Automotive revved for change
The new century will bring four "mega trends" and one "maybe mega trend", according to Gary Benninger, vice president of MagnaWorks. Benninger identifies global consolidation as the number one trend, ...
The new century will bring four “mega trends” and one “maybe mega trend”, according to Gary Benninger, vice president of MagnaWorks. Benninger identifies global consolidation as the number one trend, with serious implications for Tier Ones: “In many product areas the competition for business is so fierce that the OEM is able to source parts below some suppliers’ cost.”
Vehicle modularization is the second, creating pressure on suppliers to bid and assemble larger vehicle sub-assemblies, rather than simple components. A third mega trend is the logical extension of the explosion in outsourcing, the design and manufacture of complete vehicles by suppliers. Multi-company engineering teams at design facilities are a step in this direction, according to Benninger, who identifies the “truck explosion” as the fourth trend. The popularity of trucks has great significance to the plastics industry because the body-on-frame construction of most trucks render them ideal for polymer body panel applications.
The “maybe mega trend” is the elimination of PVC which, Benninger notes, can currently be easily replaced, chiefly by TPOs, TPUs and spray urethanes.
PACKAGING TRENDS WRAPPED UP IN DEMOGRAPHICS, GOVERNMENT
Paper fibre may still be the dominant material in Canadian packaging, at 40 to 42 per cent, but plastics is number two with a bullet, according to Packaging Association of Canada lobbyist Larry Dworkin. Trends driving the industry include the rise of the seniors’ market, re-sealable and pouch packaging, and the move to light weight materials. Why the seniors’ market ? “They’ve got more money, more disposable income than ever before,” explained Dworkin. Simple to open, read and understand are the primary design criteria for successful packaging targeted toward the seniors’ market.
The flight of packaging operations from B.C. was described by Dworkin as a consequence of the high cost of doing business in that jurisdiction due to high taxes and a strict regulatory regime. “Quebec may not be far behind,” he warns, noting that industry may be forced to finance recycling efforts regardless of the economic consequences. When volatile organic compounds (VOCs) are added to the regulatory mix, the result may be a flight from Quebec for manufacturers and printers of packaging.
SOLID FOUNDATION FOR GROWTH
According to Alex Carrick, economist/editor for CanaData, the outlook for construction in 2000 suggests moderate growth above the good results of ’99, fed by a modest rise in the consumer price index, and sustained growth in real GDP.
In residential housing, mortgage rates are stimulatory, employment data is favorable, and demographic considerations suggest good prospects for housing starts in 2000. Carrick estimates approximately 150,000 starts for Canada in the coming year, tailing off in 2001 as the economy cools.
Canada wide, commercial starts will taper off gradually over 2000, to approximately 50 million square feet. Industrial starts will remain flat at just under 20 million square feet, with vacancy rates flat or falling in every major centre in the country.
Will plastics industry exports play a part in economic growth for 2000? As Carrick states: “North American per capita consumption of plastic is 40 kilograms per year. (Canadian) companies are looking to Asia as a major market, because in China, India and Japan, the comparable figure is about one kilogram per year. These are major markets.”
WILL THE BEARS RUN RAMPANT IN THE CHEMICALS SECTOR IN ’00?
“More often than not I’d have to say there are better places to put your money (than the chemical industry)” declares Deutsche Bank Securities director Frank Mitsch. Mitsch cites double digit growth in the computer, pharmaceutical, media and telecom sectors which overshadows the three to four percent performance of chemicals.
The Asian recovery, coupled with strong North American demand has kept prices buoyant in ’99. Mitsch notes that over a billion pounds of ethylene production was lost to down time in the first half of ’99 which, when combined with a tight inventory situation carried over from the last quarter of ’98, drove PE pricing above predictions.
In general, however, Mitsch explains that the industry is struggling from an earnings perspective: “With very few exceptions, and Dow is a major exception, earnings have been on the down side rather than on the up side.” Metallocenes have been well promoted on Wall Street, but Mitsch notes that the technology has yet to catalyze industry earnings potential. If there is a commodity resin that he feels will run counter to the trend, it’s PVC. CPL