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Articles from 2004 In January


Global equipment suppliers solidify their Chinese positions

If processors are following their customers to China, the same can be said of suppliers. In short, machinery suppliers now see advantages to producing in China and have gone to lengths to locate facilities there.

China, known as the world''s workshop, has been welcoming another production sector to its shores of late: plastics processing machinery manufacturing. With export-oriented industries such as electronics continuing to make rapid gains, a fast-growing auto industry, and increasingly affluent Chinese consumers demanding higher quality for packaging and other products, demand for more advanced machinery is expanding. And numerous Western machine manufacturers see a local production presence as one key in growing their share of this pie on account of superior economics and faster delivery times.

We first reported on this trend last month (January 2004, MP/MPI). The Chinese market for injection molding machines is pegged at between 25,000 and 31,000 units by industry observers, with an estimated 16,000 to 20,000 entry-level machines supplied by local Chinese manufacturers; 6,000 to 7,000 mid-level units by firms from Hong Kong and Taiwan; and 3,000 to 4,000 high-end presses by Western players, including the Japanese.

Stephan Greif, VP for China at Demag Ergotech (Schwaig, Germany), believes many processors currently at the low end of the scale will eventually shift to more sophisticated machinery, and the mid-level market segment could thus increase by up to 10,000 units. Demag Haitian Plastics Machinery (Ningbo), Demag''s joint venture with Chinese giant Haitian, targets this sector.

Demag Haitian is the pioneer of Sino-European collaboration in injection machine manufacturing, having started up in 1998. The joint venture expected to ship more than 300 injection machines in 2003 according to Greif. Demag Haitian is relocating in April to a new facility that will double capacity to 600 units (December 2003 MPI).

Other movement

Husky (Bolton, ON), meanwhile, started making hot runner systems in Shanghai in November 2003, and marketing VP Jeff MacDonald says the manufacture of Hylectric machines up to 3000-kN clamp force will start at the facility within the current calendar year. "The market demands speed, and first and foremost, we are manufacturing in China to be closer to our customers," says MacDonald. "If we can deliver machines within weeks, we''ll get more business." He says cost issues are secondary.

He terms the initial manufacturing initiative "incubative production" in that Husky will learn which components can be sourced locally and what benefits are derived in terms of delivery time.

Fellow hot runner producers Mold-Masters (Georgetown, ON) and Plastic Engineering & Technical Services (Auburn Hills, MI) have also opened manufacturing facilities in China. The latter plans to use the China facility to develop hot runner manifold system components to be assembled in the U.S.

Ube Machinery Corp. (Ube, Japan), meanwhile, inked a 10-year licensing deal with Hong Kong''s Cosmos Machinery Enterprises (Group) Ltd. in March 2002 in which the latter manufactures large injection machines under the Grand Tech-Ube badge in Wuxi, China. Ube reports smooth progress since production started in August 2002.

Changhong Appliance (Sichuan, China) recently took delivery of eight Grand Tech-Ube machines with clamping forces ranging from 10,000 to 25,000 kN. The firm is China''s leading TV manufacturer and had used Chinese and Japanese machines previously. Machines built under license feature fewer options. Injection-compression molding, for example, is not available.

Kawaguchi Ltd. (Shimizu, Japan) is also planning production of injection machines in China starting early this year. It plans to form a joint venture with Hong Kong''s Century Win Enterprises in Shanghai.

Other Japanese injection machine suppliers manufacturing in China include Toshiba (Tokyo), which produces all-electric machines at a wholly owned subsidiary in Shanghai, and Mitsubishi (Tokyo), which outsources production to Hangzhou Jinnong Machinery Mfg. Co. The Chinese firm assembles hydraulic injection units, clamping units, and control panels for 350- to 850-tonne presses at a custom-built facility in Hangzhou, Zhejiang Province. The subassemblies are shipped to Mitsubishi''s plant in Nagoya, Japan, for final assembly and quality assurance. Annual production of 200 machines is targeted. All components are sourced locally except the screw and the machine controller. Full local manufacture in China is planned.

Extrusion equipment consolidates foothold

In the extrusion field, Reifenhauser (Troisdorf, Germany) has announced that it will establish a manufacturing presence in China. The wholly owned operation will start manufacturing "special edition" small, three-layer lines (1.7 m wide, 450 kg/hr) at Suzhou, near Shanghai, with the first machine to be exhibited at Chinaplas in Shanghai in June. The machine will be sold in other developing economies such as South America, Russia, and Egypt.

"The goal is to procure as many parts as possible locally in China," says managing director Klaus Reifenhauser. The standardized machine will feature no high-tech options, but there will be no compromise on quality. The sales target is six lines in the first year, then 12 to 15 in the following year. Eventually, sales of more than 20 lines/yr are targeted. "It will take time for the China market to accept the machine," says Reifenhauser.

Also in extrusion, Battenfeld Chen Extrusion Systems (Foshan, Guangdong Province) extended its line at the end of 2002 to include blown film lines and has received eight orders to date, with three having already been installed. Except for the controller, all components are sourced locally.

The company, a joint venture between the SMS Plastics Technology Group and Hong Kong''s Chen Hsong, also supplies pipe, profile, and sheet extrusion equipment, and a full order book and extended product range prompted the firm to expand its plant. A new 8300-sq-m facility and technical center was due for completion this month. "Manufacturing should be transferred to the new facility from existing operations at two leased factories by April," says Battenfeld Chen Chairman Harold Wrede. Battenfeld Chen also develops its own machinery; the latest addition unveiled at Chinaplas was the BCE 2-72 C active conical twin-screw extruder (see Product Watch, p. 73)

Biaxially oriented film line maker Bruckner Maschinen-bau (Siegsdorf, Germany) is another firm sourcing local components to cut costs. Non-critical parts such as oven frames, insulation panels, ductwork, and sheet metal work have been sourced from subcontractors for two years. "Local procurement of these labor-intensive parts has enabled savings of about 30% to 40%," says Phillip Chen, managing director of Bruck-ner Far East (Hong Kong).

Bruckner recently established a subsidiary, Bruckner Machinery (Jiangyin) Co., in Jiangsu Province, to further develop its service presence and local procurement efforts in China. "China-sourced parts are already exported, and we plan to increase the scope in China," says Chen.

Extrusion blowmolding machine supplier Krupp-Chen (Foshan, Guangdong Province) is now a wholly owned subsidiary of SIG Blowtec (Troisdorf, Germ-any) after SIG acquired the shares of Hong Kong''s Chen Hsong. The name will be changed to SIG Blowtec China, and it will relocate to a new facility in Foshan.

The latest offering is the KCC-III multipurpose shuttle machine. Key components are made in Germany. The performance is similar, but half the cost. SIG Blowtec plans to attain CE certification for the machine as it wants to market it as a low-cost alternative in Europe and the U.S., according to Area Sales Manager Walter Andersch.

In robotics, Wittmann Kunststoffgerate (Vienna, Austria) plans to start building its W720 two-arm robot and Drymax 30 dryer in late 2004 in Kunshan, China. Major components will be sourced from Europe.

Stephen Moore [email protected]

Contact information
Battenfeld Chen:    www.bce.battenfeld.com
Bruckner:    www.brueckner.de
Chen Hsong:    www.chenhsong.com.hk
Cosmos Machinery:    www.cosmel.com
Demag:    www.demag-ergotech.com
Haitian:    www.china-haitian.com
Husky:    www.husky.ca
Kawaguchi:    www.kawaguchi.co.jp
Mitsubishi:    www.mhi.co.jp
Mold-Masters:    www.moldmasters.com
Plastic Engineering & Technical Services    www.petsinc.net
Reifenhauser:    www.reifenhauser.com
SIG Blowtec:    www.sigblowtec.com
Toshiba:    www.toshiba-machine.co.jp
Ube:    www.ubemachinery.co.jp
Wittmann:    www.wittmann-robot.com

Illinois molder brings innovation to bear on capitalization

Finding a way to make capital investments in tough times kept Glatt Aided Injection Molding from going under—and even helped it get going overseas.

Time and money. Glatt Aided Injection Molding (GAIM; Bensenville, IL) was running short on both in 2001, when the U.S. recession began impacting plastics processors. President Skip Glatt says the firm needed to replace antiquated equipment to remain viable.

"We''ve had to be innovative, looking for out-of-the-box ways to get capitalization so that we can continue to provide the best products and services to our clients at a price that''s worth staying in the States for," Glatt says.

GAIM is a $1.7-million company specializing in using 100% industrial scrap to develop and produce high-quality products for more than 33 industries, including retail, automotive, and home improvement. Like many small molders, GAIM lacked the financial resources to purchase new machinery that would enhance productivity and efficiency. At the same time, the company was feeling heat from customers requesting price reductions ranging from 14% to 25%.

"There was also severe out-of-state competition for some automotive business we were able to hang on to," Glatt recalls, "as well as mass merchants like Wal-Mart flexing their muscles with our customers, wanting lower-priced products." So he began investigating unique means of capitalization.

Glatt found that Illinois offers a variety of programs and services designed to help local businesses thrive in the global economy. "So I filed a grant application with the Illinois Department of Commerce and Economic Opportunity (DCEO)," he says. The move paid off, as GAIM secured approximately $460,000 in state-funded grants from sources such as DCEO. The 13-year-old processor was required to match 25% of each grant, money used primarily for investments in new injection molding and automation equipment. "Without all of the grants we''ve been awarded, we would have had to downsize," Glatt says bluntly.

According to Glatt, the grants come with no strings attached—no mandates for hiring new employees or reaching certain sales figures—and he owns the equipment after three years.

Other government grants awarded to GAIM enabled the molder to upgrade its quality-control program. GAIM has 13 employees, of whom 30% attend community college for ISO class and TS requirements for automotive. "We will soon have ISO 9000 and TS16469 certifications that will allow us to recruit sales agents and compete on a larger level," Glatt says.

GAIM operates from a 13,700-sq-ft building housing 10 robots and 15 injection molding machines that range from 1 to 330 tons clamping force. The new equipment has increased output by 10% to 15%, Glatt says, which improved GAIM''s position as a low-cost producer.

GAIM also looked into government programs that support U.S. foreign trade initiatives, and expanded its foreign outreach. "The Illinois Trade Office made it easier, supplying us with economic information, contact names, video conferencing tools, appointments, and use of their office while traveling abroad," Glatt says.

GAIM began forging international partnerships in Canada, Mexico, and Germany. It is in the middle of contract talks with organizations in Bulgaria, Poland, France, and Italy to market its retail bag-carrying grips—TotASak and hand-lr.

Overseas trade is roughly 5% of GAIM''s current business, but Glatt expects it to double in the next couple of years as GAIM establishes distribution abroad. "I export to Singapore, Australia, Bulgaria, and Mexico, and we have our sights set on Italy and France," he says.

Greg Valero [email protected]

Cross-laminated film offers high strength, more stiffness

An idea, which is expected to compete against heavy-duty paper, woven sacks, and bioriented polypropylene bags, is counting on its light weight and high strength to corner a market share. Developed by Ole-Bendt Rasmussen, director of O-B R. Enterprise (Walchwil, Switzerland), the cross-laminated film has mini-flutes on one side of the structure and takes advantage of high-tear propagation resistance. This is provided in the cross-laminated films in a manner similar to the crisscross grain of plywood.

One side of the material is a film oriented in the transverse direction, which can be printed, while the other machine-direction-oriented web consists of a fluted film structure. Each flute is about 1 mm running parallel to the main direction of the orientation. The flutes provide stiffness and resilience while reducing weight. Channels formed by the flutes can be used to "bury" protective substances such as oxygen scavengers or fire retardants. Such a solution can solve problems of highly sensitive additives, which might decompose at high extrusion temperatures.

The fluted configuration is produced by intermeshing rollers, one with sharp crests and heated to 70C and the other with rounded slots operating at room temperature. The film, which meets the crests, is preheated. The flutes are shaped and heated on a transfer roll at 110C and then heat laminated, or spot welded, to the cross-stretched substrate film. The rolls can be designed to spot-burn micro holes for substance release in the mini-flutes.

Rasmussen previously developed Valeron, a cross-plastics, high-strength film for packaging processor Van Leer (Essen, Belgium), which is still being produced. But the lack of stiffness and heat-sealing problems of cross-plastics laminated films led him to the mini-flute development, he says. Rasmussen is licensing the technology (www.xf-plasticfilms.com) and will not produce the film himself. Markets include industrial bags, tarpaulins, stand-up pouches, and diaper film.

Robert Colvin
[email protected]

Appliances: Easier (and cheaper) does it

Cost pressures and superior performance are positioning plastics as an alternative to metal-based materials as appliance manufacturers seek greater design flexibility amid increased consumer emphasis on aesthetics.

Household appliance manufacturers are creatures of habit, observers say. They prefer building equipment with tried-and-true materials that provide known performance and value. Nonetheless, plastics industry members say they are leveling the playing field by using materials that offer new and increasing capabilities, heat resistance, and mechanical strength.

"The design and manufacture of next-generation appliances must navigate their way between increasing market demands, costs, and regulatory mandates," says Paola Babka, global market director, commercial and consumer appliances, GE Plastics (Pittsfield, MA). "Fortunately, engineering thermoplastics, in addition to mechanical and chemical performance, provide the aesthetics required to create lifestyle products."

The Assn. of Home Appliance Manufacturers (Washington DC) identifies five major categories in the $20 billion home appliances industry. These are cooking (electric and gas ranges, microwave ovens), home laundry (washers and dryers), kitchen cleanup (disposers, dishwashers, compactors), food preservation (refrigerators, freezers), and home comfort (air conditioners, dehumidifiers). Dow Chemical Co. (Midland, MI) estimates that the North American household appliances market grew 2% to 3% in 2003. ABS, polystyrene, and compounded polypropylene are reportedly the most widely used plastic materials.

"What I see in the appliances industry is [companies] continuing to look for new plastic applications," says Wade Cullen, VP, manufacturing operations, WaDal Plastics (Medford, WI), an injection molder of custom plastic parts for several industries, including appliances. "For example, we just converted a door striker, which used to be metal, to plastics for door assembly for one appliances company."

Attempts to reach officials at Whirlpool Corp. (Benton Harbor, MI), Maytag Appliances (Newton, IA) and Bissell Corp. (Grand Rapids, MI), three leading home appliances manufacturers, for comment were unsuccessful at press time. But according to OEM suppliers contacted by MP, price sensitivity and ever-increasing customer demands for functionality, aesthetics, performance, and ergonomics are among the major trends at work in their business. More OEMs are reportedly realizing that in most instances, a plastic part is not only as good as the conventional metal, but sometimes as strong and very often less expensive.

Price pressures on processors serving the appliance market are said to be high. As a result, processors are reportedly implementing more automation and lean manufacturing techniques, as well as alternative materials in an effort to consolidate material buys and leverage resin suppliers. "We buy electric presses for the majority of our applications because the molding is more energy efficient than with other technologies," Cullen notes. "You also get better shot-to-shot consistency because of the preciseness of the servo motors."

Design flexibility

As OEMs look for ways to differentiate their products from competitors'', more attention is being paid to aesthetics. More designs per product and regular design changes mean OEMs and processors are looking for flexibility.

"Frequent color changes can be an issue due to the lost productivity and the cost of the raw material waste in transitioning," says Denise Kniager, North America market manager, appliances, Dow Engineering Plastics. "Additionally, OEMs and processors face the risk of an inventory of pre-colored resins in obsolete and thus unusable colors."

Design, in fact, is becoming the primary differentiator for applicances in the retail market. "Technical capabilities are becoming less of a differentiating factor between original equipment manufacturers as most appliances offer similar functionality," Kniager says.

The design freedom offered by plastics also allows for a far greater level of molded-in feature integration than is possible in die-cast metals, such as for brackets used to mount electrical motors, pumps, and compressors.

For dynamic structures and moving parts, plastics allow engineers to overcome the relatively low stiffness of plastics vs. metals, while their reduced weight decreases dynamic loads on the structure considerably. In some cases, OEMs are reportedly finding it more desirable to use a hybrid plastic/metal solution in certain sections of the assembly. "Hybrid assemblies can be manufactured using insert molding, where a metal part is inserted in the injection-molding tool, resulting in a fully assembled, fully finished part emerging from the tool," Babka says.

New environmental and regulatory requirements are having an effect on product specification as well. These include, among others, the EC Directive on Waste Electrical and Electronic Equipment, Restriction on the Use of Certain Hazardous Substances in Electrical and Electronic Equipment regulation, and IEC 60335. Experts say these changes could impact future designs and/or selection of appliance materials in North America.

A case in point is Underwriters Laboratories Inc.''s (UL; Northbrook, IL) new and revised requirements that impact portable, unattended household equipment. The standards and categories affected are those that directly reference UL 746C in the end-product standard. Effective June 1, UL says the flammability level for the enclosure is required to be a V-rated material (V0, V1, or V2). UL expects the changes will increase the safety of household appliances.

"The biggest change to what is defined as portable unattended equipment are products that switched from metal enclosures to plastic years ago," says Daniel O''Shea, UL''s principal engineer, plastics. "Those products have moved from non-flame-retardant versions to flame-retardant versions."

Processors may need to work closely with both end-product and component manufacturers to choose the appropriate material for their particular application. Says O''Shea, "[OEMs] are looking for assurances that these parts will not have any difficulty meeting UL requirements."

Greg Valero [email protected]

Dishwashers will have more plastics inside

Just as the use of plastics for interior components of clothes washing machines has gradually increased in the last 10 years —most notably polypropylene for the tub on front-loading models—so the same process is now beginning to happen with dishwashers. Borealis (Lyngby, Denmark) is now in the final phase of a project with an undisclosed appliance manufacturer to develop a complete one-piece PP tub. The product will debut later this year.

Last year, Bosch und Siemens Hausgeräte GmbH (BSH; Munich), launched a dishwasher with a tub floor in a PP compound specially developed by Borealis to provide long-term resistance to chemicals used in dishwasher detergents at temperatures around 80C (February 2003 MP, p. 49; MPI, p. 57). Another important feature of the development is that Bosch-Siemens has been able to considerably reduce its production costs for the part.

Werner Posch, a market development engineer in Borealis'' engineering applications business unit in Linz, Austria, says plastic tubs have been developed before, but have not been intended for such high-temperature environments. Especially important for BSH was color stability of the part.

Posch says future dishwashers will contain a lot more polypropylene than they do now, not just for the tubs, but also for interior fittings. He says Borealis is currently working on replacement of steel hinges, as well as various parts of the baskets and their supports that are currently made in PVC-coated steel.

Other dishwasher makers are likely to be working on similar developments, but all those responding to information requests for this article refused to discuss ongoing projects.

Peter Mapleston [email protected]

Fridge door liners transition to ABS materials

There has been a notable transition from HIPS to ABS among processors of refrigerator door liners, according to Kurt Brunner, sales and project engineer at thermoforming machine manufacturer Kiefel (Freilassing, Germany). Using ABS lets these processors downgauge on wall thickness without losing part strength, he says, and often also reduces part cost.

Thermoforming ABS usually requires some sort of pressure assist to get good parts definition, a growing requirement as these liners'' design becomes more detailed. "We''ve developed some special solutions for this [pressure assist of ABS]," Brunner says.

In late 2001, Kiefel acquired the know-how and technology of Italy''s Rigo, until then one of its closest competitors in the market for thermoformers for refrigerator door liners. Rigo (Castelnovetto) no longer makes thermoforming units, only trimming equipment for these door liners, and performs upgrades on machines used to thermoform these parts.

Refrigerator manufacturers are even considering replacing metal external refrigerator doors with ones made of plastic. Turkish OEM Arcelik is working with Austrian sheet extruder Senoplast (Piesendorf) on use of Senoplast''s high-gloss coextruded ABS/PMMA sheet for this application. Senoplast is also developing a grade of sheet using these materials that it says will be suitable for replacing the entire metal housing of a refrigerator. Advantages would include reduced weight, easier recyclability, and increased design options.

Matt Defosse [email protected]

Contact information
GE Plastics www.geplastics.com
Assn. of Home Appliance Manufacturers www.aham.org
Dow Chemical Co. www.dow.com
WaDal Plastics www.wadalplastics.com
Underwriters Laboratories Inc www.ul.com
Borealis www.borealisgroup.com
Senoplast www.senoplast.com
Kiefel www.kiefel.de

Distributing low cost and added value

A rapidly changing industry is increasingly asking material distributors to not only get products into processors'' hands, but also add supply-chain value and fill the technical support void left by cost-conscious suppliers

Adaptation, as Charles Darwin believed, is the key to survival. And as you''ll find in virtually every other industry segment, market forces are presenting material distributors with an equivalent, and very familiar, scenario: Adapt or perish. Survival now means excelling at not only the essential modern distribution function of supply-chain management, but establishing a national distribution presence, taking on account management, finding ways for processors to reduce costs, and providing technical support services such as moldflow analysis and training on products and techniques.

From distributor to integration

Traditionally, distribution has primarily been about what the word implies—distributing product from supplier to end user. And it still is, but with significant new twists, such as being an integral part of the end user''s cost control as it relates to the supply-chain management element of operations.

"We see an environment growing in global trade with increased pressure to deliver lower costs to market," says Michael Gilbert, director of marketing, plastics, Ashland Distribution Co. (Dublin, OH), a distributor of chemicals, plastics, fiber-reinforced plastics, and fine ingredients. "One way to take out costs is to eliminate errors and deliver market-leading service that is on time and hassle free."

"First and foremost, distributors need to remember what we are looking for—distribution," agrees Matt Pederson, VP of Bayer Polymers'' (Pittsburgh, PA) Injection Molding Group for North America. "We both need to get better at managing the total supply chain inventory, so you get the right products into customers'' facilities and provide the right service."

Excelling at the fundamentals of distribution also means adapting to another element of change in processors'' operations: to effectively service the total supply-chain inventory, distributors now must be able to operate on a national scale.

"There used to be a lot of regional distributors," observes Jim Preston, VP of distribution sales, RheTech Inc. (Whitmore Lake, MI), a designer and manufacturer of polyolefin alloys, compounds, and concentrates. "Now these guys are being acquired or going out of business because you have to be a complete national player. A lot of molders may have plants in different regions of the country. There are fewer, larger molders and the business is more competitive than it''s ever been," Preston says. "There are now a lot of smaller molders and they''re spread out across the country."

Mastering the fundamentals is no longer enough for success, however, as suppliers and end users both are redefining the distributor''s role. As Bayer''s Pederson succinctly puts, "Distributors are acting more as partners in managing the relationship to whatever degree is necessary. Instead of being order takers, they are doing account management."

Beyond the fundamentals

The distributor''s focus on inventorying large quantities of products and delivering them to a large variety of customers is what made them an attractive and cost-effective external distribution channel for manufacturers. Vendors realized years ago an opportunity to better serve small to mid-size accounts through wholesale distribution, because distributors typically treat these customers as big accounts, while suppliers focus on serving larger companies that require more pampering.

"Suppliers really view us as essential to their account segmentation strategy," says Mike Rademacher, VP and general manager of PolyOne''s Distribution Group (Cleveland, OH), a distributor of polymer, elastomer, colorant, and additive products.

But now, this function, as important as it is, is only the minimum expected by suppliers and end users alike. The distributor must now look to bring a different form of value to both, because suppliers see less benefit to having a middleman if all that the distributor does is ship product. And end users are applying the same cold logic. As more suppliers explore different ways to better reach and service smaller accounts, distributors have evolved from selling agents to service companies.

"We''re not just supplying material anymore," says Joe Muhs, VP of Prime Alliance (Des Moines, IA), which provides distribution and technical support services for a broad range of thermoplastic materials from resin suppliers.

"You have to help customers choose the right material, get samples, help run materials, whatever it takes to make the sale. One of the big changes we see is the reliance of our customers on technical information," he observes.

"It used to be that suppliers would be the ones with the most technical information and supply that. But with downsizing at larger chemical companies, our customers are relying on us more and more for technical information and hands-on technical support, whether it involves molding or extruding. We''ll troubleshoot their tooling. Our technical service guys will run seminars on how to modify tooling or get better cycle time."

Rademacher echoes that assessment. "I have always felt that we have been more than just a logistics provider. We offer value-added services such as tool design and moldflow analysis, and help train customers'' employees on processing techniques and products."

Technical knowledge gets back to supply-chain management to cut processor costs via packages of products and services. With thousands of different SKUs in the marketplace, each offering its own features and benefits, and the myriad end uses available, customers often need someone to help them select the right products for their applications.

"We find that because customers have trouble passing along price increases, they are more open to material alternatives," as PolyOne''s Rademacher says.

Opportunity and risk

David Honeycutt, PolyOne''s director of e-business and marketing communications, views the recent trend by distributors to shoulder more functions previously handled by suppliers as a win-win.

"First of all, it creates a larger shift towards distribution," he says. "In that shift, major suppliers benefit because they are able to offer consolidated service offerings. Processors benefit because they are able to take advantage of the better value offered by distributors."

However, as wholesalers invest in technology and expand services to increase their importance to customers, they are walking a fine line between price and service. Profit margins and rising distribution costs make it increasingly difficult for wholesalers to "give away" special services.

"We will continue to offer a wide variety of services while keeping a watchful eye on the cost," Gilbert says. "There is a delicate balance to maintain."

The dilemma for wholesalers is that processors often want the best of both worlds: rock-bottom prices and top-flight services. Some services may seem basic to the wholesaler, yet it may charge the customer separately for them. Other services may seem more creative, but the customer may also be reluctant to pay for them. The balance between value and cost depends on each customer.

The value of service can be gauged by its ability to reduce a customer''s costs, increase productivity, or boost sales. "Not all customers want them, need them, or are willing to pay for them," Rademacher points out. "This forces us to be more selective on what we do for whom because of cost factors."

PolyOne officials admit the firm caters to large accounts—typically the ones generating the most volume—by providing them with special services when and where they need them.

"We are finding it difficult to provide the same service value to all customers," Rademacher explains. "Some customers create more value than other customers. We cater to accounts that create the most value for us, whether they are large or small accounts."

Greg Valero [email protected]

...and resin futures'' U.S. prospects?

As the London Metals Exchange launches its foray into plastics futures, it can glean a cautionary note from the meager results of the Chicago Mercantile Exchange''s (CME) short-lived benzenes and mixed xylenes futures. From 2001 to 2002, there were only 15 trades for benzene and none for the xylenes, leading to the program''s de-listing in early 2003.

Further up the derivative chain than polymers, the benzene and mixed xylene futures were initially offered on Sept. 21, 2001, marking the first time chemical futures were traded at the CME. They entered a marketplace that had been flush with activity, due in part to the frenetic dealings of one now-infamous energy trader.

"[The benzene and mixed xylenes futures] were developed at a time when there was a significant amount of liquidity created by a lot of trading activity, particularly by Enron," says Eric Paulsen, VP of commodity markets for the independent electronic marketplace ChemConnect Inc. (Houston, TX).

"As you can well imagine, since the Enron crash there''s been a shrinkage of liquidity for natural gas, power, crude products, chemicals, gases—everything."

A futures market''s viability derives from consistent, daily activity that leads to true price discovery, something that was lacking for the CME''s offering, according to a CME spokesperson who declined to be indentified for this report.

The pricing volatility of polymers makes them a natural fit for a futures market, giving processors and resin producers a hedge against the whims of a market where sudden swings in petroleum and natural gas feedstock subject those down the line to punitive prices.

"Companies that are between the big producers and the big retailers have got to define what their risk is," Paulsen says. "The confidence that if you fix a price with your customer—the confidence that that price is going to hold—I think that''s been a problem."

ChemConnect appreciates the need for resin futures, and does limited over-the-counter trades of polymers and their feedstock like methane and propane right now. But some benefits found in a true futures market like active regulation; widely available, consistent pricing; and clearing and settlement purchases, which shield traders from financial risk of their counter party, have been absent.

ChemConnect has taken steps to address two of these problems, announcing a partnership with the Guaranty Clearing Corp. to offer a clearing service, and teaming with financial services information provider Bloomberg LP to create real-time market information of natural gas liquids and chemicals.

These steps towards a futures-friendly environment for polymers show some progress, but several obstacles remain. "The history of developed commodity markets suggests that you really need to have a very robust and developed underlying physical market," Paulsen says. "You have to have a large spot market where there''s a lot of transactions."

Does this describe today''s market? "There are not financial transactions on polymers that occur every day, and I would be shocked if they''re every week," he says.

Another hurdle for polymers is a general lack of widely accepted standards. Petroleum and other commodities are clearly defined, making their pricing more generally accepted.

"PE, from a price standpoint, very much acts like a commodity," Paulsen says, "but in the truest sense of the word, it''s not exactly a commodity. There are different kinds of melt indexes, clarity indexes, and all sorts of stuff, so it''s not as clear cut."

As a matter of policy the CME doesn''t comment on specific products it is considering listing, but the spokesperson conceded anything''s possible.

"The CME probably has the most innovative history of any derivatives exchange in the world, so we''re constantly evaluating all avenues of potential products. I think in general, we''d never say never on anything."

Tony Deligio [email protected]

Big hasn''t proved better

Hope springs eternal, at least in e-commerce. In early December, as materials platform Omnexus was closing its sales portal and selling off other components after less than four years in existence, officials of startup FairMoulds.net were exhibiting for the first time at the EuroMold exhibition in Frankfurt.

FairMoulds.net touts its platform as a low-cost means for moldmakers and processors to sell new or used molds using the the Internet to attract buyers.

E-commerce is growing—exponentially in some countries and markets—but can any of the firms on the plastics side make money at it? At FairMoulds.net, selling firms pay €100 to list a mold for six months; buyers pay nothing, and deals are closed offline so sellers can be assured they are not selling to their rivals. Survival on €100 for each listing? "We''ll make our money through the volume of sales," says Maksym Skvortsov, a native of Russia and the firm''s sales manager for Eastern Europe.

Just more than 650 items were listed in early December. He says the firm sees huge demand for its service on the buy side in Eastern Europe (especially Russia), India, and parts of Asia; and on the sell side in Germany and other highly developed markets. "Processors here (in Germany) usually make complicated parts and cannot continue using a mold with a flaw. But their old molds are of great interest in these other countries," he explains.

Omnexus'' demise makes a pure materials play on a global scale look unlikely, at least in the short term. Only the hottest of the consumer sites such as amazon.com have reported profits, and then only recently; so how could a site serving a complicated market such as plastics processing have a chance? In end-use markets, there are a number of e-commerce sites that match plastics packaging processors with their customers; www.webpackaging.com, for instance, used by many packaging processors and in service for seven years. In December that firm developed new online product catalogs with enhanced search facilities for packaging producer Rexam. But what works for packaging has not translated to other end-use markets.

Judging from the few independent e-outfits still focused on the plastics industry, the Internet as a means of sourcing materials, molds, and equipment seems to be most accepted by processors using smaller or more targeted outfits.

In the U.S. the longest-standing e-business for plastics is Polysort (Akron, OH). Formed in 1995 as an information exchange, it has transformed itself into a successful provider of hands-on sales and service, something only possible because all of the processors purchasing material through its Private Resin Group Purchase program are located in eight states in the north-central and northeast U.S. The program is open to processors in those states with at least $3 million in annual sales. For processors in Ohio, the site also has a group purchasing program for electricity and natural gas.

Many users of the site, including processors and compounders, also unload unwanted material via the site''s spot exchange, www.polymersite.com.

E-sales growing, says ChemConnect

At independent e-marketplace ChemConnect (Houston, TX), Tim Fetters, VP of Negotiation Solutions, says the site continues to see growing use of its plastics trading platform. "The resin and polymer additives [sales and auctions] continue to grow at a steady pace. We''ve seen double-digit growth in packaging-related auctions since May," he says, without specifying from what base that growth is achieved. Users of the site can either run their own auction, or have ChemConnect run one for them.

Fetters says sell-side auctions of wide-spec commodity plastics and rubbers are most popular. He says auctions are split fairly evenly between sellers and buyers. "In the aggregate, ChemConnect customers are still averaging 8% to 10% savings on direct materials," he says.

Selling material or molds is not the only service processors are eager to have. Distributing current regional pricing information is a major part of earnings at sites such as Turkey''s www.chem-orbis.com and India''s www.polymerupdate.com. The latter also serves as a marketplace for materials and machines, a place for classified job advertising, and a news source.

Mirza Kadic, sales director at ChemOrbis, says pricing data plays an especially significant role among Turkey''s processing community since almost all of the polymer consumed there (with the exception of that produced by Petkim, the lone Turkish supplier) is bought on the spot market. He says Turkey is the second-largest spot market for plastics, following China.

"We have learned from the e-commerce systems in Europe, which were high-spending with high overheads and proceeded to go belly up," he says. The three-year-old firm updates pricing information twice daily.

Polymerupdate.com is in the midst of a five-year contract to provide Asian pricing data to Bloomberg, and has a contract for similar services with Polymertrack. Others, including Dow Jones and Bridges, have approached the firm about acquiring data.

Matthew Defosse [email protected] and Robert Colvin [email protected]

The future of plastics purchasing could be—futures...

The London Metals Exchange intends to open a market for regulated trading of plastics futures contracts. The first plastics slotted for trading starting in the first half of this year will be LLDPE and PP, with trading of HDPE and LDPE and bottle grade PET to follow in a second phase. If the market takes off, the minimum contract size will likely be 20,000 tonnes.

During roadshows in Geneva and the U.S. late last year to drum up support from potential buyers and sellers (polymer suppliers, traders, compounders, processors), LME officials outlined their program and the reasons for it.

The initiative came from Edward Wilson, a consultant at U.K. consultancy Chemair Technologies Ltd., who approached the LME with the idea. It was first publicly aired by John Pizzey, chairman of the LME, during the exchange''s annual dinner last October. He says trading of polyolefin futures makes sense, as "there is significant volatility [in current pricing], and a growing desire for risk management tools from both producers and consumers."

The LME already has developed a website, www.lmeplastics.com, where it lists its arguments for trading plastics futures, and details some of its plans. About

$2 trillion in non-ferrous metals are traded annually through the LME.

There are other options available for processors to manage pricing risk, such as those offered by ResinDirect (Davidson, NC), acquired in January by PolyOne. The service brings together buyers and sellers to settle on a long-term forward price. Dreyfus began offering the service in 1996. Dreyfus'' service brings together buyers and sellers and helps them settle on a forward price as a means to minimize potential future price swings.

Last summer, ResinDirect took over the commodity plastics distribution business of GE Polymerland.

But settling on a forward price does not involve actual transfer of material. In contrast, a regulated futures market does, matching buyer and seller for each transaction and specifying a quantity, unit price, product description, and delivery date.

The LME says the market will help both buyer and seller limit pricing risk on some of the plastics with the most volatile pricing ranges. It says plastics futures makes sense as—like non-ferrous metal, traded through the LME since 1876—the commodity plastics being considered for trading are also industrial raw materials.

The market, reckoned by the LME to have been $118 billion in 2002 (for all polyolefins, PET, PVC and polystyrene), approximates that for metals. Many giant consumers of metals who are already used to futures trading—in industries such as packaging, automotive, consumer durables, and industrial—are also large plastics consumers. Some large consumers, including packaging giant Tetra Pak, have said their experience with the purchase of aluminum through futures markets has not helped slice costs. (March 2003 MPI).

But Wilson says the market makes sense for futures trading because of the large number of sizable participants—about 150 significant suppliers, he says, and more than 3000 plastics consumers whose demand exceeds 10,000 tonnes/yr. The LME notes the plastics under consideration exhibit classical commodity pricing volatility as they are influenced by current supply and demand as well as raw materials costs.

Futures will give buyers and sellers some of the risk management already available for purchasers of many of the raw materials from which plastics are derived. Crude oil has intra-day pricing, whereas plastics and plastics-containing products are often priced with much less flexibility. Cars, for instance, are priced for a model year, and consumer goods for a catalog year.

Plastics processors have little influence on the pricing of the final products, but gaining better control of raw material pricing should help them improve planning and give a more accurate financial picture sooner, according to the LME. Wilson notes that PP pricing volatility has averaged well above 15% between January 1991 and January 2003.

Matt Defosse [email protected]

Contact information
RheTech, Inc. www.rhetech.com
Ashland Distribution Co. www.ashchem.com
PolyOne Corp. www.polyonedistribution.com
Bayer Polymers www.polymers-us.bayer.com
Prime Alliance www.primealliance.com
ChemConnect Inc. www.chemconnect.com
Polysort www.polysort.com
FairMoulds.net
ChemOrbis.com
Polymerupdate.com

Site selection: following customers, opportunity

Moving up the learning curve in new processing plant site selection takes time and care.

Todd M. Sholtis, joint managing director of Slovakian injection molder EsoPlast, puts the success of his startup operation down to patience and method. EsoPlast is a subsidiary of Plastic Molding Technology, based in Seymour, CT. Its roots go back to a decision PMT made after the Iron Curtain fell in 1989 to try to source molds in Slovakia for itself and North American molders.

Why Slovakia? Sholtis cites sentimental reasons (his great grandfather emigrated from the country), the well-trained labor pool, and price. Industrialist Steve Forbes calls the Slovak Republic "the world''s next Hong Kong," featuring not only good workers and prices, but also living costs that are 41% of the EU average, and many western transplants such as IBM, Kimberly-Clark, Volkswagen, and Peugeot, that need plastic components and assemblies. Slovakia enters the EU on May 1.

PMT established an office, PMT Slovakia, in the country''s capital, Bratislava, in 1991, where a single employee researched all known Slovakian moldmakers and molders. It then gave out specifications to test 20 moldmakers. Sholtis says 17 were unable to meet minimum Western standards.

The company has since built up a pool of moldmakers in Slovakia, the Czech Republic, and Hungary. But it still takes few chances. Following a minor disaster when a mold that was shipped directly to a customer failed to work, the company now tests all molds on its own machinery before final delivery. It has its own injection equipment, which it also makes available to students at Brataslava''s technical university, where the office is located.

PMT-Slovakia established its own design center in 1994. Then in 1998, after finding what it considered a top moldmaker, Esox, a family-owned toolmaker in Liptovsky Hrádok, it formed there a joint venture molding operation, EsoPlast, supplying parts for the white goods, automotive, and electronics industries. The venture has been so successful that the partners have outgrown their facilities and are opening a 4000-sq-m plant in May, to be shared by the moldmaking and molding operations.

Now the company is looking even further east. Despite Slovakia''s cost advantages, Sholtis says PMT-Slovakia still can''t compete in price against Chinese-made molds. "An average U.S. toolmaker earns $22/hr; here in Slovakia it is $3/hr. But our intention is to try to have quality molds built in Ukraine where wages are the equivalent of $.50/hr," he says. "At that price we could successfully compete against the Chinese." PMT plans to employ the same methods there that it used in scouting Slovak moldmakers.

Moving west is best

While PMT looks east, German molder Wirthwein AG (Creglingen) has decided to follow its customers in the opposite direction. The company has just opened an $11 million, 50,000-sq-ft (4650 sq m) facility, Carolina Technical Plastics (CTP), in New Bern, NC, close to its major white goods customer Bosch und Siemens Hausgerate GmbH (BSH). It produces one- and two-component parts on equipment with up to 16,000-kN clamping force.

CTP VP Bernd Nagel says that the final decision to locate in North Carolina resulted from the offers made by politicians and state industrial recruiters. State benefits include tax breaks for job creation, worker training, and investments; employee screening and training in a local community college; and equipment sales tax reductions. The county provides a fee waiver for tapping into public services, staff machinery training at a local community college, and job training assistance. Wirthwein committed itself to create 70 jobs within three years of receiving a "certificate of occupancy."

"We have definitely made the right decision and there have been no disappointments," Nagel says. "The service and hospitality received from state and county officials was and still is excellent. They consider this a partnership."

Back in Germany, BASF (Ludwigshafen) is one of several large polymer producers offering freed space on their sites to processors. Since BASF bought the previously state-owned Schwarzheide chemical site in the former East Germany, it has been actively seeking processors by offering a package of services at a site it markets on the strength of its proximity to new markets in Eastern Europe and strong local infrastructure, says Gerhard Ramlow, who heads the investor service team at the BASF site.

He says new investors get a reliable energy source from on-site generators, steam, compressed air, nitrogen, fire brigade services, security, and the option to buy BASF polymer "across the fence," thereby eliminating long-haul logistics charges, and on a just-in-time basis. The company, together with the local state of Brandenburg, also has staff to help cut red tape to get construction permits in less than six weeks, as well as to secure bank loans. It already has 10 investors, eight of which are in plastics processing.

Brandenburg built an expressway exit exclusively for the site and also helps finance staff training. Although the state offers no tax breaks to investors, it will pay 50% of direct investment by small- to medium-sized entrepreneurs and 35% to large investors based on a corporate revenue formula. "Locating here offers the advantage of being close to emerging Eastern European markets without the risks," says Ramlow. Labor costs and benefits are 25% less than than in West Germany, he says.

Robert Colvin [email protected]

Border crossing can pay big dividends

Industry-wide sales of $14.7 billion, annual growth of 12.5%, and a plastics trade surplus of

more than $2 billion. More gaudy figures from the ranks of plastics'' emerging market players in Asia or Eastern Europe? Not quite. These robust results arrive from Canada, a familiar face in plastics processing who''s exploiting the combination of a weakened U.S. dollar and a shared tariff-free border with the richest consumer nation in the world to feed feverish growth, all the while re-establishing itself as a place to be for plastics processors and suppliers, thanks to low-cost utilities, skilled labor, and a business-friendly tax system.

"Employment [in 2003] in plastics processing increased, whereas employment peaked for overall manufacturing in Canada one year ago November," says Faris Shammas, VP of business and economics for the Canadian Plastics Industry Assn. (CPIA), based in Mississaugua, ON.

It''s not hard for Shammas to find growth figures, especially within the province of Ontario where a narrow corridor extending from Windsor to Toronto contains approximately 2250 companies, employs 87,000, and has 60% of Canada''s plastics processors. This region also boasts 65% of the country''s plastics industry suppliers, including industry luminaries like GE Plastics, Husky, Engel, and Mold-Masters, as well as a large number of moldmakers, who, despite struggles felt by toolmakers around the globe, managed to sell tools worth $710 million in 2001.

This processor/supplier base serves several multinational players who''ve located in Canada, such as Honda, Toyota, Colgate Palmolive, Procter & Gamble, and Unilever. "The whole concept of a Silicon Valley," Shammas explains, "if you tried to apply that here, that would be an equivalent in the sense that you have all the requisites—you have the skills, the supply chain, and the value-added chain."

Cost advantages

In addition to collocating with OEMs, plastics processors weigh a myriad of factors when considering where to locate. Recently, the international consulting and accounting firm KPMG completed a study of cities within the G7 countries (Canada, France, Germany, Italy, Japan, U.K., U.S.,) as well as Austria and the Netherlands to determine which regions had the most to offer in terms of tax rates and land, labor, transportation, utilities, and financing costs.

The land of maple leaves came out smelling like a rose, scoring the lowest average corporate income tax rates, as well as the lowest total labor, electricity, and building construction costs. It''s all part of the plan, according to George Mandrapilias, who works for the Ontario Ministry of Economic Development as its Trade Sector Specialist for plastics.

"[Ontario and Canada] have always tried to work with business," Mandrapilias says. "We''ve tried to create the correct environment, keep our corporate taxes low. We try to get the business climate right."

Canada''s combined corporate income taxes, when applied to manufacturing operations, came in at 30.8%, vs. 37.3% for the U.S., and 47.1—the highest—for Germany.

The study also looked at the manufacture of plastics products, where Canada ranked fourth overall, behind the U.K, Italy, and the Netherlands, with the primary difference being transportation costs for truck freight-reliant Canada vs. rail- and ship-friendly Europe. In terms of utilities, Canada had the lowest electricity costs (5.13 cents/kW hour), and the third-lowest natural gas costs (.61 cent/100 cu ft).

Calling Canada home

Thin-gauge film manufacturer Multi-Plastics Inc., has been providing products for envelope, carton, label, and printing industries since 1979, and it recently broke ground on a new facility in Whitby, ON for its Canadian operation, which complements six U.S. facilities and one in the U.K.

"Multi-Plastics first got involved in Canada approximately nine years ago," Doug Caillier, Multi-Plastics Canada Co.''s general manager explains. "[Multi-Plastics] first tried to supply Canada out of the Ohio facility, and we really felt—we came to realize pretty quickly—for us to gain any presence in Canada, we had to set up an operation there." The company''s older facility housed three splitters in a 15,000-sq-ft space. They''ll now have room for six splitters in their new 33,000-sq-ft operation.

Any disadvantages to running a film plant in Canada? "None. I think we''d be hard pressed to find any," he says.

Tony Deligio, [email protected]
Multi-Plastics Canada Co.,
www.multi-plastics.com

Locating in China? Think water

China has attracted masses of foreign direct investment since it joined the World Trade

Organization (WTO), in late 2001, but local governments across the country want more in order to keep their citizens employed. According to a major U.S. engineering plastics supplier with operations in China, some cities and towns are so desperate to attract investment, that they are giving land away for free. But over and above free or discounted property, tax breaks, or competitive utility charges, the key parameters for site selection in China are location, location, location.

"In China, site selection is simple," says Battenfeld Chen (Foshan, China) Chairman Harold F. Wrede. "You have to be within easy distance of a port." China''s road infrastructure and logistics system lack the capability to swiftly ship products, hence the need to base industrial facilities close to sea or riverport facilities. Battenfeld Chen''s Foshan production facility in Guangdong Province manufactures profile, pipe, blown film, and sheet extrusion equipment.

Moreover, if processors are shipping components to customers within China, they should locate facilities as close as possible to their final destination.

Having narrowed down potential sites to those close to water and/or customers, plastics processors might then consider the size of the towns or cities they''re contemplating. "Too large a city and party and local government officials might be relatively inaccessible as they are more likely to lend close support to multinationals," notes one observer. "Choosing the right-sized city may give the investor leverage if one day he faces problems like requests for payment of arbitrary taxes and fees, or intellectual property rights violations."

One of the many industrial parks competing for investment dollars is the Jiangyin Economic Development Zone—35 km long and 5 km wide, on the banks of the Yangtze River in Jiangsu Province. Reportedly, 30,000 people were relocated to make way for the park.

DSM Engineering Plastics (Jiangsu) Co., the Chinese nylon, PBT, and PP compounding facility of Dutch company DSM Engineering Plastics BV, selected a site within the park for its logistics advantages. The park has 19 10,000-tonne docks, and is 140 km away from the major cities of Shanghai and Nanjing. Shanghai is a key center for the automotive industry in China, while cities close to Jiangyin are major bases for electronics manufacture, both key markets for DSM products.

The zone is also home to the Asia Packaging Center, a technology development entity set up under the auspices of the World Packaging Organization and China''s State Trade and Economic Commission. Through this facility and the park''s other benefits, it aims to host processors turning out 800,000 tonnes/yr of flexible plastics packaging by 2005.

Besides tax exemption for the first two years and the 50% tax reduction for the following three years, enterprises in the park are eligible for further preferential support from the development zone. Water and electricity are also offered at discounts, while major investment projects can enjoy discounted land prices.

Another advantage of investing in major industrial parks is the availability of a dedicated power supply. Jiangyin has three power plants with a total capacity of 1.9 million kW.

Reducing blackout worries

The city of Shanghai faced a shortage of 2 million kW of generating capacity during the winter of 2003, according to the Shanghai Electric Power Co. In the preceding summer, a heat wave forced 4000 businesses in the city to reschedule production to non-peak hours. City authorities stress that foreign-invested companies will be given priority with electricity allocation, but nevertheless, a captive power source is a good insurance policy.

Moreover, park developers say surrounding areas, including other parks, have attracted the investment of 45% of the world''s top 500 investors in China, and 50% of the overall Taiwanese investment in mainland China.

Other parks are taking a more focused approach in attracting industry-specific investment. The Shanghai government, for example, has invested more than $1 billion in development of the Shanghai International Automobile City in the Jiading District of the city. Investors include Taiwanese compounder Shanghai Nytex Composite Products Co., processor Shanghai Myron Industry Co., and wire harness maker Delphi-Parker Automotive Systems Co.

Even more specialized is Huadong Lighting City in the city of Danyang, Jiangsu Province, which is close to Shanghai. The city specializes in production of lamps and lighting accessories for automobiles and motorcycles. There are some 1900 companies at Huadong. In recent years, 16 industrial parks have been set up in Danyang specializing in the production of various motor lighting products, accessories, instrument panels, bumpers, and street-lamps.

Stephen Moore [email protected]

New Deal program entices processors with good deals

Born out of the incredible economic pressure of the Great Depression and signed into law on

May 18, 1933 by U.S. President Franklin D. Roosevelt, the Tennessee Valley Authority (TVA), by its own mandate, has always been a unique entity residing at the crossroads of independent business and government agency.

During the TVA''s creation, Roosevelt asked Congress to form "a corporation clothed with the power of government but possessed of the flexibility and initiative of a private enterprise." Seventy years on, the TVA is fully weaned from federal dollars and actively recruiting business investment in an area of the American Southeast that encompasses all of Tennessee and portions of Kentucky, North Carolina, Virginia, Georgia, Alabama, and Mississippi.

True to its diverse lineage, the TVA serves its constituents'' best interests with the flexibility of a corporation driven by profits, not a bureaucracy weighed down by rules and regulations. One of its latest initiatives is recruiting specific businesses, like the plastics sector, using industry-focused agencies.

Chasing OEMs like 3M, Kohler, and Tyco, as well as automakers like DaimlerChrysler, Honda, Nissan, and Toyota, processors have entertained these overtures not only to realize proximity to customers, but also to partake in an array of government initiatives. There are now more than 500 plastics processing companies employing 33,000 currently operating in the area.

Bag of goodies

Working as the executive director of the Industrial Development Assn. Of Northern Mississippi (an area that has lost 40,000 to 60,000 jobs since 1995), as well as the president of the Tennessee Valley Industrial Development Assn., Roger Clark has learned quickly what it takes to get companies to locate in a region.

"Incentives are quickly becoming the issue," he says. Actually, he thinks they probably are already, "but I think there''s room for them to be even bigger in the future."

Cash in the form of loans or grants, tax abatements, training dollars, and infrastructure improvements are just some of the incentives companies may barter for in exchange for expanding to a locale. The TVA has provided $57.4 million in loan commitments since 2001 that have leveraged $832 million in additional investments and helped attract or retain 143,000 jobs.

For its part, the TVA offers several of its own programs, in addition to incentives from the individual states, to attract business. Its Economic Development Loan Fund is a low-interest loan whose main objective is to create jobs. If three requirements—capital investment, job creation, and needed electrical load—are met, the TVA will invest $5000 for every new job created up to $2 million, or a maximum of 25% of the total project, whichever is greater.

For larger projects that create 100 jobs or more, have a capital investment of at least $20 million, and use half a megawatt of load, companies can use the Valley Advantage program for non-repayable monies that can go towards infrastructure, training, or similar needs.

"It''s really a bag of goodies," Clark says, "and you have to take them out one at a time and see how they fit. Not only with the project that''s at hand, but how those monies or incentives can fit with other incentives so they can be chained together and get the biggest bang for a particular project."

In addition to this, the TVA remains steadfast in its original mission: provide dependable, affordable energy. Coal-fired, nuclear, and hydroelectric plants generate electricity that the TVA''s target market specialist for plastics, Jeff Taylor, says is approximately 30% cheaper than the national U.S. average.

"Along with having some of the cheapest electric rates in the nation," Taylor says, "we are number one in electric service reliability, which you know is key to plastics companies'' bottom lines."

Tony Deligio [email protected] Tennessee Valley Assn., www.tva.gov

Wanted: A few good firms

Pennsylvania steps up efforts to support and recruit industry members.

When it comes to supporting plastics, Pennsylvania is attempting to break the mold. The Commonwealth, home to nearly 1500 plastics companies, is marketing itself as a breeding ground for research and development in the industry. The state believes that its highly skilled workforce, financial assistance programs, and extensive transportation system provide ample incentive for businesses to relocate.

The Pennsylvania Department of Community and Economic Development (DCED; Harrisburg, PA) claims the state is among the world''s hot spots for plastics production, engineering technology, tool and die, and moldmaking. There were some 657 plastics processors in the state in 2002, according to the latest Society of the Plastics Industry (SPI; Washington DC) data. This number, however, has declined steadily since 1999, when 721 plastic products makers inhabited the state.

Pennsylvania is positioned as a low-cost option for businesses located in neighboring states such as New York and New Jersey, where the cost of living, property values, and taxes are higher. Nicos Polymers & Grinding, Inc. relocated to Nazareth, PA in 1988 from Bellmore, NY, citing skyrocketing insurance and power costs and traffic congestion as the major drivers. Since that time, Nicos reports the company has significantly reduced these expenses while staying in close proximity to its customers.

"I had customers in New Jersey who said they didn''t care what I charged them, they were not going to send their truck to Long Island because they would lose them for the day because of the traffic," says Jim Nicos, president. The company offers custom grinding, blending, and compounding services.

The state provides funding for a wide range of needs—from bricks and mortar to technology and job training. For example, area manufacturers pay no sales tax on machinery and equipment, and no capital stock tax on assets used in manufacturing. Businesses located in the state''s Keystone Opportunity Zones pay virtually no taxes for up to 10 years.

Pennsylvania is moving aggressively to recruit industries such as plastics as part of an effort to bolster its lagging economy. Recruitment efforts focus largely on small- to mid-size companies, which Governor''s Action Team Director David J. Yeager considers prime targets for relocation. "That''s where most of our growth is coming from."

Pennsylvania''s trade development programs and services are intended to help businesses expand globally as well. The state claims its financing programs have virtually eliminated the most common trade barriers for small- and mid-size enterprises. Pennsylvania has five foreign trade zones, some in areas outside of U.S. Customs territory, where products are protected from taxation and charges, and 17 overseas offices providing a variety of services.

Greg Valero [email protected]

Moving east, cheap labor is not the only carrot

Central and Eastern Europe has for some time now been a growth zone for plastics

processors. The Czech Republic has been particularly successful at attracting new business. One of the main reasons is to supply the mushrooming automotive sector. According to CzechInvest, the government agency for foreign investment, the automotive sector is the largest end-user for plastics in the country, at 26%.

Contract electronic manufacturing has also been growing fast, and growth looks set to continue. OEMs that have located there include Taiwanese companies First International Computer and Foxconn. Other famous names include Gillette and Black & Decker, the latter of which has just finished transferring much of its U.K. production there.

Overall, plastics consumption in the Czech Republic grew by 20%/yr or more during much of the 1990s, slowing down to 16% in 2002. Rene Samek, director of U.K. and Ireland operations for CzechInvest, says the size of the industry grew fivefold between 1991 and 2000, faster than any other. It is now worth some $2 billion, with $1.451 billion generated internally, and $1.456 billion from imports. There is $836 million generated from exports.

Molders are made to feel at home

Although processors are more often than not driven to the country by their major customers, information supplied by CzechInvest indicates they are not unhappy to be there, quoting several as being more than satisfied with the availability and qualifications of the local labor force.

They also find help in companies like Netherlands-based CTP, which builds "tailor-made" facilities on industrial parks for lease. Companies it has built facilities for include Irish molder Mergon, which is scheduled to begin production this month, as well as screw and barrel maker Xaloy.

So far, CTP has built three parks between Prague and Brno, and in December it bought a fourth, which it says it will develop further. Paul Deverell, business developer with CTP Project Invest in Humpolec, Czech Republic, proposes that Brno is the best location within the republic, given its six universities, 10% unemployment, labor costs that are lower than in Prague, and higher skill levels.

U.K.-based Carclo Technical Plastics, which supplies OEMs in the automotive, medical, optical, and teletronics sectors, set up its first operation in the Czech Republic on an industrial park near Brno two years ago. This July it will open a second, slightly smaller, unit on the same site. The company had been mulling an operation in the north of the country (Brno is to the southeast), but European business development director David Kernahan says the level of business being generated from the Brno site convinced the company to expand there first.

It will have 37 injection molding machines in total there. The main reason for being in the region was to serve Flextronics, located in the same park, although Kernahan says it was always the company''s intention to build an extensive customer base in and around the country—just as well, given that Flextronics has since moved out.

Carclo currently supplies to some 15 customers—including some in neighboring countries—from Brno. "We don''t want many more. Our intention is to grow our global accounts," says Kernahan.

"We move to support out customers"

Kernahan says Carlco could stand to benefit from government incentives if their investment continues in the country, but this was not the major factor that drove it to this location. "We don''t move to low-cost regions for lower manufacturing costs primarily; we move there to support our customers. The location is based on reaction speeds to customer demands," he says.

"We run molding machines. A molding machine is a molding machine, wherever it runs. Labor costs may change, but essentially it''s an automatic process. The capital cost is approximately the same, wherever we build the plant."

Kernahan says Carclo is likely to open further operations in Eastern Europe in coming years. Countries being considered include Hungary, Poland, Romania, and Slovakia, but the decision will depend on key customers.

Peter Mapleston [email protected]

Germany seen as unfavorable investment area for processors

Corporate taxes are hindering investments in Germany, according to the American Chamber of Commerce in Germany (Frankfurt), which says the country''s tax situation is its largest competitive disadvantage. The chamber says foreign investors can expect a tax rate, which includes capital gains tax, of 41% to 45%. This compares to 41% in Italy, 40% in Belgium, 36% in France, 35% in the Netherlands, and 30% in the U.K. An auditing study by consultant KPMG (Frankfurt) says Switzerland, with 24.1%, and Ireland, with 12.5% corporate taxation, come out far better than larger Western European countries.

Build and they will come—maybe

The Economist magazine recently opined that some U.S. states could be paying too much to attract foreign carmakers. It noted that since 1993, Alabama has persuaded three large carmakers to put plants in its territory—Honda, Mercedes-Benz, and Hyundai. These companies, together with the component suppliers they are bringing in their wake, will bring tens of thousands of much-needed jobs to Alabama. The cost is high: $253 million went to Mercedes-Benz alone, The Economist says, in tax incentives, preparing the site, and training workers, but the state believes the cost worthwhile.

It''s a high-risk strategy. When Georgia bid recently for a DaimlerChrysler plant, it had already bought a site and set up a training program before DaimlerChrysler pulled out. And it''s not only U.S. states that get stung. Electronics company Flextronics paid Brno one Czech crown ($.03) in 2000 for land just outside the city to build a new factory to extend activities it already had in the area. According to one local report, the total tender, including the technical network on the land, was going to cost the city treasury half a billion crowns ($1.5 million). Flextronics was set to spend some $100 million over five years, and did in fact put up one production hall. Then at the end of 2002, it pulled out as part of a global cost-saving program and moved production to China. The hall is now used by Honeywell. Czech foreign investment agency CzechInvest says that Honeywell''s plans look more economically interesting for the area than did Flextronics''. The land —back in the hands of Brno—has just been sold to CTP Project Invest. Alabama has persuaded three large carmakers to put plants in its territory—Honda, Mercedes-Benz, and Hyundai. These companies, together with the component suppliers they are bringing in their wake, will bring tens of thousands of much-needed jobs to Alabama. The cost is high: $253 million went to Mercedes-Benz alone, The Economist says, in tax incentives, preparing the site, and training workers, but the state believes the cost worthwhile.

It''s a high-risk strategy. When Georgia bid recently for a DaimlerChrysler plant, it had already bought a site and set up a training program before DaimlerChrysler pulled out. And it''s not only U.S. states that get stung. Electronics company Flextronics paid Brno one Czech crown ($.03) in 2000 for land just outside the city to build a new factory to extend activities it already had in the area. According to one local report, the total tender, including the technical network on the land, was going to cost the city treasury half a billion crowns ($1.5 million). Flextronics was set to spend some $100 million over five years, and did in fact put up one production hall. Then at the end of 2002, it pulled out as part of a global cost-saving program and moved production to China. The hall is now used by Honeywell. Czech foreign investment agency CzechInvest says that Honeywell''s plans look more economically interesting for the area than did Flextronics''. The land —back in the hands of Brno—has just been sold to CTP Project Invest.

Compounding developments improve processor efficiency

New ways of optimizing extruder output should prove beneficial to masterbatchers and compounders wanting to improve performance without adding major costs.

A recently completed study by Bayer Technical Services (Leverkusen, Germany) and pelletizer equipment maker Gala Kunststoff- und Kautschukmaschinen GmbH (Xanten, Germany) shows that the geometry of the pellet plays an important role in the output of the compounding extruder. The test pitted various polymers and two color masterbatches in cylindrical strand-cut pellets against spherical pellets produced by underwater granulation. In some cases results showed that spheres gave the same output as cylinders but at half the extruder speed, leading to significant power savings for the processor.

Michael Eloo, technical manager at Gala, says the results showed a particular performance improvement for twin-screw extruders with dual flights. "The explanation for this result comes from good flow since the [spherical] granulate appears to roll better from the funnel into the feed throat," says Eloo. Strand-cut cylindrical granulate showed tendencies to hinder flow by causing bridging or in some cases jumping out of the funnel, something that spherical formed material did less frequently.

Jurgen Flecke, a development engineer at Bayer Technology Services who participated in the study, says both granulate form and size show an important influence on extruder throughput. Spherical form provided a better throughput than the cylindrical form, particularly with hard polymers, such as polycarbonate. The PC spheres fed more evenly, he says.

Eloo says the results indicate that processors can improve the output of their existing equipment without major equipment upgrades if they already have underwater pelletizers. Or, with shear-sensitive materials, the same output one would get when processing strand-cut pellets can be achieved with spherical pellets but at a slower speed.

Quick change for screw and barrel

Compounding extruder maker Leistritz (Nuremberg, Germany) is promoting a way to cut downtime for processors of short production run compounds and tailor-made masterbatches. Taking an idea from pharmaceutical producers using twin-screw extruders who instigated this technology, Leistritz has devised an extruder design in which the barrel and screw can simply be lifted off the frame by crane or forklift truck and replaced by a clean unit. The barrel clamps onto the body and operators connect power and water lines before it is ready for production. This is done in 15 to 30 minutes, depending on operator efficiency.

While the clean screw and barrel are starting up production, the second one is cooling down for cleaning and maintenance. This quick-change solution is more economical than investing in a second extruder. "A second processing unit [barrel and twin screws] is of course a slightly higher investment than just buying a single extruder. However, by reducing downtimes [cleaning while the other processing unit is in production], the investment payback is in a few months depending on batch sizes and applications," says Richard Steiner, marketing director at Leistritz. He says experience shows cleaning downtimes can be reduced by up to 70% using this idea.

He also says processors can invest in two different processing units with the same drive so that they can switch from a standard to a high-volume, high-torque extruder in 30 minutes.

Robert Colvin [email protected]

Contact information
Bayer AG www.bayer.com
Gala Kunststoff- und Kautschukmaschinen GmbH www.gala-europe.de
Leistritz Extrusionstechnik GmbH www.leistritz-extrusion.de

Build it and they will come

The Loadhog pallet lid is a story of success foretold. It confirms the old addage, "Build a better mousetrap and the world will beat a path to your door." Penniless inventors need not apply, however.

Loadhog Lids, the Sheffield, U.K. molder that has developed the innovative Loadhog pallet lidding system it says will save millions of dollars in the use of stretch film, was set to go into series production around the end of January. The lid secures a palletized load by means of straps—and a tensioning mechanism, both integrated into the lid—that attach to a wooden pallet, holding the lid, and the load it sandwiches, tightly in place.

Toward the end of December 2003, the company took delivery of its first two Engel injection machines (January 2004 MP, MPI) for production of Loadhog''s two main components, the chassis and the cover. Production molds for these components were due to be delivered by Petford Tools (Brierly Hill, U.K.) at the beginning of January. The machines provide annual capacity for around 180,000 complete units.

"We expect to outsell this capacity in the first 18 months when another two machines will be ordered," says Simon de Jaeghere, sales and marketing manager. Premarketing has yielded significant interest among major potential users in the retail and automotive sectors, several of whom have asked to test samples. First production will be for the U.K. market, but molds for other lid sizes are in various stages of development, with commissioning likely around mid-year.

Several other molds for internal mechanisms of the Loadhog were made by two other U.K. mold makers, Hi-Tech in Bolton and Hi-Spec in Birmingham. Both companies will also injection mold the parts until Loadhog installs further processing equipment of its own.

Loadhog''s inventor, Hugh Facey, does not scrimp in his search for success. Fortunately, he can afford not to, having previously invented the highly successful wire tensioning device, the Gripple (also the name of the company he founded to make it).

It has taken three years to take the Loadhog from concept to design. A team of three R&D people has worked more or less full-time on the project, which alone cost around £1.0 million (approx. $1.6 million). The company has also used outside design and engineering studios, and no fewer than four universities have been involved.

Facey has to date spent some £4.2 million on capital equipment, £1.5 million on the land and factory, and £300,000 on "miscellaneous." Costs have been partly defrayed by a government award to assist commercialization, using the production and testing of a limited batch of prototype units. Development started in 2000 when one of Gripple''s U.S. customers was trying to use the product to secure copiers on a special pallet it had developed.

All this effort shows: Last year, the Loadhog picked up two U.K. awards for its environmental advantages, and has been shortlisted for a pan-European environmental award for 2004. Even the plant Facey built to make the Loadhog features an ultra-modern design rarely seen in the injection molding world, and which itself could well win design prizes.

Initial attempts were to design a pallet and lid system with the working parts in the pallet, but research indicated that replacing ubiquitous, low-cost wooden pallets with an advanced system would restrict overall market potential. So Facey and his team put the tensioning mechanism in a light-weight lid that would work with any standard pallet, and filed for a patent on the concept. "Market research confirmed a massive market opportunity," says de Jaeghere.

Loadhog will use polypropylene impact copolymer for the main components, produced by regular injection molding (not injection-compression as indicated in a previous article). Mark Jackson, Loadhog''s production director, says the intention is to fully automate molding, assembly, and packaging. A robotic system now in development will stack the Loadhogs and then secure them using their own straps. That system, once proven, will then be offered to Loadhog customers for use in their own packing operations.

Peter Mapleston [email protected]

Contact information
Loadhog Lids www.loadhoglids.com

Staying ahead of the game

Nypro''s integrated manufacturing services are on pace to soon exceed the company''s molding revenue. The shift in emphasis says everything about current market dynamics, and re-imagining processing to remain relevant.

As Nypro Inc. (Clinton, MA) enters its 49th year in the injection molding business, diversification is key to its longevity. The processor has found ways to innovate, adapt, and seize opportunity in a fast-changing industry.

A major element of Nypro''s strategy is its continued investment in integrated manufacturing services. The processor has dramatically expanded its capabilities in product design, moldmaking, robotics, assembly, and supply-chain management to become a complete solution provider. "We call ourselves an integrated plastics manufacturer," says Al Cotton, director of corporate image.

Nypro is one of the largest providers of precision injection molding and related manufacturing solutions, serving the healthcare, electronics/telecommunications, consumer/industrial, and automotive markets.

"The value proposition has changed," Cotton says during a recent plant tour. "We are seeing more value-added [business] in this fiscal year from non-molding than molding itself."

Revenues from non-plastics activities at Nypro traditionally have been less than 20% of total sales. But in the fiscal year ended July 1, 2003, that figure swelled to 48%. "This whole question of getting into other services is one that has made a huge difference in our company," Cotton says. "In the current fiscal year, we anticipate less than 50% of our revenue will come from molding."

Nypro expects non-molding revenue to continue upward, possibly exceeding 75% of total revenues in three to four years. Officials admit the evolution of the business is daunting, but the returns are compelling.

"Customers are outsourcing much of their manufacturing, and they look to us to do it," Cotton explains. "Also, time-to-market demands are squeezing many companies into requiring more from suppliers than used to be the case."

A case in point is a new approach pioneered by Nypro in Denmark. The processor combined product, mold, process, and assembly/robotic design in one engineering center. "This approach is allowing us to grow integrated supply by providing integration from the very beginning of all of the different functions," Cotton says.

Nypro started building its own molds more than 15 years ago with NyproMold, a joint venture that has 630 moldmakers working for Nypro in about a dozen different locations, including several in Asia, Cotton says.

Nypro recently extended its product design capabilities by opening a Radius Product Development office in Chicago, offering original design manufacturing capability. Radius started up Union Street Brand Packaging at Nypro''s Clinton headquarters to develop packaging design solutions for customers seeking products with maximum shelf appeal. The firm also built a $10-million Tooling and Technology Center in Clinton that serves as its lead technological innovation center.

Nypro operates more than 900 injection molding machines—ranging from 20- to 350-ton clamping force—at 28 manufacturing locations. Virtually all of Nypro''s upstream and downstream business is directly associated with the molding function. "We have cross-trained sales and marketing people to represent the newer functions, and there are some specialized salespeople, particularly for product design," Cotton says.

Moving forward, Nypro is looking to deepen relationships with key customers. Consequently, Nypro has committed to improving its own processes, initiating a High Velocity System (HVS), which is an initiative designed to reduce costs by eliminating waste and error.

Modeled after the Toyota production system, HVS enabled Nypro to reduce its average cycle time by 30.6% and improve average output by 48.3%. "We also saw a quantum improvement in our facility''s readiness for whatever challenge there might be," says Gregory Adams, corporate VP. "HVS is a consistent way to identify and eliminate waste in all our processes, which results in faster time to market, reduced processing times, and the lowest total system cost."

Greg Valero [email protected]

Contact information
Nypro Inc. www.nypro.com

Powder impression molding process is rolling

A U.K. company licensing a somewhat mysterious new molding process invented in the U.S. likes its chances of success, as it''s capable of turning out products as diverse as 100% recycled-plastic roof slates, low-weight truck beds, and boat hulls that rival glass-reinforced thermoset composite types.

Five years ago, 3DM Worldwide plc, previously called Camco Corp., (Witney, U.K.), signed a deal with DaimlerChrysler to develop a pickup truck rear box made by powder impression molding (PIM; not to be confused with powder injection molding, the process was developed by 3DM Technologies Inc. in Detroit, MI; Camco bought that company, and changed its own name when it saw the value of the process.) When the head of DaimlerChrysler saw the product—a one-piece unit with integral steel framework and integral coloring that came in 43 kg lighter than a steel version—at the Detroit Motor Show in early 2002, he said he wanted it on the next Dodge truck.

Things have not gone completely according to the original plan, but they are moving in the right direction. Global Technologies Inc. (GTI), a Detroit company associated with 3DM, is now handling a project for making PIM truck beds for the aftermarket, but the numbers currently are low. 3DM remains optimistic that one day the process will be used for series production of OEM truck beds.

In the meantime, 3DM has been at work on numerous other fronts. Last September, it sold its first PIM license to a U.K. company for an unspecified building product to be made on a robotized line currently under construction—the first of its type. It has also signed a deal with leading yacht designer Bill Dixon for production of PIM yacht hulls by Highseas Technologies, a startup company in which it has interests; first prototypes should be ready this year.

Through GTI, 3DM is also involved in a major project in Mexico that will lead to the production of low-cost housing panels using PIM, and is expected to garner at least $15 million over the next five years for 3DM. PIM can be used to make floor and wall panels in place of cast concrete. It weighs far less, provides thermal and acoustic insulation, and enables ducting to be molded in-situ.

PIM basics

So what is PIM? 3DM won''t reveal much about it, and no photos of the equipment are available for publication. It appears similar to slush molding, although it works with granular materials rather than powder. Parts can incorporate reinforcing inserts, as well as particulate reinforcement such as fibers or beads.

In producing the truck beds, the two skins of a bed are produced by filling preheated open molds with granular polymer, allowing the skins to gel, and then pouring off the excess material. Reinforcements are then laid on top of the lower skin and more granules and blowing agent are poured on top, and the mold half containing the upper skin is laid over that. The two mold halves are then clamped together and the assembly is heated to foam the core and join the two skins together. Skin thickness can vary from around .5 mm to more than 4 mm across the surface of the part.

The entire process takes about 25 minutes, but use of multiple molds can reduce the effective cycle time to a level suitable for industrial application. Since the process operates low pressures, the molds can be made using low-cost processes. Four sets of tools should cost less than $2 million.

Miguel Linares is chief technology officer of 3DMTI and one of the inventors of PIM. "This is the only process in the world that allows you to vary the wall thickness of the part from 1/8 inch to 3 inches without altering the geometry of the mold," Linares says.

"For example, the customer may decide to go to a thicker cross-section on a part because it may need more strength. Unlike traditional molding processes, [PIM] does not require any modifications to the tool. The same tool that was producing the 1/8-inch thick part can now produce a 1-inch thick part, instantly."

Peter Mapleston [email protected]

Contact information
3DM Worldwide www.3dmworldwide.com