Industry Watch 20119

Packaging market: Resin prices ease, M&A accelerates

A RECENT REPORT FROM securities firm U.S. Bancorp Piper Jaffray showed that resin prices for packaging remain relatively high, but in some instances, weakening demand and excess supply have pushed them downward. Examining the 18-month period from January 2001 through June 2003, the report covers aluminum, steel, paper, and plastics like PET, HDPE, LDPE, PS, PP, and PVC used in packaging.

PET prices have dropped in spite of increased demand, thanks to excess capacity that’s expected to remain for the next 12 to 18 months. The growth of HDPE, LDPE, and PS inventories between January and June 2003 set up the current slide in pricing. Year-to-date, PP prices have risen 15 percent in response to reduced capacity and greater demand. PVC pricing fell as a result of lower demand brought on by weather conditions. In the same period, most paper has shown slight increases, while aluminum has been flat and tinplate steel has shown upward trends.

The mergers and acquisitions activity within packaging picked up in early 2003. Some of the bigger deals in terms of company size are as follows: Precise Technology acquired Courtesy Corp., Waddington North America acquired Avon Plastics, Actipak purchased Blowpack, Pechiney Plastic Packaging acquired Novacel, and Amcor PET acquired Alcoa’s PET assets.

Congress considers manufacturing’s role in national defense

BEFORE OLAV BRADLEY began his prepared testimony to the House of Representatives’ Small Business Committee, he abided by the request of committee chair Don Manzullo and offered a brief explanation of tools, the role they play in molding, and a broader overview of how everyday items constituted of plastic take their final form.

“I explained exactly what a mold was, and what we did, because a lot of people didn’t understand,” Bradley says, describing his role as an emissary from the American Mold Builders Assn. (AMBA). “In one way, it’s still surprising to me that in this day and age, people don’t know what molds are. Nobody seems to understand how plastic is processed or how it’s made.”

That point was exemplified as Bradley expanded his description, noting that the cups in front of the legislators likely came from a mold, and how everything from car components to computer housings are originally pellets that are melted, shot into a tool, and then cooled and ejected. The lesson sank in for at least one representative.

“Everyone was kind of looking at each other,” Bradley recounts, “and this one congresswoman—like a light bulb went off in her head—picked up a water pitcher and held it up, and I said, ‘Yeah, just like that. As a matter of fact, I think we might have made that one.’”

A moment of levity in an otherwise austere setting, the congresswoman’s epiphany, while comical, highlights a question that isn’t very funny for American molders, moldmakers, and plastics processors in general: How can the United States government help the plastics industry if it is generally ignorant about what the industry actually does?

This painful irony wasn’t lost on Bradley, who, along with his work at the AMBA, is president of PM Mold (Schaumburg, IL). This 40-plus-year-old business began as a moldmaking shop and has added 20 presses to become a full-service molder for several markets.

Five years ago, Bradley sensed pricing pressures from abroad at his own company that indicated a downward slide, which has accelerated into the current spiral. Three years ago, as the situation festered, he began going to Washington as an advocate. But first, he worked as an educator who initially drew blank stares when he talked about tools and molding.

“[Legislators] understand a little bit more,” Bradley admits, “so we are making progress—not a lot—but we are making progress. Hopefully I haven’t been wasting my time.”

This most recent opportunity to enlighten those in power came at the July 9 hearing in the Capitol’s Rayburn Building that was titled “Saving the Defense Industrial Base.” Many within manufacturing in general and molding in particular have argued that industry is the foundation to any country’s defense. This event highlighted that argument and seemed like an ideal forum to vouch for manufacturing’s role in America’s continued military preeminence globally.

The issue gained greater prominence when Duncan Hunter, a state representative from California and the chairman for the House Armed Services Committee, inserted rules in the 2004 defense budget that would force the Dept. of Defense (DOD) to gradually turn to American suppliers more and more, especially for machine tools, when it divvied up contracts. The DOD and the defense industry’s lobby objected to these stipulations, and Suzanne Patrick, the deputy undersecretary for industrial policy for the DOD, presented testimony at the July 9 hearing arguing that America’s defense industry already uses U.S. manufacturers and those suppliers remain healthy.

“The current U.S. industrial base remains the strongest and most capable in the world,” Patrick testified, “one that continues to be fully capable of meeting the demands placed on it by the DOD.” In her closing statements, Patrick said that baselines created to eliminate non-U.S. suppliers and machine tools “would have the unintended consequence of discouraging the emerging U.S. suppliers that we care so much about from participating in the defense business.”

Patrick went on to say that Secretary of Defense Donald Rumsfeld would call on the president to veto the bill if it included the House’s Defense Industrial Base Provisions. Likewise, Mathew Borman, the deputy assistant secretary for export administration with the Dept. of Commerce, spoke against the provisions.

“Machine tools are expensive and long-lasting assets,” he said. “While this requirement may ultimately provide additional sales for U.S. companies, requiring that they be replaced, even for large defense contractors, would entail expenditures of money that would be better spent on other areas.”

In the face of this argument, Manzullo commended Hunter’s “Buy-American” clauses and offered the latest statistics on the hemorrhaging of manufacturing jobs to illustrate the current crisis. Manzullo reported that in June, manufacturing lost jobs for the 35th consecutive month, shedding 56,000 positions. He said that for the first time since statistics have been kept, fewer than 10 percent of the nation’s 147 million workers were employed in manufacturing, and of the 2.6 million jobs lost domestically since February 2001, 90 percent were in industry. (See p. 54 for more current figures.)

At the time of publication, House and Senate versions of the bill were stalled in committee, and Congress had left for its summer recess, meaning debate won’t restart until September, and the bill won’t reach the president’s desk until sometime this fall. Regardless, Bradley says that even recognition of American’s ailing manufacturing, including molders and moldmaking, is a positive step.

“It was a very interesting day,” Bradley says. “It was very tough, very grueling, but I think we did a lot of good as a group and opened a lot of eyes.”

Short shots

IN THE COMPANY’S seventh venture in the Asia-Pacific region and its first in Thailand, Nypro Inc. (Clinton, MA) announced a 50/50 joint venture with Avaplas Ltd. (Amphur Bangpa, Thailand). The 23,538-sq-ft facility runs 40 presses, applies MuCell technology, and employs 61. Current customers include Hewlett-Packard, Texas Instruments, and Schneider; Nypro says it will try to expand into the hard disk drive and automotive markets.

Alltrista Plastics Corp. (Greenville, SC) billed its Unimark Plastics Div.’s acquisition of Plastic Injection Ltd. (Dorset, U.K.) as an opportunity to pursue new business in Europe. The new company will be called Unimark Plastics Ltd., and it joins Alltrista’s eight other manufacturing facilities located in the U.S. and Puerto Rico.

Container and closure manufacturer Owens-Illinois (O-I, Toledo, OH) announced a joint project with Husky Injection Molding Systems Ltd. (Bolton, ON) to create higher-cavitation, multilayer PET injection systems. In an expansion of the SurShotSM multilayer program, O-I and Husky are targeting systems with up to 144 cavities to be installed in 2004.

Combining complementary products, Moldflow Corp. (Wayland, MA) and Kistler Instrument Corp. (Amherst, NY) announced a distribution agreement to package the companies’ software and sensor technologies. Moldflow’s Manufacturing Solutions software will be joined with Kistler’s piezoelectric pressure sensors and charge amplifiers.

Syscon-PlantStar (South Bend, IN) and Van Dorn Demag (Strongsville, OH) will give molders the opportunity to purchase presses with built-in production and process monitoring thanks to a new cooperative effort. Syscon’s monitoring software will now be embedded into the Pathfinder 6000 series of Van Dorn control systems.

In a move designed to use current technologies to combat foreign competition, Sunset Mold Corp. (Venice, FL) announced that it purchased a multiyear license from Beaumont Runner Technologies (Erie, PA) for that company’s MeltFlipper technology, which is designed to rotate melt to provide uniform cavity fill, reducing cycle time and strengthening the part.

The full line of robots and lean automation solutions built by Japan’s Sailor Pen Co. Ltd. will now be marketed and sold directly in the U.S. by a new company, Sailor Automation Inc. (Placentia, CA). Sailor Automation also has a technical center in Kennesaw, GA and plans to open another in the Midwest soon.

Choice Mold Components (Clinton Township, MI) has updated its website to include its part catalog, complete with part specifications and pricing, as well as templates that can be used to help design custom applications.