Capital Spending by Plastic Compounders Forecast to Slowdown in 2007 as Grassroot Capacity Comes Online

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Researched by Industrial Info Resources, Incorporated (Sugar Land, Texas). Four grassroot plastic compounding plants are forecast to come online during 2007, keeping capital investments in existing plants low in comparison to the recent past. These four new plants represent a total investment value (TIV) of nearly $48 million, almost equal to the $54 million this industry segment is forecast to spend the entire year in 2007.

Plastic compounding plant owners have enjoyed an increase in demand over the past couple of years as polypropylene and polyethylene producers increased production rates and consumer markets for specialty plastics continued to maintain momentum. The first new compounding plant to come online in 2007 will be a plant currently under construction in Pasadena, Texas, owned by Sanam Corporation (West Elizabeth, Pennsylvania). Construction will be complete for this estimated $12 million plant soon with commercial startup planned for the first quarter of 2007. The new plant was built by Toyo USA Incorporated (Houston, Texas) under a turn-key agreement.

Almost half of the capital project activity identified by Industrial Info for this segment of the chemical processing industry (CPI) in 2007 will be for major line additions and expansions. Much of the new capacity these projects will bring to the market will be through twin screw extruders, providing the most advanced compounded materials. In this industry segment, the addition of a new line often equals the most significant opportunity for equipment and service providers. Once operational, maintenance and ongoing capital is generally small in scope and can be accomplished with plant maintenance staff and resources.

Closely following traditional spending activity and the downstream markets, the Great Lakes region will be home to over half of the planned project activity in 2007 followed by the Mid-Atlantic region. These two market regions have led spending in this industry segment in past years largely due to the close proximity of the automotive industry and consumer plastic producers. The single largest project planned for next year will likely be a number six line addition in Sumter, South Carolina at the site of EMS Chemie North America Incorporated (Sumter, South Carolina) at the estimated cost $20 million.

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