Your Business Market Outlook - February 2008
Blow Molding Markets Are Steady
Blow molding markets will have an average annual growth of 4.4% from 2007 to 2010, according to Mastio & Company’s latest U.S.
Blow molding markets will have an average annual growth of 4.4% from 2007 to 2010, according to Mastio & Company’s latest U.S. Blow Molding Market Study. The study divides blow molding into five major segments: packaging, home and recreational, HIC/auto fluids, automotive parts, and miscellaneous industrial and commercial. Together, these market segments consumed just over 10.8 billion lb of resins in 2007 and are forecasted to exceed 12.3 billion lb by 2010 (see table).
Two factors—resin pricing and end-user company mergers—were cited by the blow molders surveyed as slowing growth in many market segments. High resin prices here have opened the door to more offshore competition, forcing several domestic blow molders to purchase resin overseas to help lower their costs. In order to stay competitive, most blow molders try to avoid passing on the price increases and absorb as much of the cost as possible, resulting in less overall profit.
| BLOW MOLDING MARKETS 2007-2010 | |||
| 2007 Consumption MM lb | 2010 Consumption MM lb | 2007-2010 AAGR | |
| Packaging | 7104.6 | 8191.6 | 4.8% |
| HIC/Auto Fluids | 2084.9 | 2279.4 | 3.0% |
| Home & Recreational | 837.6 | 980.0 | 5.3% |
| Auto Parts | 743.5 | 807.6 | 2.8% |
| Misc. Industrial & Commercial | 105.7 | 116.6 | 3.3% |
| Grand Total | 10,876.3 | 12,375.2 | 4.4% |
The second factor, mergers and acquisitions among customers, can be a double-edged sword. On one side, orders from existing customers usually increase in volume after such mergers, but increased order size often coincides with implied purchasing power and ability to impose lower prices. This has forced blow molders to be more competitive by increasing their operational efficiencies.
There have also been mergers and acquisitions among blow molders themselves. Some smaller blow molding companies have increased their sales when locally competing plants were closed after the mergers. And as blow molders grow larger through acquisitions, they tend to target national brand-name accounts. That creates additional opportunities for smaller molders to gain local, smaller accounts not typically served by large molding conglomerates.
Packaging
Growth is expected to be moderate but healthy in the blow molded packaging segment. Carbonated soft drinks (CSDs) continue to be the largest packaging market but have one of the slowest growth rates. While CSDs remain the largest beverage category, consumers are turning to alternatives perceived to be healthier—bottled water, juices, teas, and sports beverages.
Conversion from glass and other plastic materials to PET packaging has spurred blow molding growth in distilled spirits, dry and liquid foods, personal-care products, cosmetics, pharmaceuticals, and healthcare products. Consumers apparently will pay a premium for a product packaged in plastic, especially if it is esthetically pleasing and easier to use. However, some blow molders feel pressure from customers converting bottles and jars to plastic pouches.
The country’s aging population will increase growth for packaging in personal care, cosmetics, pharmaceuticals, and healthcare markets. Examples include hair dyes and anti-aging skin-care products. Rising popularity of vitamins and herbal supplements also adds to container demand.
Home & Recreational
This blow molding market segment is expecting higher growth than any other in the next three years. Lawn and garden products is the largest and fastest growing application area within this segment, due to the increasing number of elderly retired and semi-retired consumers spending time in their yards and gardens. Another important trend is replacing metal with plastic parts for lawn equipment.
Recreational and leisure products are expected to show renewed growth due to a continual stream of new and advanced equipment. Increased spending power of baby boomers, more and more of whom are approaching retirement, will contribute to this growth.
HIC & Auto Fluids
This is the second largest blow molding segment, but it is also the slowest growing. A number of economic factors contributed to a downturn in 2007 for production of drums, drum liners, intermediate bulk containers (IBCs), and tight-head pails. Many participants in this market are apprehensive about projected growth for 2008. As the U.S. economy continues to struggle, blow molders’ customers try to find means of reducing packaging costs. Some are turning to greater reuse and refilling of durable packaging while others seek out less costly forms of packaging.
With record-high crude-oil and gasoline prices, more American consumers are electing to perform their own automotive maintenance. This activity increases usage of smaller blow molded containers for automotive fluids and motor oil. Seasonal weather changes also impact consumption of automotive fluids. More purchases are made during the colder winter months when the need rises for anti-freeze chemicals and windshield-washer fluid.
Auto Parts
Blow molded automotive parts is the slowest growing segment. Car parts and related items such as gasoline containers and highway safety barrels are heavily affected by the economy, gasoline prices, and natural disasters. Many survey participants reported that orders for blow molded automotive components were flat in 2007 and they do not foresee any increase in car sales in the near future. OEMs have relied on just-in-time delivery of parts and reduced their inventory levels until economic indicators become more favorable. An offsetting factor is the continued desire by automotive OEMs to reduce vehicle weight to increase fuel efficiency.
Sales of highway safety barrels depend on government budgets for repairing and constructing roads and highways. About half of the manufacturers claim that this market is not growing, but the remainder are very optimistic.
The final market segment is the miscellaneous industrial and commercial products not included in the other segments. These comprise a wide variety of products from dumpster lids to portable toilets, concrete forms, livestock feeders, and containers for kitty litter, pet foods, correction fluid, and biotech samples. Growing use of plastics in such applications points to modest annual growth through 2010.
About the Author
Bart Thedinger is managing partner of Mastio & Company in St. Joseph, Mo., a consulting firm specializing in industrial-consumer opinion research and market trends in the plastics industry. For more information, call (816) 364-6200 or visit www.mastiogale.com
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