North American compounding market as per a research by BCC summarises: • The North American market distributed 98 bln lbs of plastic compounds in 2008. The market decreased to an estimated 91 bln lbs in 2009, but is projected to increase at a compound annual growth rate (CAGR) of 3.4% to 107 bln lbs in 2014. • The largest segment of the market, resin producers, distributed 64 bln lbs in 2008. It decreased to an estimated 60 bln lbs in 2009, but is projected to increase at a CAGR of 3.3% to 71 bln lbs in 2014. • The processors segment distributed 21 bln lbs in 2008. That figure was expected to decrease to 20 bln in 2009, but was expected to grow to more than 23 bln lbs in 2014, for a 5-year CAGR of 3.4%. Two new reports from industry consultants AMI highlight the recent development of the thermoplastics compounding industry in North America. Since Applied Market Information’s last published report in 2007, the North American compounding industry has been through the worse recession which has seen a fall back in market demand in almost all sectors and a very different dynamic from that which existed in the early years of this millennium. This has led to financial challenges for all companies in the marketplace and a cutback in capacity and investment in the industry. Although the level of M&A activity and new investment has declined during this period there have still been opportunities for growth for some during this time. The more significant developments include Techmer PM acquiring Accel Color and thereby expanding its offering of custom color to the molding industry; Ingenia developing a new facility in Texas; A. Schulman acquiring the operation of ICO Inc. which gives them a significant global position in the supply of rotational molding powders; Teknor Apex acquiring the technical compounding business of Chem Polymer thereby expanding its participation in engineering polymer segments; and Alloy Polymers acquiring facilities from Ampacet for toll production of products. In the past several years there have been a number of significant changes in the industry structure as producers have sought to expand their product range or their geographic coverage. In addition to some of these changes, other significant corporate changes include Breen acquiring the PVC coloring business of Teknor Color in March 2009 and Clariant acquiring the liquid color business of Ricon/Rite Systems in 2008. Ampacet has continued its expansion into custom color with the establishment of new investments in their DeRidder and Heath plants. This move by Ampacet highlights another major strategic change in the industry which has been the move by larger concentrate producer which historically focused on volume products, into smaller lot coloring. Techmer is an example of another which has been pursuing this strategy. As a consequence the color market has become much more competitive with a reduction in margins in many areas. AMI forecasts that the current economic downturn combined with a degree of maturity in the industry will see the process of plant closures and industry consolidation accelerating in the next 18 months as weaker companies go to the wall, while larger groups consolidate on a more limited number of manufacturing assets. There are approximately 130 companies manufacturing concentrates for the merchant market in North America. The three largest producers, all multinational in nature, have a cumulative market share of approximately 28% of the USD sales and 34% of the sales in volume. Ampacet remains the largest with its primary presence in commodity concentrates, although it has an increasing share of the custom color market derived from recent investments in this area. PolyOne is the second largest with a strong position in custom color as well as a moderate position in standard commodity grades. The third player is Clariant which is almost exclusively involved in custom color concentrates. As the worst of 2008 is over, the North American compounding industry is on the road to recovery, and expects to see some growth in 2010. 75% of the region’s compounders believe that worst is over and business is poised to grow, as user industry segments begin to look up. Automotive market has picked up in Q4-09, building/construction sector are believed to have bottomed out, and the consumer durable sector has started showing signs of growth. The medical and packaging sectors continued to remain stable through the downturn, and are beginning to improve. The silver lining with the grey clouds of the worst recession faced in 80 years is that all compounders have critically looked at the costs, raw materials and finished goods inventories and worked on cost reduction wherever possible. Some plant closures and shutdowns were seen in 2008 and 2009. A negative aspect of reduction in workforce has been loss of important technical personnel, making it difficult for compounders to launch new materials or programs. Research personnel were also laid off as work force was reduced as a part of cost cutting programs to face the loss of business during the recession. Several North American compounding and concentrate companies have had to adjust to volatile customer buying patterns swinging from meager to unforeseen at a short notice. However, the scenario will be challenging in 2010, as per Plastics News. The mid-2000s ushered in an era of new highs in the regions housing and auto markets: with 2 million housing starts and 15 million vehicle builds. Though these levels are far from being reached, a marginal comeback is being experienced. Demand in the automotive and durable goods markets for compounds based on engineering resins has bounced back sooner than expected in mid-2010 or the 2011. A shift towards smaller more affordable and more energy-efficient houses could benefit makers of PVC compounds, as they affect the mix for vinyl. The market has started to see development in newer grades with improved properties. Several business deals and capacity additions have been announced since February 2009, including Schulman’s investment of US$10.5 mln to retrofit and renovate its original production plant in Akron, its’ production cuts at Ohio and Tennessee. New extrusion lines are being set up by Schulman for engineering plastics compounds at San Luis Potosí, Mexico, and by Amco Plastic Materials Inc at Farmingdale. Plastics Color Corp. 7,000 sq ft “plant within a plant” specialty production area at Asheboro Manner Plastics LP, Texas, has acquired flexible PVC compounding business of PVC Compounders LLC, Arkema Inc. has acquired specialty compounder Oxford Performance Materials Inc., Viking Polymers of Jamestown has acquired ABS compounder Hughes Processing Inc. Operations that closed down in North America included Cereplast Inc., Rhodia Group, PolyOne’s plants in Niagara and Plaquemine. Clariant closed smaller plants in Lachine and Milford, and Ampacet shuttered a small plant in Vancouver. Despite these shutdowns, the general perception that North America is burdened with excess capacity for compounds and concentrates persists. Longer-term growth in the North American compounding sector is expected to be modest. Annual growth at independent compounders (not affiliated with a resin producer or processor), is expected to average just under 4% from 2009 to 2014, according to a recent market study by BCC Research. Independent compounders are expected to produce 11 billion lbs of material this year and slightly more than 13 billion lbs by 2014, according to BCC. The current configuration of green products will be a driver of compounded plastics demand, but may not last in the long run. It is likely that they will be replaced by better products, or supplanted by a return of inexpensive plastics feedstocks, as per ICIS. Another facet of the green opportunity for plastics is the influx of government spending and private investment with the aim of developing alternative energy sources such as wind power and solar energy, where innovative plastics are being used for the blades of wind turbines and to create solar panels. Additionally, bio-derived materials are starting to achieve the performance properties of traditional materials, bringing added value to those who want to use them. As user industries recover, changes are expected in ordering procedures. Larger orders will be placed, but with the emphasis on "just in time" deliveries as companies will no longer want to carry large inventories of stock.