This category covers establishments primarily engaged in custom compounding of purchased plastics resins. For more information related to this industry, see the SIC 2821: Plastic Materials, Synthetic Resins, and Nonvulcanizable Elastomers.
Custom compounding companies purchase plastic resins from plastic manufacturers. They alter and manipulate the resins to form new compounds, which they usually sell to companies making plastic products. They contribute to the plastic manufacturing process by upgrading the quality and performance of resins, improving the efficiency of the compounding process, and developing entirely new plastic substances. Custom compounding emerged as a separate industry during the 1980s and is credited with increasing the breadth of the U.S. plastics business during that decade. About one-third of all U.S. polymer production undergoes some sort of compounding.
325991 (Custom Compounding of Purchase Resin)
There were 832 establishments in the industry in the late 1990s, up from 644 in 1995. Industry shipments totaled $8.2 billion in 2000, compared to $7.9 billion in 1997. There were roughly 8,000 employees in 2000, compared to approximately 27,660 in 1997. In 2000, nearly 19,500 employees were directly involved in production. On average they earned $14.94 per hour.
Plastics are extremely long polymers, or long-chain molecules, which are shaped and molded under heat and pressure to form a resin. Resins typically take the form of pellets, flakes, powder, granules, or liquid. Although many resin manufacturers process their own resins and even make plastic products, they often sell resins to companies that make custom compounds. Custom compounders alter the physical properties of the resins they purchase by: mixing or melt-state blending several resins together, introducing additives, or adding fillers and reinforcements. An almost infinite number of compounds, each with varying grades and performance characteristics, can be created.
Several categories of additives are used to make compounds. Plasticizers, the most common additives, are chemicals that increase a resin's flexibility. Similarly, impact modifiers increase stress resistance. Plasticizers and impact modifiers are used, for example, to increase the resilience of plastic automobile body panels or to make polyvinyl chloride (PVC) resins used in construction materials. Various stabilizers and antioxidants are used to retard the oxidation and breakdown of resins that results from exposure to heat, light, air, and moisture. Heat stabilizers, for instance, help resins to retain their physical structure during processing. Flame retardants are added to reduce flammability, and colorants are used to change a resin's hue.
Fillers and reinforcements are used to add texture, strength, and other characteristics to resins without changing their polymer structure. Examples of fillers are cotton and asbestos flocks, glass fibers, chopped monofilaments, carbon fibers, hollow glass spheres, metal powder, and carbon. Glass fiber, which is integrated as whole or chopped mat, and carbon fiber have traditionally accounted for the majority of filler and reinforcement material used in the plastics industry.
Plastic compounding companies work with and create four general grades of resins and compounds. Commodity resins, which receive little attention in this industry, are low-tech plastics made with standardized formulas. Intermediate resins are slightly more advanced. Engineering resins exhibit higher performance characteristics. Advanced resin compounds, the most expensive class, are those most able to withstand exposure to heat, weight, impact, acids, and other forces. They are typically used for applications in aerospace, microelectronics, and other high-tech industries.
The first plastic, a natural material called Keratin, was developed in the early 1700s. Parkesine, the first synthetic plastic, was invented in 1862 by Englishmen Alexander Parkes; but, it was American John Wyatt who recognized the important plasticizing effect of the Parkesine production process. Wyatt renamed the substance Celluloid in 1870 and is recognized as the founder of modern plastic making in the United States.
The use of plastics increased rapidly during the early 1900s as new processing techniques, such as molding, evolved. Compounding occurred, but in relatively simple ways. Resins were combined with paints and varnishes, for example, to increase their durability. Not until World War II were more advanced compounding processes used on a broad scale—to make items such as airplane gun turret covers and lightweight field equipment. Huge advances in the chemical additives industry during the 1950s, 1960s, and 1970s created a strong demand for new compounds with specific characteristics. As compounders learned to make resins more flexible, durable, attractive, and flame retardant, the need for plastics compounds grew. By the early 1980s, the plastics industry was shipping $15 billion worth of resins, about 30 percent of which were compounded by resin manufacturers or plastic goods producers.
During the 1980s, the U.S. plastics industry began to shift its focus from commodity-like resins and compounds to higher grade products that could be used to replace steel, glass, and other natural, more expensive materials. The development of high-tech additives and alloys allowed U.S. producers to retain their global industry lead in spite of fierce foreign competition from low-cost manufacturers. As the need for advanced, efficient compounding processes expanded, custom compounding firms proliferated.
By 1987, custom compounders were processing about 8.5 billion pounds of resins annually and grossing $2.5 billion. Despite a late 1980s recession, production volume jumped to 12.5 billion pounds by 1990, and industry revenues climbed to $5,080.1 billion by 1993, reflecting average annual sales growth of 8 percent between 1987 and 1993. As plastics consumers increasingly sought the expertise and efficiency of custom compounding companies, revenues swelled at a rate of approximately 7 to 10 percent annually during the early 1990s.
The plastics custom compounding market was strong in the late 1990s because the key consumers of plastic—the automotive, electronics, appliance, and construction industries—flourished in the booming U.S. economy. The strength of the automotive industry played a particularly key role in custom compounders' success. By the late 1990s, 25 percent of all plastic compounds were used in that industry, and in 1999, car sales reached an all-time high of over 18 million vehicles. The auto industry increasingly turned to custom compounders to produce inexpensive plastic parts that could be engineered for a set purpose. Underhood and seating applications were the most common new uses for plastic compounds.
The electronics and appliance industries were equally healthy, and further drove demand for custom compounded plastics. While appliances accounted for about 13 percent of the total market for custom compounds, plastics' role in the sector was expected to increase. As plastic increasingly came to supplant metal in small appliances such as toasters, blenders, and mixers, custom compounders looked forward to burgeoning sales to appliance makers. Moreover, consumers' growing use of personal computers and portable electronics (such as pagers and cellular phones) assured plastic compounders a stable future market.
Despite its strengths the industry was not considered free from challenges. The cost of materials grew from $4.48 billion in 1999 to $4.9 billion in 2000. Compounders were plagued by rapidly escalating resin prices in 1999, which significantly drove up their operating costs. Moreover, they could not simply pass the increased costs along to their customers—end users of plastic compounds were reluctant to pay a higher price, since cheaper import compounds were gaining a foothold in the market. The weakening economy of the early 2000s also threatened to undermine the strength of the industry.
The leading custom compounder in 1999 was The Geon Company of Avon Lake, Ohio. Controlling a 10 percent share of the custom compounding plastics market, Geon reported 1998 sales of $1.3 billion and employed 2,400 workers. Like other companies in the industry, Geon had expanded its operations through acquisition in the late 1990s. In 1998 alone, Geon purchased three companies—Adchem Inc., Plast-O-Meric Inc., and the Wilflex Ink Division of Flexible Products Co. Another key player in the industry was the Cleveland, Ohio-based M. A. Hanna Company, with 1998 sales of $2.3 billion and 7,130 employees. Hanna's share of the market had been on an upswing as the company engaged in a protracted series of acquisitions, purchasing 25 companies in 12 years. A. Schulman Inc. also was a leading company, with its 1999 sales topping $986 employees. Schulman operated 13 manufacturing facilities in North America, Europe, Mexico, and Asia and maintained a workforce of 2,400. In 1998, Schulman teamed up with Du Pont to produce the brightly colored plastic compounds that were used in the bumpers of Dodge and Plymouth's model year 2000 Neon.
A technological focal point in the mid-1990s was the development of techniques that allowed resin processors to create compounds and alloys while extruding plastic into molds. By melting and mixing compounds during the molding process, processors were able to eliminate problems caused by heating resins twice. Such compound/molding techniques were already resulting in higher performance and less expensive plastic products by the early 1990s. Specifically, new grades of materials created using these new compounding techniques were capable of making products with thinner walls, greater product uniformity, and more even molecular distribution—improvements that allowed for increased use of plastics in automobiles and packaging industries, for example.
Significant expenditures were also being directed toward the development of new environmentally safe compounds. Companies were striving to meet new chlorofluorocarbon (CFC) emission regulations by developing compounds that would not require hazardous manufacturing processes. Similarly, new additives and compounds were under development that would accelerate the natural breakdown of plastics products and reduce landfill waste. Although technologies like weak-link and bacterial polymers showed promise, extremely high production costs made them commercially impractical for most purposes in the late 1990s.
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