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One Step In 'Right' Direction: Nova Chem. Drops PE Contract Prices

By: Lilli Manolis Sherman 18. November 2014

With an effective date of Nov. 1, polyethylene supplier Nova Chemicals, Calgary, Alberta (U.S. office in Moon Township, Penn.), has reduced November PE contract prices of prime resin by 3ȼ/lb, effectively marking the first move in two years to reduce North American PE prices.  Since the Nov. 2012, 2ȼ/lb decrease, PE prices moved up 21ȼ/lb—a period during which PE suppliers have enjoyed hefty profit margins.

 

Whether we’ll see other major PE suppliers take similar actions remains to be seen but some industry pros venture that something different needs to take place, as North American PE suppliers are outpricing themselves from world markets.  Michael Greenberg, CEO of The Plastics Exchange, reported recently that weakness in global energy, feedstock and resin prices are contributing factors to the “negative sentiment” gripping the domestic polyolefin market. Moreover, spot PE prices have moved lower—about 4-5 ȼ/lb below this season’s highs--as there are now ample supplies of most PE grades. “Sellers continue to offer material aggressively, seeking to quickly flip railcars rather than take on additional resin for future sale. However, processors—many of whom already have ample supplies, were ambivalent to the cheaper offers as they feel the market is trending lower,” Greenberg reported on Nov. 14.

 

For the last two years, Mike Burns, v.p. for PE at Resin Technology, Inc. (RTi) has consistently driven the point that while the price of oil has nothing to do with the cost to make a pellet in North America, it has everything to do with the price of pellets. He recently stressed that the quickly changed PE market dynamics have surfaced from the unexpected drop in oil and naphtha prices. Burns also noted that regardless of the still relatively tight supplies, North American PE suppliers will need to address the global price that is set by the price of oil and make downward adjustments.

 

Burns cited two market changes that would force domestic PE suppliers to respond to today’s PE price level: an escalation of imported finished goods such as stretch film and can liners; and, the build-up of supplier inventories outpacing demand. He also saw two choices for North American PE suppliers: a proactive move whereby they gradually decrease prices regardless of still tight inventories; or, a reactive one, whereby suppliers wait until their inventories build up without an export market, supply outpaces demand, and sales are lost to Asia PE manufacturing.

 

IHS analysts, and other industry experts, all concede that processors are not likely to directly benefit from shale gas development lower energy and feedstock costs until new PE capacity comes on stream—most likely in the 2017-1208 time frame. At the same time, they forecast a 4.4%/yr increase in demand (1.2 times that of GDP) and roughly flat PE prices for the remainder of this year and through 2015.

 

Want to find or compare materials data for different resins, grades, or suppliers? Check out Plastics Technology’s Plaspec Global materials database.

 

 

 

 

Bag Bans Embolden Activists

By: Tony Deligio 18. November 2014

“Activists don't like plastics, period,” Michael Westerfield said. “They don’t like quick-service restaurants, and they certainly don't like packaging or anything single use. They'll pick us off one at a time. They were targeting plastic bags first, now they'll go after foam.”

 

Westerfield, corporate director of recycling programs, at packaging and food-service product manufacturer Dart Container Corp., shared his first-hand insights into the emboldened activists zeal for new bans at SPI’s recent Equipment and Moldmakers Leadership Summit (Oct. 26-28; Tucson).

 

Dart manufactures a number of items that are increasingly in the regulatory cross hairs, including cups made from coated paperboard, foam, HIPS (they acquired the iconic Solo brand), and PET, as well as portion containers and PS clamshells.

 

Westerfield recounted a recent conversation with a representative of a non-governmental organization seeking to restrict plastics use who stated plainly that a ban on foam the group was now pursuing, much like the plastic bag ban it had already helped push through, was “largely symbolic but a good fundraiser.”

 

In a slide, Westerfield shared an e-mail promotion he had recently received, which read “The Bag is Banned—What Should We Tackle Next?”—reinforcing the search for a new plastics public enemy No. 1.

 

Dart, like many manufacturers of EPS foam, has been proactive in its response to calls for bans, stepping up its recycling efforts [read about ACH Foam’s EPS recycling initiative]. “For us, recycling is key to the long-term viability of foam,” Westerfield said, “so we’ve invested heavily in it.”

 

Since foam is 95% air, the first step in reclaiming it is densification, reducing the volume it takes up as it’s repurposed. Dart is working with machinery suppliers on improving densification technologies, and Westerfield acknowledged that more work will be required at municipal recycling facilities (MRFs), many of which were built to sort aluminum, paper, and glass and struggle with foam and other plastics.

 

Post-Ban Perspective
Westerfield was followed by Mark Daniels, senior vice president of sustainability and environmental policy, at bag manufacturer Hilex Poly. Daniels and his company provided a post-ban perspective.

 

As background, Daniels laid out the numerous steps Hilex Poly has taken to reduce the impact of its product. In 2005, the company opened what Daniels called the first and largest cradle-to-cradle recycling facility for reprocessing bags and wraps. The company recently doubled the capacity of that recycling to more than 25 million lb/year.

 

Hilex has delivered approximately 34,000 recycling containers to retailers, collecting more than 1 billion lb of post-consumer bags. Daniels pointed out that studies show that around 75% of bags are reused, with an additional 10% recycled, adding up to a diversion rate of 85%.  

 

Hilex Poly has 22 manufacturing facilities throughout U.S., Canada, and Mexico, running 340 extruders 24/7, while the broader bag-making sector boasts 380 facilities throughout the U.S., with more than 30,000 employees. According to Daniels, that figure has grown as leading retailers like Wal-Mart and Walgreens reshore some bag making to secure bags with recycled content.

 

A Not-So-Green Replacement
Recyclable PE “t-shirt” bags made by U.S.-based companies like Hilex Poly are increasingly being replaced with non-recyclable woven PP bags imported from countries including China. According to Daniels, more than 2 billion woven PP bags have been imported over the past few years as bans and fees took hold, resulting in enough bags for each family in the U.S. to have more than 20 each.

 

All this to displace a product that Daniels points out takes up 4 tenths of 1 percent of the municipal solid waste stream, is derived from suddenly abundant and domestically sourced natural gas and can carry 17-18 lb while only weighing 5g.

 

During his presentation, Daniels alluded to a new referendum seeking to overturn the bag ban, which at the time had 100,000 of the 500,000 signatures required. Whether or not that effort is successful, it seems the plastics industry will be fighting a multi-front war going forward.

Robot Sales Maintain Record Pace

By: Tony Deligio 17. November 2014

Some 21,235 robots valued at $1.2 billion were ordered from North American companies in the first nine months of 2014, an increase of 35% in units and 22% in dollars over the same period in 2013. The totals for the first three quarters of 2014 established a new high watermark for the industry, surpassing previous highs only recently reached, according to the Robotic Industries Association (RIA) Ann Arbor, Mich.
 

Topping 2013 numbers is all the more impressive when you consider that robot sales globally last year were “by far the highest level ever recorded for one year”, according to the International Federation of Robotics (IFR), Frankfurt, Germany which summed up the industry’s performance succinctly in the report’s title: “2013: The highest number of industrial robots ever sold.”

 

Gardner Business Media, Inc., publisher of Plastics Technology tackled the broader industrial automation segment in this special supplement.

 

The RIA reported that shipments to North American customers through September totaled 18,490 robots valued at $1.1 billion, also breaking the previous record set in 2013 by five percent in units and two percent in dollars.
 

RIA said that automotive is leading the way, with orders in that sector up 48% year to date over 2013. Other strong segments cited were electronics, food & consumer goods, and metals, which all posted double-digit growth in the first nine months of the year.
 

The IFR report noted that the rubber and plastics industry has increased robot installations in every year going back to 2009, more than doubling from about 5,800 units to 12,200 units in 2013. The IFR also noted, however, that this performance is still far below the peak years of 2006 and 2007, which neared 15,000 units.

 

China became the biggest robot market in 2013 according to IFR, with a share of 20% of the total supply. Japan, China, the U.S., Korea and Germany accounted for about 70% of the total robot sales in 2013. Growth in the U.S. has been outpacing many other regions, according to the IFR, with annual sales increasing by an average of 18% per year between 2010 and 2013. The report links this growth in the U.S. to “the necessary modernization of the domestic production facilities.”

 

That modernization is apparent in the most recently released data from SPI’s Committee on Equipment Statistics (CES). In the second quarter, CES also saw an uptick in robotics demand—the auxiliary equipment segment, which includes robotics, temperature control, materials handling, and more, had record levels of new bookings in the second quarter. The total of $108.0 million represented a 21 percent spike compared with the second quarter of 2013.

 

Robots and Jobs
Jeff Burnstein, President of RIA pointed out in its most recent report that the rising demand for robots in the U.S. can be linked to employment, just not in the way you might think:

 

“It’s also interesting to note that as robot sales boom, U.S. unemployment continues to fall, and is currently at its lowest level since July of 2008, further evidence that robotics helps save and create jobs.”

Steering Clear of Culture Clashes in International Business

By: Tony Deligio 12. November 2014

Countries can be quite close geographically but oceans apart culturally, and that’s a fact often lost on business leaders in our increasingly globalized world, according to Joe Carella, managing director of executive education at the Thunderbird School of Global Management.

 

Carella addressed that paradox during a presentation at SPI’s recent Equipment and Moldmakers Leadership Summit (Oct. 26-28; Tucson, Ariz.). Carella began with some attention-grabbing numbers on just how globalized the world has become over the last two decades. In 1990, there were only 3000 “multinational” companies, but by 2010, that number had exploded to 80,000 multinational companies, which themselves had an additional 800,000 affiliates.

 

“The typical global growth strategy for a company is pretty simple,” Carella said, “go from mature markets to mature markets. Right now, we are at a time of profound change with a lot of innovation going on—new products, and new markets with a lot of potential. It’s reassuring to do business where your colleagues do, but the reality is markets are more complex than that. Only your actions determine whether you're going to be successful or not.”

 

To help display that complexity, Carella included a slide with the Inglehart-Welzel Cultural Map of the World. This “map” looks at countries distance from each other in terms of cultural values versus geographical space. Arranged as a graph, along the y-axis the map has survival values and self-expression values, while along the x-axis, it charts traditional values and secular-rational values.

 

With this system, nations are grouped along historic cultural boundaries, including Confucian, Orthodox, Islamic, Africa, Latin America, English Speaking, Protestant Europe, Catholic Europe, and South Asia.

 

“This is a great lens to see who you could do business with that you have not done business with before,” Carella said. On this map, seemingly disparate countries like Poland and India are actually next door neighbors when it comes to their value systems.

 

“In a time of change, it’s important to reconsider what binds you to others and how you understand what binds you to others, how you make connections,” Carella said.

 

Part of understanding those ties that bind is awareness of influences on individual behavior. To help visualize this, Carella displayed a pyramid with human nature at the base, culture in the middle, and personality/style at the top.

 

At the bottom of the pyramid, the influences are universal and innate, Carella said. While in the middle, they are specific to a group or category and learned, and at the top, they are specific to each individual can be innate or learned. At first blush complicated, this can be simplified as well.

 

“We are all ruled by fears, we are all ruled by hopes, no matter where you go in the world,” Carella said, “so there are many things that could bind you to people all over the world.”

 

Culture Clash
Even with cultural awareness, difficulties are inevitable when companies try to forge business relationships outside their own space. The top three problems identified in a Thunderbird survey were:

 

  • Different working styles and office norms
  • Inability to understand local culture
  • Cultural or national conflicts between staff

 

To overcome these and other challenges, Carella said leaders must develop a “global mindset”, defined as:

 

A set of individual characteristics that helps a global leader better influence individuals, groups, organizations and systems unlike his or her own.

 

“The ultimate challenge for a global leader is the ability to influence, and how do you influence others?,” Carella asked. “Communicating, trust, and research—understanding their mores. Communication is not just sharing but also listening. Ultimately you influence people by building trust.”

 

Even when you’re able to exert influence, Carella said truly successful global managers are able to let go of something they’re typically loath to: control. “The change you need to see within yourself, is not where you better understand culture or language alone, but the change is with being comfortable with being uncomfortable in uncomfortable situations,” Carella said. “Be comfortable with the fact that your expectations, the ones you have in your normal setting, are not going to be met.”

 

Carella closed with five "simple" and "hard" rules when working internationally:

 

"Simple" Rules

 

  1. Be patient when building trust and relationships.
  2. Speak more slowly than you normally do. Carella: “I see this especially when I deal with technical sales people—they get so passionate about the product, go million miles per hour.”
  3. Avoid slang, buzzwords cultural references. Carella: “Things that you take for granted—a slam dunk, for instance—that you think everyone should know, are not necessarily something others understand.”
  4. Pay attention to non-verbal clues.
  5. Build knowledge of your target market.

 

“Hard” rules

 

  1. Build networks, not one-on-one connections.
  2. Respect differences.
  3. Recognize the complexity.
  4. Be self aware and balance between the cultures and values.
  5. Test your knowledge with in country representatives.

 

“Global leaders need to manage across diverse cultural systems, diverse political and institutional systems, time and geographic distance, as well as individual and group preferences,” Carella said. Despite those myriad challenges, and the cultural chasm, he offered a hopeful insight.

 

“The world is full of different political systems, but business succeeds in all of them, shouldn't you be successful in them too?”

 

Are PE Prices Likely To Drop?

By: Lilli Manolis Sherman 12. November 2014

How much relief in PE pricing we are likely to see and when, is up in the air at the moment. However, after the 3ȼ/lb September price hike, prices have been flat and are expected to continue that way into early 2015. It’s now been two years since the last decrease in North American PE prices. Since then, prices have moved up 21ȼ/lb. This while PE suppliers have enjoyed hefty profit margins.

 

Mike Burns, v.p. for PE at Resin Technology, Inc. (RTi), who a year ago predicted that PE prices would be higher again in 2014, offers some of his latest observations on market conditions. Burns consistently has driven the point that while the price of oil has nothing to do with the cost to make a pellet in North America, it has everything to do with the price of pellets globally.

 

Burns now points out that the PE market dynamics have been quickly changed by the unexpected drop in oil and naphtha prices. “Latin America has turned to Korea to meet their PE resin needs at a significantly lower price. He says that regardless of the still relatively tight supplies, North American PE suppliers will need to address the global price that is set by the price of oil and make downward adjustments.

 

Every global feedstock related to PE production tumbled in October, with the exception of flat pricing for natural gas and ethane: ethylene fell 15ȼ/lb, oil fell $17/bbl, naphtha fell $120/m.t. These decreases resulted in lower global PE prices, with the exception of Europe, where for the short term, tight ethylene supplies will keep PE prices firm.

 

There are two market changes Burns ventures that will push domestic PE suppliers to respond to today’s PE price level: an escalation of imported finished goods such as stretch film and can liners; and, the build-up of supplier inventories outpacing demand. He notes that PE exports so far have represented 17.7% of all North American PE production, which is on the lower side of the three-year average of ~20%. Latin America remains the primary destination, accounting for about 60% of exports.

 

At this juncture, Burns sees two choices for North American PE suppliers. One is proactive, whereby suppliers gradually decrease prices regardless of current tight inventories. However, he finds this unlikely to take place due to year-end incentives for sellers and product managers. He says 2014 has been a good year for suppliers, and processors ought not expect a proactive price reduction.  The other is reactive:  suppliers wait until their inventories build up without an export market, supply outpaces demand, and sales are lost to Asia PE manufacturing. In order to continue to manage inventories, Burns ventures that North American PE suppliers will have to sell resin nearly 15% less than domestic prices.

 

Want to find or compare materials data for different resins, grades, or suppliers? Check out Plastic Technology’s Plaspec Global materials database.

 




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