In modern economies plastic film is ubiquitous. It is a highly cost-effective medium for packaging virtually the full gamut of food and non-food products. It is also used in a host of non-packaging applications in diverse markets; agriculture, aircraft and aerospace, automotive, container labeling, dry-cleaning, electronics, materials handling, signs and displays, tapes, and so on. Monolayer and multilayer film can be produced by means of several plastics processing methods; blown extrusion, casting, calendering and extrusion, and these processes can accommodate a wide range of commodity and engineering resins that can deliver the combination of aesthetic and functional properties precisely tailored to the film end-users evolving needs.
Over the period February-April 2003 PCRS conducted a telephone-based survey of officials at over 100 U.S., Canadian and Mexican companies with captive, custom and/or proprietary film production capabilities. We also consulted with officials at all the leading suppliers of resins, machinery, tooling and auxiliary equipment to the regional film producers. Our objective was to determine the recent and likely future patterns of growth and technological change, as well as the evolving industry infrastructure, in North American film production and converting. Ultimately we sought to provide accurate data and compelling insights for strategic planning to both existing players and potential new entrants into this business.
As of 2002 film production in this region accounted for 14.7 million lbs. of virgin resin and reprocessed plastic material consumption. That translates into roughly 15% of all plastic material consumed in this region. However, it is clear from our research that after many years of strong growth in the volume and value of film production and converting the regional film producers today confront a number of challenges that call for a fundamental re-evaluation of their corporate growth and development strategies. These challenges are both domestic and foreign in origin. First and foremost, the slowdown of the U.S. economic growth dynamic from 2000 up through early 2003 has impacted adversely on film demand in many of their major markets. Secondly, the regional film producers confront stiff competition from China and other foreign countries that can convert their low labor costs, low raw material costs, and less restrictive regulatory environment into low-cost film and film product exports. On the positive side, some of the recent slowdown in the growth of domestic film volume and value stems from increased efficiency in film production. There has been steady down-gauging of film of all types, resulting in greater film yield per pound of plastic material. The efficiency of machines and tooling has also been improved to reduce material scrap. And on the demand side the film end-users, responding to both economic and environmental mandates, have cut back on over-engineering in their film packaging designs.
Looking to the future, the pace of growth of the regional film production business in volume terms is likely to return to the 4-5% average annual growth rate of the 1990s. Sales of film will grow at an average annual rate of 6%, resulting in $20.8 billion worth of film produced in this region by 2007. In addition, the film producers are determined to restore former levels of profitability. A key part of this strategy is increased economies of scale; the rapid pace of corporate consolidation witnessed in 1999-2001 will probably resume, if only to correct the current supply/demand imbalance. The trend to multilayer film will continue, and new and improved barrier technologies will emerge. Overall the regional film producers will benefit from the long-term trend to replace rigid plastic and non-plastic packaging with flexible packaging to the ultimate benefit of their customers.