PCRS has researched and published studies of the North American industrial thermoforming business in 1995, 1998, 2001 and 2004. Over the period November 2008-January 2009 we revisited this business to determine how the unfolding domestic and global economic crisis is impacting this business and what strategies the processors in this field are adopting to survive the difficult conditions likely to obtain in the major markets they serve.
Our earlier research indicated that whereas the regional industrial thermoformers enjoyed vigorous growth in the second half of the 1990s, the growth dynamic in this business stalled from 2000 to 2003, during which period the U.S. economy experienced a recession. Sales of industrial thermoformed output rebounded strongly in 2004. Yet the annual pace of sales growth decelerated steadily from that point until 2008 when total industry sales declined. The average annual growth rate in sales terms from 2003 to 2008 was 3.9%. When one figures in the increase in the processors cost structure particularly the soaring cost of resins that go into heavy-gauge sheet the conclusion one draws is that there has been no real growth in this sector of the plastics processing business over this 5-year period.
Several factors combined to create the difficult market conditions industrial thermoformers confronted in recent years. The demand for plastic parts and products of all types deteriorated in many of their major markets. U.S. sales of cars and light trucks have been trending downwards since 2000. The low interest rate regime introduced in reaction to the 2001 recession restored economic growth, yet it contributed to the housing bubble that began to burst in 2006. Meanwhile much of U.S. manufacturing has relocated offshore to take advantage of low labor costs in China and other developing countries.
The industrial thermoformers also experienced loss of market share to alternative plastics processors. The erosion of U.S. manufacturing due to foreign outsourcing was felt particularly keenly by domestic injection molders. Faced with costly excess capacity, they began bidding for part programs marked by lower volumes of production. This brought them into direct competition with the industrial thermoformers. With the twin competitive advantages of available capacity and lower Chinese-origin tooling the injection molders succeeded infringing on the industrial thermoformers traditional market space. Officials we interviewed noted they confront today similar competitive challenges from other plastics processors such as blow molders, composite processors, and rotomolders.
Several officials interviewed suggested explicitly or implicitly that their strategy for the near-term future is geared to simply surviving the current economic downturn. Yet the more progressive companies are seizing on this cyclical downturn to transform their operations. They are exploring new sheet materials and investing in modern machinery with leading-edge technologies that will permit them to compete for new product introductions. When the three regional economies recover in response to massive planned fiscal stimuli in addition to monetary stimuli already in place, these companies will be in a position to participate in those markets most likely to benefit.
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 1981. He is a member of several plastics industry associations such as the Society of the Plastics Industry, the Society of Plastics Engineers, the Society of Manufacturing Engineers, SAMPE, and the Association of Rotational Molders. He has researched and written over 75 multi-client reports, as well as over 75 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 global plastics industry.