March 31, 2003
A just-completed survey of roughly 200 North American rotational molders and their material and machinery suppliers has identified a number of critical issues affecting business. These issues undoubtedly confront rotomolders elsewhere.
Over the first half of the last decade, North American rotomolding output grew at an average annual rate of 9.7%, which made it arguably the fastest-growing process at the time. Over the second half of the decade, however, the growth rate decelerated dramatically to 3.2%/yr. Then, rotomolders, like other processors, were hit by the economic slowdown in 2001 and 2002. Total rotomolded output declined by 5% in 2001 and failed to recover any lost ground in 2002.
Much of the slowdown stems from difficulties related to the toy market, which historically is the largest segment of business. In 1994, toys represented 42% of total rotomolding output; by 2002, toy market share had dropped precipitously to 20%.
North American toy rotomolders have been shifting production offshore or contracting with foreign manufacturers. Much of toy manufacturing has migrated to Asia. China is now the world’s toy production leader. Meanwhile, mass-merchandisers like Wal-Mart that dominate North American toy retailing increasingly are limiting shelf space for the generally large rotomolded toys.
When toys are excluded, the rotomolding industry recorded a robust 7% average annual volume growth from 1994 to 2002. Some segments, such as agricultural and industrial tanks and boating, even recorded good growth in volume, if not profitability, over the last two years. However, rotomolders in these markets must confront challenges if they are to maintain growth and profitability in the foreseeable future.
First, they face increased competition from other types of processors in markets and applications formerly regarded as secure to rotomolding. Whereas rotomolding is ideal for making small to large hollow parts in low to medium volumes, thermoformers with twin-sheet forming machines can deliver large hollow parts of greater complexity via much faster cycle times. And, when rotomolded part programs are scaled up to medium to high volumes, they often are converted to blow molding, which boasts much faster cycle times, as well. While rotomolders could add blow molding capabilities to retain programs, the investments needed for machinery, technology, and training dissuade most of them from such diversification.
Second, competition among rotomolders is changing. In the past, custom and proprietary rotomolders served areas of only a few hundred miles, dictated largely by freight rates for large, non-nestable parts. Today, freight rates are less of a cost factor and as a result, many rotomolders are seeking sales regionally or even nationally. In line with this strategy, several suppliers have set up manufacturing plants far outside their home regions.
A third challenge is tougher requirements posed by customers. Besides demanding parts with consistent high-quality performance and appearance, they need fast, reliable delivery to accommodate just-in-time manufacturing. Rotomolders are responding to this mandate in several ways.
On one hand, they are, where practical, converting from dry-blended color resins to compounded materials. Color compounds provide superior processability as well as better color dispersion, color matching, and retention of neat properties such as impact resistance. Masterbatches allow rotomolders to compete for parts that require additives such as antioxidants, antistats, flame retardants, lubricants, and light stabilizers, which can only be introduced through compounding.
Rotomolders also are replacing vintage — and often self-built — process machines with modern units with sophisticated controls that can deliver high-quality parts consistently. Yet, with no paradigm-changing technical developments in the offing, the long cycle times, limited material choices, and labor-intensive nature of rotomolding will force processors to be more open to change than ever before.
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