Modern Plastics Worldwide - October 2007 - dae uptlax

MODERN EXECUTIVE
R.I.P. $0.40/lb PE
By Tony Deligio
Bowie, currently COO of Resin
Technology Inc. (RTi), a resin purchasing
consulting firm in Fort Worth,
TX, has been in the plastics industry
overall for 25 years, starting out in processing
at a film operation and then an
injection molding business, before
launching RTi with a partner in 1998,
giving him the long view on resin prices.
“[Resin prices] are extremely volatile,”
Bowie says, “and it’s volatile at a step
above where it was even two to three
years ago, which was a step above what
it was six or seven years ago.”
As his company works to help processors
negotiating an increasingly harrowing
resin-buying minefield, it’s tracking
four larger, meta issues that are truly
making these interesting times in plastics.
Globalization: In simplest terms, “The
world is opening up and competing with
North America,” Bowie says.
Repercussions include downward pressure
on labor and products, with possible
lessons to be gleaned from industries like
textiles and automotive, which have been
exposed to worldwide competition longer
and enjoyed varying levels of success.
Supplier Consolidation: “When there were
14 guys making polypropylene, you could
always find someone who was a little tight
on cash and just wanted to turn some
inventory and cut you a deal,” Bowie
says. Those days are gone, with larger
companies wielding greater leverage and a
weak dollar leaving an export valve to
release inventory pressure for producers.
Energy: Call it unlucky 7s, as in $7/mm
BTU natural gas and $70 barrels of oil.
“I don’t like the word never,” Bowie
“You don’t see fours anymore,” says Bill Bowie. “Even a couple years ago, you
still saw $0.48-$.049/lb for polyethylene. Ten years ago, when we started the
business, there were threes all the time. It’s a new world.”
Good-faith negotiations
Basic rules to stay in the good graces
of your resin supplier rep, offered by
Bill Bowie, whose RTi has staffers
with lengthy experience at the other
side of the negotiation table with GE,
Dow, Total, and others, that can offer
a producer perspective.
Pay on time “The person that’s calling
on you has to listen to his credit
department, and the next time you
want a favor—you need an extra
[rail]car, you need an extra penny
off—you’ve tied his hands so he can’t
go up the ladder.”
Be honest, don’t bluff “Don’t tell someone
you got $0.62 when you got
$0.64, because the first time that
blows up in your face, they’ll never
trust you again.”
Negotiate fairly and on level ground
“Yelling doesn’t get you any further
than sugar does. Use facts to state
your case and negotiate—emotion
doesn’t have to play into it.”
says, “but I don’t see $2.50 natural gas
[mm BTU basis), which is what we had
through most of the 1970s through
1990s.”
Events: In these tumultuous times,
“events” entail everything from terrorist
attacks, to oil and gas infrastructure and
natural catastrophes like hurricanes,
which, as was seen after the twin
Hurricanes of Katrina and Rita in 2005,
can have a deleterious effect on resin
pricing and supply.
Number-one cost,
number-one opportunity
In spite of the daunting nature of such
myriad challenges, Bowie says processors
cannot ignore resin pricing. “You can
take labor, utilities, I don’t care,” Bowie
says, “nothing is as expensive or costs as
much to a plastics processing business as
buying resin.” From RTi’s experience,
which includes roughly 80 North
American-based processors working in
PE (40-45%), PP (40-45%), and engineering
resins (10-20%), the average
amount that resin costs occupy in overall
cost is 50%, with film businesses higher
(80%), and value-added injection molders
(25-30%) ranking lower.
Whatever the process, Bowie stresses
that smart material buying always has a
net positive effect on the ledger. “The
beauty of resin is, it doesn’t lose its value
as it falls through your business,” Bowie
says. “It really goes right to the bottom
line—if you save a dollar, that dollar goes
MPW
to the bottom line.”
CONTACT INFORMATION
Resin Technology Inc. www.resinpros.com
30 OCTOBER 2007 • MODERN PLASTICS WORLDWIDE modplas.com