Plastic Compounding Investments Decrease Sharply in 2008

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Researched by Industrial Info Resources (Sugar Land, Texas)--Capital project investments for new compounding capacity haven’t reached any impressive highs in recent years, although the outlook for the next year or two promises very little of the same. Looking ahead to next year, total spending for this segment of the Chemical Processing Industry (CPI) is estimated to equal less than $50 million in total investments. Much of this spending is actually for projects delayed from previous years, some of it from as far back as 2005.

Demand continues to strengthen for this small group of producers, although at a much slower rate than most would like. There are an estimated 142 operational plants in this segment of the CPI operating in the United States and Canada with at lease six more under construction and planned to go online over the next six months or more. With grassroot capacity consuming a great deal of the new demand, this is largely to blame for many of the projects delayed from previous years or months. A good example of a significant delay is EMS Chemie North America Incorporated (Sumter, South Carolina)’s plans. EMS Chemie has been planning an addition at its Sumter site for several years. EMS is planning for a new building, No. 6 compounding line and expansion at this site, which now appears to be on target for a construction start during the second quarter of next year. Another long-delayed project is one planned by Azdel Incorporated (Lynchburg, Virginia), which to add a No. 4 line addition at its Forest, Virginia, plant. This project has been in the planning phase for at least two years, and current plans are to consider this project again next year.

The complexity of compounding requirements by the end users who consume these products for manufacturing plastic or rubber consumer products continues to become increasingly stringent. This complexity in compounding formulation is requiring the use of twin screw technology in place of single screw units. These larger and higher-capacity machines not only offer increased production rates but also a more complete blend of additives and colors introduced to a plant’s final product. An overwhelming majority of the construction planned in this industry segment next year will be for the addition of a twin screw extrusion machine at almost a dozen plant sites.

Demand for upstream raw materials, such as polyethylene, polypropylene and other plastics, continue to gain strength that will ultimately mean growth or an increase in demand for downstream compounders. Consumer markets make up a large percentage of the demand for products of this industry. Consumers drive many of the niche markets in this segment with the demand for electronics and accessories in a multitude of colors. The increased use of plastics in automobiles and equipment has required significant development in producing heat or fire resistant plastic compounds.

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