PCRS undertook an economic analysis of the North American profile extrusion business in 2000 and again in 2004. Since 2004 the companies in this business – processors, die-makers, machinery and auxiliary equipment suppliers - have suffered through the most difficult economic conditions since the commercialization of the profile extrusion process. Other regional plastics processing businesses have also been adversely affected. However, the recession starting in December 2007 has taken a profound toll on regional profile extruders since 75% of their output is directed to customers in two industries – automotive and building and construction - which have felt the full brunt of the historic drop-off in consumer demand.
We decided to revisit this business, not so much to chronicle past conditions, but to accurately and candidly project likely future conditions. Over the period September-November 2009 we conducted a telephone-based survey of officials at companies with profile extrusion operations. We also consulted with officials at leading suppliers of extrusion machinery. Overall we are able to collect and distill information from over 100 companies in this field. We supplement the data and insights gained from these interviews with historical data and forecasts generated by organizations tracking developments in all the major markets for profile extruders.
The peak of the North American profile extrusion business was reached in 2005 when aggregate industry sales crested at $13.9 billion. Largely due to the collapse of the U.S. housing industry and the erosion of the regional automotive industry predating the recession, the value of profile extruded output declined to $11.9 billion in 2008. Based on our interviews, we estimate this total declined a further 14% to $10.2 billion in 2009. However, this is the nadir of this destructive business cycle. We envisage the value of output of this industry rising at an average annual rate of 6% to basically regain the 2005 peak sales level by 2014. Some of the major markets for profile extrusion will have fully recovered prior to 2014.
As one would expect the hierarchy of players in the regional profile extrusion business has been transformed over recent years as some companies were unable to survive the dramatic decline in demand for their products and services. There has been significant corporate consolidation among the surviving companies. Yet remarkably there has been a noticeable number of new entrants into this business, either focusing on new niche applications or introducing innovative products to establish a position in existing applications. Meanwhile the survivors in this business are hardly standing idly by, waiting for government stimulus packages and bank bailouts to “lift all boats”. They are devoting sales/marketing resources to secure their position in traditional markets as well as diversifying into new ones with strong growth prospects such as medical equipment. And beyond the resin standard-bearers such as PVC and the other commodity thermoplastics, many companies are investing in the machinery and manpower required to process high-performance engineering resins.
The business mantra of the moment is innovation. Going forward it is incumbent on regional profile extruders to innovate in their product lines and in their utilization of manpower and machinery in order to raise their productivity to better compete on domestic and international markets. One of the features of this report is an analysis of operations across the industry – for example, average sales accruing to captive, custom and proprietary profile extrusion operations, the number of extrusion lines and employees per plant, the number of employees per extrusion line – that processors can utilize to benchmark their own operations.
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 International. He is also a member of the National Association of Business Economists. He has researched and written over 75 multi-client reports, as well as over 100 single-client reports, in the field of plastics and related industries. He has organized, chaired, and made presentations to numerous conferences on critical issues facing the domestic and global plastics industry.