Thermoplastic concentrate producers in NAFTA have had to deal with a pretty challenging business environment since the financial crisis of 2008. However, in adapting to the ongoing volatility and market uncertainty, new opportunities have emerged. Almost all the major players have survived through the downturn and in many ways stronger, more viable companies have emerged which are seeking to exploit opportunities for growth in both existing markets and in new areas. This is one of the key findings of AMI Consulting's new report on the thermoplastic concentrates market in NAFTA. After two years of dramatically shrinking demand, 2010 and 2011 have seen the industry return to growth. Despite the impact of the recession over a six-year period since 2005, demand has still managed to average growth of around 4% per year. For 2012, AMI forecasts that the use of concentrates in the thermoplastics processing industry in NAFTA will be around 3.8 bln lbs (approximately 1.7 mln tons).
Much of the growth of recent years has been driven by surging demand for calcium carbonate concentrates which are increasingly being used by processors to reduce costs in the face of rising resin prices. On the other hand, rising costs and shortages of titanium dioxide have seen the use of white concentrates decline over the past five to six years as processors have sought alternative solutions to using white. Demand has also been affected by increased imports of finished film products. The use of color concentrates has also shown fluctuating growth reflecting weak demand in certain key segments such as the automotive industry as well as cost cutting exercises by brand owners and processors. The concentrates market in NAFTA is estimated to be worth nearly US$4 bln in 2011. Although in volume terms the additive concentrate market is the largest, in value colored products dominate accounting for 44% of the value of the market. This tends to reflect the smaller volume, custom nature of the color market and the fact that the raw materials are more expensive than many of the additives and black and white pigments. The color market is highly sophisticated in NAFTA because of the influence of the brand owners and OEMs in consumer markets and food packaging making wide use of color for brand differentiation.
In application terms, the largest market by value is the injection molding market, which accounts for approximately one-third of the value, followed by film extrusion with just over 25% of the business. Black types accounted for 11% of the market with the majority of usage in polyolefin applications, although a large proportion of the market is used in compounding. This segment has managed to maintain steady growth since 2005. The final market segment of white concentrate has suffered in recent years as some of the traditional application areas such as shopping bags have seen production move offshore, while the recent escalation in titanium dioxide prices has caused some customers to move from using white to either alternative colors or clear product. While the study shows the market is expected to continue to grow, it is not likely to be at the levels the industry historically achieved. The prime reason for this will be slower growth overall in many polymer markets, particularly volume areas for concentrate such polyethylene film extrusion, and small HDPE containers. Future growth will largely be driven by the growing penetration of concentrates in engineering resin applications and the development of new added value applications such as biopolymers, TPEs, grass yarn and sophisticated packaging films. The development of future demand for individual concentrate types will also be influenced by pigment pricing, especially in the titanium dioxide area. It is likely that some applications (shopping bags being a good example) will see some move from the default color of white to either clear bags or a variety of other colors. However, the consumer has become accustomed to the color of certain products and the color has subliminally been incorporated into the brand, thus switching from a white color is not always be as easy as may be initially thought. However, NAFTA is a key centre for product innovation and brand development and the concentrate industry is in an ideal position to drive market growth through the development of new colors and property enhancing products.