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Market Snapshot: Structural products

July 1, 2006

4 Min Read
Market Snapshot: Structural products

Parts from Mack Molding demonstrate the diversity in structural plastics. Below, a cover for a Pitney Bowes postage system is injection molded using PC/ABS, while a painted cover for a walkie fork jack (above) is produced by molding a TPE material in a low-pressure structural foam press.

It’s not a single market, but many. Ditto for the processes used to make structural parts. Industry statistics apply here.

What image comes to mind when you hear the term “structural plastics”? It’s likely you’ve conjured up a highly ribbed shipping container or wheelbarrow produced via low-pressure, structural foam molding. While these are certainly typical structural plastic products, they are definitely not the only ones.

When asked to define structural plastics, the Alliance of Plastics Processors (APP, Washington DC; formerly SPI Structural Plastics Div.) says the term refers to applications that enclose, support, or bear a load in products for markets such as automotive, agriculture, recreation, lawn and garden, medical, computer equipment, telecom, appliance, building and construction, furniture, industrial, military, and material handling. It’s a broad brush to use. Processes involved are no exception, ranging from structural foam and gas assist to traditional IM, bulk IM, compression molding, and insert molding.

Survey says slow growth

Considering the breadth of markets that structural plastics reach, statistics for the entire industry are most accurate in defining this mega-market. At this year’s annual conference of the APP in Columbus, OH, Jeff Mengel, a partner at Plante & Moran (Chicago), presented data from the company’s 2005 North American Plastics Industry study (see charts, opposite). These statistics apply to all of the markets and processes that make up structural plastics.

Mengel asserts that the industry continues to grow, but at a slower rate than the rest of the world. “Commodity resin consumption is expected to grow approximately 3% in North America through 2010, but up to 7% globally. There will be some recovery in the machine tool market, with approximately 4000 injection units to be sold in North America vs. 70,000 globally.”

The study points out that the industry remains highly fragmented. There are more than 7000 injection molders in North America with average sales of $10 million to $12 million. (On the other hand, there are more than 40,000 injection molders in China, most of whom operate smaller-tonnage presses.) Utilization remains extremely low despite almost 15,000 injection molding machines being retired over the last five years in North America, according to the study. As a result, margins remain compressed.

Productivity up

On the bright side, Mengel points out that productivity for the industry is on the rise. “Value-add per employee has started to grow again, at least for successful companies, and productivity appears to be growing faster than sales,” he says. “Value-add per labor dollar is a good measure for comparisons with other countries, because it measures your productivity—what you convert within your four walls.”

Other highlights from the study include the following:

• Sales growth doesn’t correlate with return on sales or assets. “You cannot grow your way into profitability. Smart growth needs to be part of your strategy, not your solution for lack of profits or idle equipment.”
• The delta between internal and external quality does correlate with profitability. “Having a robust system of quality that does not rely on inspection improves profitability.”
• Companies with fewer active tools have higher profits and also have greater savings from lean manufacturing efforts. “It takes the right mold with the right resin and the right press to create sales.”
• Successful companies’ total labor is invested more in skilled positions vs. direct labor, even for commodity molders.
• Companies that won new programs via e-bid enjoyed a higher annual sales growth, but also higher labor as a percentage of sales. “Perhaps new programs require additional labor to launch.”
• Companies with lower sales growth tend to participate and win transfer work via e-bid. “It’s possible that lack of sales growth is making the competitor’s programs more enticing, but not more profitable.”
• Smaller companies tend to take on more transfer work from other molders, which have lower gross margins.
• In general, you cannot perform better than your customer. “If the customer’s financial position is in jeopardy, then the contracts from that customer will also reflect the inability to pay a fair margin.”

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