Outlook for New Investments in Plastic Compounding Remains Slim

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Researched by Industrial Info Resources (Sugar Land, Texas)--Last year, Sumika Polymer Compounds America (New York, New York) completed a nearly $30 million new polypropylene resins compounding plant in Griffin, Georgia. This was the last project of its size in the plastic compounding segment of the Chemical Processing Industry (CPI) in North America in the past year. Looking ahead, it might be the biggest compounding investment seen for a while. As the demand for consumer products, specifically those made of plastic, decreased globally over the past year, the opportunity to add new capacity within the segment also diminished.

Capital spending and investments this year will be mostly limited to incremental capacity increases and safety projects as plant owners await definitive indicators that demand is improving. Despite more favorable outlooks for the general economy and consumer confidence since the beginning of the year, these increases have not turned into increased demand at the plant level yet.

The largest plastic compounding project expected to get under way this year offering any substantial amount of new capacity is planned by American Compounding Specialties LLC (Fowlerville, Michigan). This project will include a new building almost 45,000-square-feet in size and initially including the first of three planned extrusion lines, increasing the plant's capacity by an estimated 50 million pounds per year. American Compounding has selected Baruzzini Construction Company (Brighton, Michigan) as the general contractor for the project and expects to hire an architect to complete the buildings upon receiving final approval for the project in the coming weeks.

The introduction of new bio-plastic materials in the mainstream markets of plastic bags and packaging could be a bright spot for this industry segment. There is a growing trend to adopt these more environmentally friendly materials over traditional plastics, and this trend could ultimately lead this segment of the CPI back into an investment mode. Several companies in the United States, including Cereplast Incorporated (Hawthorne, California), NatureWorks (Blair, Nebraska) and others are increasing their investments in this area with several new projects that look promising over the next year or more.

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