new gadget from Japan. OK, let's try it.' "

Boosting bottle recycling rates is a BEAR

By Steve Toloken
PLASTICS NEWS STAFF

ATLANTA (Nov. 16, 2001) -- Months of study by an unusual environmental and business coalition looking at falling container recycling rates has yielded a surprising result: California's version of the bottle bill may be the cheapest way to boost plastics recycling.

The study, by Businesses and Environmentalists Allied for Recycling, is touted as the first independent assessment of the costs of deposits, curbside collection and other plans to boost container recycling.

The effort was unusual in that it drew people on opposite ends of the recycling political debate, ranging from environmentalists to the soft drink industry.

The preliminary conclusion: California's system has a per-container cost of 0.14 cent, compared with 1.7 cents for curbside programs and 2.7 cents for traditional deposit systems. That includes the cost after materials are sold.

Coke's Jordan (left) with BEAR's Ferrari

Pierre Ferrari, chairman of Atlanta-based BEAR, unveiled the numbers during a panel discussion Nov. 13 at the Plastics Encounter Atlanta conference in Atlanta. He emphasized that the group still was debating what conclusions to draw from the data before it releases its final report, likely by the end of the month.

Still, the figures seem sure to draw keen interest in the plastics industry recycling community, which has been trying to figure out how to deal with falling rates. The PET container recycling rate, for example, has dropped from 39 percent in 1995 to 22 percent last year, according to figures from the Charlotte, N.C.-based National Association for PET Container Resources.

While the BEAR report laid out overall cost figures, some industry recycling officials on the panel said it does not address a fundamental political question -- who will pay.

"A big issue of ours and people in the industry is the cost to us of this type of system," said Ben Jordan, environmental manager with Coca-Cola North America in Atlanta. At one point he questioned some of the data, but at another he said: "Maybe the cost is where the data says it is."

Coke participated with BEAR in preparing the report, along with BEAR members such as the Container Recycling Institute, the U.S. arm of Mikhail Gorbachev's Green Cross International, and carpet maker Beaulieu of America LLC.

Traditionally, the beverage and plastic bottle industries have argued that the best way to boost recycling is to make better use of curbside programs, including improved consumer education. They also have decried the cost of traditional bottle bills, which they say put a heavy administrative burden on retailers and distributors.

Ferrari said in a Nov. 14 telephone interview that BEAR's data should not be read as victory for traditional bottle bills, which were the most costly system.

California's hybrid system is so much cheaper because it has centralized collection centers that do not require grocery and retail stores to redeem bottles, and because it does not require bottles to be sorted by brand, Ferrari said.

California's system does, however, require bottle producers to pay a tax to support recycling and it has an extensive bureaucracy to administer it, said Frank Mechura, president of blow molder Constar Inc. in Philadelphia and vice chairman of NAPCOR. Mechura participated on the panel.

"PET today as a recycled material is not economically viable to anybody that is dealing with it," Mechura said, "It is a cost to do business that is being absorbed in different ways by different players in the system."

Mechura, after he saw BEAR's data, said that it was "fascinating."

"Now I'm sorry I didn't participate in BEAR because if that's true, I just learned something, because I said something exactly the opposite in comments," Mechura said.

Jordan questioned what would be an appropriate level of recycling - BEAR is setting an 80 percent goal. He also said recyclers would not know what to do with a huge increase in supply. Right now, there is too much material, he said.

"A year ago you had this supply crisis," Jordan said. "Well, what are we talking about now? We're talking about an oversupply crisis."

Mechura said he would like to triple the size of Constar's recycling subsidiary, but said it does not make economic sense. He also noted that most of the players that might be tapped to fund more recycling - governments, bottle makers, resin makers - are themselves strapped for cash.

"We all want to have the most efficient way," Mechura said. "If it's the California model, so be it. There just isn't enough money to have anything but the most cost-efficient way to go collect it."

Consumer education is needed to get people to put more materials into curbside programs, he said. He cited data showing that since PET recycling rates are lower than some other packaging materials, that means there's plenty of room to improve curbside systems.

But Ferrari said that BEAR's research questions how big of a jump you can get from education. There is very little data available, and he said some analysis overestimates the number of containers potentially available for recycling in the home.

"If [you're] happy with two or three percentage points, then education is a good idea," Ferrari said in an interview after the panel. "If we want to triple it, education is nonsense."




Panel debates what processors want from dot-coms

By Joseph Pryweller
PLASTICS NEWS STAFF

ATLANTA (Nov. 21, 2001) -- With three of the largest dot-com plastics competitors joining for one panel discussion, some Web rivalry could be expected to surface as quickly as a pop-up advertisement on the Internet.

Instead, the three panelists speaking Nov. 14 at Plastics Encounter Atlanta chose to discuss a common concern: the malaise among plastics processors at adopting Web purchasing tools for their businesses.

Dot-competitors: (L-R) Foss, Jukes and Mosberg

"Processors haven't really understood what this Internet thing is all about," said David Jukes, senior vice president of global commercial organization for Omnexus, an Internet marketplace with U.S. headquarters in Atlanta. "In the beginning, it was a blunt instrument of pricing and e-auctions. Now, that has been totally augmented by a more customer-focused model to take out supply chain costs."

That message -- the Web as a no-frills means to enhance a manufacturing business -- also was brought home by speakers from GE Polymerland, a major engineering-resin distributor that has shifted more than half its business online, and ChemConnect Inc., an independent trading and negotiation site for chemicals and plastics.

The companies did disagree on some fundamentals. Their business models are different. In some cases, their uses are different. Their financial sustenance comes from different sources.

"Time will tell what customers will want," said GE Polymerland President Peter Foss. "We have a lot of models, and customers will choose the ones that add the greatest value. We can't decide for them."

All the companies have some proof, unlike earlier dot-com companies, that they will be successful. Huntersville, N.C.-based Polymerland, with possibly the largest volume of plastics transactions on the Web, expects to conduct more than $3 billion in Internet business during 2001, Foss said.

The company has added such features as product design and engineering help, a color-matching service and electronic seminars. In the first quarter of 2002, Polymerland expects to launch MyOrder.com, dedicated to helping customers easily identify the status of their orders and update shipping information, Foss said.

"We already do this internally with our customer-service representatives," Foss said. "Now, we want to release it in some form to the outside world."

ChemConnect expects to conduct more than $2.7 billion in resin and chemicals transactions this year on its site, an amalgam of auction and exchange tools, commodity futures pricing and private supplier purchases. The firm keeps moving globally, recently adding partners in Mexico, South Africa and South Korea.

The San Francisco-based company, launched in 1995, has witnessed an Internet evolution from basic transaction tools to a greater quest to integrate computer systems to fulfill orders, said Jamie Mosberg, ChemConnect vice president for strategic accounts.

In June, the dot-com purchased Envera, a Richmond, Va.-based company that links the computer systems of chemical companies.

"Our critical push in the plastics industry comes from taking long-term costs from [order] fulfillment," Mosberg said. "The Internet is not a matter of reducing my head count or of reducing efforts to make strategic products. It's a matter of reducing fixed costs so you can add more value."

Omnexus also has focused its attention on cost reduction. The marketplace, launched in June 2000, has mustered steam by enlisting more than 20 suppliers as investors, sellers or both. Its mission is to help processors connect directly to those multiple suppliers and to compare resin prices from several companies.

One of its largest site tools is a new program that can help processors identify cost savings from purchasing products over the Internet, Jukes said. Omnexus has achieved many of its first-year goals and now is gathering plastics product makers worldwide to shift to Internet purchasing, Jukes said. Yet, the crash of many earlier dot-com sites, some of which charged fees to processors, has scared off some buyers from again dipping their toes in the water, Jukes said.

"So many things are possible and so few things have been done," he said. "There were 14-15 [plastics] dot-coms at NPE 2000, and now it's down to a few. They've left behind individuals who are dazed and confused."

The three companies hope to lure processors with new business approaches. None charges fees to processors. And all are focused on shifting strategies away from pure transactions to offering more breadth of functions.

The enemies of those companies are the fax and the telephone, the existing methods of doing business, Jukes said. In a perfect world, all three sites would operate together and allow processors to link directly without extra work. But that has not happened, and the officials acknowledged their differences.

Foss said his company is a traditional brick-and-mortar distributor taking its business to the Web, selling GE Plastics products as well as other materials not offered by the Pittsfield, Mass.-based resin supplier.

ChemConnect has a reputation as an exchange site, one that the company is working hard to replace, Mosberg said. Instead, the company wants to be known as offering an end-to-end solution to Web purchasing.

And Omnexus, while backed by suppliers, is working to become a central hub for purchasing, where processors move in different directions depending on whom they are buying from.

But the job still is in the beginning stages. GE does not work with Omnexus on its site, nor did Foss express any interest in doing so, but sells some resin via ChemConnect. None of those companies works with such vertical e-portals as automotive consortium Covisint or consumer-products e-marketplace Transora.

"We're ready to work with other hubs," added Mosberg. "But our customers have to determine where we go or which ones we work with."

Still, with three companies -- and a host of resin suppliers -- offering direct-sales sites, the landscape is starting to clear. The dull and boring work of getting processors to try the Internet is just starting, Jukes said.

"Probably 10 years from now, [Internet] tools will be totally commonplace in the industry," Mosberg said. "We all hope to be around when that happens."

Cascade claims PN's Processor of the Year Award

PLASTICS NEWS REPORT

ATLANTA (Nov. 14, 2001) -- Plastics News announced the winner of the 2001 Processor of the Year Award -- Cascade Engineering Inc. -- in a ceremony this afternoon during the Plastics Encounter Atlanta trade show.

Cascade President Michael Valz makes his acceptance speech.

Cascade beat out three other finalists: Grote Industries Inc., Inland Technologies Inc. and Trend Technologies Inc. Plastics News Editor/Associate Publisher Robert Grace and senior reporter Bill Bregar presented the award to Cascade President Michael Valz and Vice President of Business Services Michael Goldman during the show.

Based in Grand Rapids, Mich., Cascade injection molds parts for the automotive, office furniture, bulk bins, trash cart, shipping container and other markets.

"Few plastics companies in North America can come close to Cascade Engineering in the area of corporate social responsibility and worker development," Grace said. "And on top of that, the company has an excellent reputation as a lean manufacturer and quality molder."

Grace said the decision on a winner was a difficult one, given the caliber of all four finalists, and resulted in the closest vote in the contest's six-year history.

• Grote Industries of Madison, Ind., injection molds lenses, housings and other parts for its truck lighting products.
• Inland Technologies is a small, Fontana, Calif.-based injection molder of medical products used in applications such as catheters and heart angioplasty.
• Trend Technologies, based in San Jose, Calif., is a major molder and contract manufacturer of computer and electronics enclosures.

A total of 28 companies were nominated for the award this year. They covered a spectrum of injection molding, blown film and extrusion. The award is open to all types of plastics processors with operations in North America that have been running at least five years.

This year’s winner joins an esteemed group. Past winners include Tessy Plastics Corp. of Elbridge, N.Y.; Royal Group Technologies Ltd. of Woodbridge, Ontario; Courtesy Corp. of Buffalo Grove, Ill.; Nypro Inc. of Clinton, Mass.; and Bryan Custom Plastics of Bryan, Ohio. Bryan Custom now is owned by Plastech Engineered Products Inc. of Deaborn, Mich.

[EDITOR's NOTE: See related Plastics News feature story about Cascade from its Nov. 19 issue.]