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Industrial Blow Molding: Changing Industry Structure and Growth Dynamics
Publish Date: Nov 2006,   Pages: 81,   Report Code: PL-106
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PCRS has studied the North American industrial blow molding business periodically over the past decade. In our previous analysis (2001) we determined that following strong growth in the second half of the 1990s, marked by average annual growth of 11% in value terms and 6.5% in volume terms, there was a growth pause in 2000. The pace of growth in the regional economy had decelerated, and several critical markets for industrial blow molders had been adversely affected. Automotive industry production had plateaued, the housewares industry had suffered from resin pricing spikes and changes in product retailing, and the toy industry was experiencing stiff foreign competition.

The theme of our previous analysis was current challenges, future opportunities. Based on this new analysis, it is clear that the industrial blow molding marketplace has become even more challenging over the ensuing 5-year period. By 2002 the industrial blow molders had managed to recover from the growth pause of 2000 and the moderate recession of 2001. However, the volume of output only grew 3% on average over the period 2000-2005. Moreover, during this period when resin pricing soared, the average unit value of output from industrial blow molders actually declined by 1.5%. This perverse product pricing pattern is evident across most major markets segments automotive products, industrial packaging, and several other major and minor markets. Thus whereas the collective value of the business grew, for many it turned out to be immiserizing growth due to profit compression.

The level of industry concentration has always been high in industrial blow molding, and events of the past few years have raised this measure even higher. In part this reflects normal market forces with companies entering and exiting the business. The profit margin squeeze induced several small- to mid-sized players to either seek partners or simply exit the business. The high level of industry concentration also reflects evolving federal and state mandates aimed at limiting hydrocarbon emissions from fuel tanks and containers, a critical market for blow molders. Complying with these mandates requires either converting to costly high-barrier resins in a monolayer structure or investing in costly coextrusion machinery and molds to deliver multilayer units. Thus the blow molded automotive part supply chain is now dominated by 6 major players, the portable fuel container business by 4 major players, and the multilayer non-automotive fuel tank business by 2 players. Other critical industrial blow molding marketssuch as industrial packaging have undergone corporate consolidation.

Challenges remain, therefore, for regional industrial blow molders and their material/machinery/mold suppliers. Blow molders confront increased competition from alternative plastics processors, and they also confront competition from imports as many of their customers relocate manufacturing operations offshore. Industrial blow molders not only need to regain their former growth dynamic; they need to invest in modern machinery and automation equipment to enhance their productivity and inter-process competitive position. This imperative applies across all product lines captive, custom and proprietary.

ABOUT THE AUTHOR

Dr. Peter J. Mooney is the founder and president of Plastics Custom Research Services. Dr. Mooney holds a Ph.D. in economics from the University of North Carolina, and he has covered the plastics industry as a technical/economic market research analyst and consultant since 1980. He is a member of several plastics industry associations such as the Society of the Plastics Industry, the Society of Plastics Engineers, and the Association of Rotational Molders. He is also a member of the National Association of Business Economists. He has researched and written over 50 multi-client reports, as well as over 100 single-client reports, in the field of plastics and related industries. He has also organized, chaired, and made presentations to numerous conferences on critical issues facing the domestic and global plastics industry.
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