Bulk packaging remains strong
William Atkinson -- Purchasing, 7/13/2006 2:00:00 AM
Demand for both rigid and flexible bulk packaging will remain strong fueled by continued manufacturing activity in certain industries and a shifting product mix.
On the rigid market side, Cleveland-based market researcher Freedonia Group says demand for rigid bulk packaging is projected to climb 3.7% per year to nearly $6 billion by 2009. Advances will be spurred by increased manufacturing and a shift toward higher-value containers offering enhanced performance and supply chain efficiency.
Growth in the different product segments of the industry will be varied, though. For example, segments offering a combination of total cost benefits, greater reusability and increased performance efficiency are expected to experience the strongest gains as they supplant a variety of smaller or shorter life alternatives.
Drums, the largest rigid bulk packaging product segment, will post below-average growth through 2009, largely due to weakness in demand for fiber and steel drums, which have been negatively impacted by competition from plastic drums as well as larger capacity (rigid intermediate bulk containers) RIBCs and, to some extent, flexible intermediate bulk containers (FIBCs).
Strong gains are forecast for RIBCs and material handling containers. In addition, plastic drums and plastic pails will post above-average advances. RIBCs will experience the fastest growth among rigid bulk packaging product segments as a result of cost and performance advantages over smaller, single-trip or shorter life containers.
Bulk box growth will lag the industry average, the result of competition from reusable drums, material handling containers and intermediate bulk containers, both rigid and flexible.
"We are seeing an increase in returnable all-plastic IBCs for liquids and powders/granulars," reports Michael Spurrier, vice president of sales and marketing for Snyder Industries in Lincoln, Neb. Part of this demand is from buyers that once used disposable or one-way containers.
"Once they empty the container, they like to be able to return it to the shipper, so they don't have to deal with disposal issues," Spurrier explains.
Demand is also coming from buyers that once used steel returnable containers, according to Spurrier, instead opting for durable all-plastic designs because they are lighter, more corrosion- and chemical-resistant, and offer lower acquisition costs with a comparable useful life-to-cost ratio.
In terms of cost, in the last two years, Snyder Industries has seen raw material prices increase near the end of the calendar years. "Resin suppliers are again using the threat of hurricanes, among other reasons, to justify warnings of future price increases this year," adds Spurrier.
"The prices that affect us the most are the resins and, to some extent, steel," says Don Scherer, purchasing manager for Snyder Industries. "Metal prices in general have been in an upward spiral for quite awhile." He also says resin prices have been extremely volatile in the past year, but overall, prices have trended upward a fair amount.
"I just hope we don't see the volatility in resin pricing this year that we did last year as a result of the hurricanes," he adds.
Like many markets, bulk packaging makers have their eyes on Asia. "As China and India continue to industrialize, these markets have very good potential for us in the long-term," reports Kevin Stuart, marketing director for Paper Systems in Des Moines, Iowa which specializes in manufacturing one-way disposable corrugated totes and returnable collapsible composite plastic IBC systems.
There is limited potential in the short-term, though, he admits because most manufacturing in these countries still relies on human power, rather than machine power, such as lift trucks. As a result, maximum sizes and weights are based on what a single person can lift or move.
"As these countries continue to industrialize and develop their infrastructure, we expect to see significant growth in demand for bulk containers," adds Stuart.
Asian demand has also impacted the supply of raw materials used in bulk packaging. "Up until a couple of years ago, there was a huge demand for raw materials in Asia, especially India and China, and those countries bought up so much [global] supply that it put pressure on worldwide supply," says Scherer. "However, in the last couple of years, more and more raw material plants have come online in Asia, it's taken the pressure off the [global supply] somewhat."
Douglas Silverman, general manager of the Dry Products Division of Hoover Materials in Alpharetta, Ga. also sees the ups and downs of the industry in terms of product demand and raw material pricing.
"Demand has been strong," he states. "In fact, it is continuing to grow." However, he has found that increasing stainless steel prices are becoming more and more of an issue. "We've eaten the first portion of these increases, but it's to the point where we will have to pass these new increases along to customers," he says. However, he adds, the company has been taking steps to lower the cost of its product without compromising quality.
Paper Systems recently introduced its EXO-BIN, a returnable and collapseable package that reduces the cost of return transportation. "In the space taken up by one filled unit, you can return seven empty units," explains Stuart.
Hoover Materials is seeing a shift in the petrochemical market, which is now more often specifying DNV-certified equipment. (DNV, or Det Norske Veritas, is an international provider of services for managing risk, including certification programs). "As such, we have introduced a DNV-certified frame to handle our liquid tote products," he states. This galvanized steel frame, called a Rig Rack, will safely secure 275- to 330-gallon composite IBCs.
Snyder Industries has been introducing more dry-handling IBCs for powders and dry granulars. An extension of this line are cone-bottom IBCs for liquids of higher viscosity, which promote faster, more complete dispensing. "We are also seeing more interest in smaller nonbulk packages, specifically 15- to 30-gallon packages," relates Spurrier. These are useful for customers who may need a specific feature to aid in better dispensing, handling, mixing, and/or storing that may not be filled by traditional drum or pail designs.
In terms of services, Snyder says buyers continually want cost saving ideas. "We spend time with customers' decision makers, such as purchasing, product management, and engineering," discussing the function of the containers and how the containers can improve their own and customers' operational efficiency, such as better dispensing, handling, valve function, etc., that will reduce labor and waste. "We can then incorporate these ideas into feature and function improvements on their specific container design," he adds.
Freedonia reports U.S. demand for flexible bulk packaging is expected to increase 3.4% per year to $7 billion by 2009. Overall advances will benefit from healthy outlooks for manufacturing and retail activity. Film wrap and FIBCs are expected to experience the strongest growth.
Plastics will remain the leading flexible bulk packaging material, with demand growth far outpacing other materials through 2009. Polypropylene will remain the plastic of choice due to its favorable cost/performance profile. Paper use will continue to decline, the result of weak prospects for paper shipping sacks and an increased use of higher performing kraft papers to reduce weight.
Low-cost imports of FIBCs from China and India are expected to limit pricing flexibility for the few North American flexible bulk packaging manufacturers that still exist.
Lewis Anderson, executive vice president of the Minneapolis-based Flexible Intermediate Bulk Container Association (FIBCA), is encouraged by the latest forecasts. "According to this research, FIBCs represent one of the highest growth areas," he states. FIBCA has found that a lot of end users are getting more comfortable with FIBCs after years and years of use, realizing that the products represent a strong and economical packaging option.
"For example, the chemical industry and plastics/resin industry have a long history of utilizing FIBCs," he states. "We are also starting to see more use in the agricultural area." FIBCA has also seen cases where environmental regulations and waste reduction acts have encouraged users of large rigid packaging to shift to FIBCs.
With demand high and so much of the FIBC manufacturing being done overseas, are there problems with supplies and leadtimes? Not according to Anderson. "There has been a shift in production from the U.S. to Mexico, then to Asia," he reports. "However, this hasn't led to any problems with leadtimes because the manufacturers have a lot of experience with warehousing stocks of FIBCs as well as understanding the implications of transportation times. This allows them to keep their customers supplied." However, he admits, there may be longer leadtimes with some of the specialty FIBCs that aren't warehoused in large quantities.
Flexible bulk packaging manufacturers are also struggling with rising materials costs. "Obviously, we are seeing the effects of increases in petroleum prices on FIBC costs," says Anderson. While the industry has been able to hold prices down with the introduction of less expensive (foreign) labor, prices continue to edge up because of increases in the costs of raw materials.
Many FIBCA members are coming up with new products to meet customer needs. One new type of product, for example, features electrostatic dissipative properties. "Some members are also developing FIBCs with rigid inserts for filling and discharging, which can take on some of the properties of rigid packaging, such as load-bearing capabilities," he adds.
Anderson offers a recommendation to buyers on how to get the best value when purchasing FIBCs. "There has been a tendency for buyers to provide detailed specs to manufacturers on what they want, such as certain weight fabrics," he points out. However, he believes, it makes more sense to provide the manufacturer with performance needs for functions such as filling, handling, storage, transportation, etc. Also provide information related to UV exposure, heat levels, and moisture. Then, he suggests, give the manufacturer the "flexibility" (no pun intended) to come up with the best package for the best price to meet those needs. "The manufacturers have years of expertise in designing products based on specific needs, so they can provide the most effective and lowest cost FIBC for you," he emphasizes.
Stuart of Paper Systems offers an additional recommendation: "When making a purchasing decision, look at total cost, not the individual price of a container," he suggests. "For example, you need to factor in return freight costs, labor costs, and other costs." He has found that many customers are finding his company's products more attractive because of increases in transportation costs for returnables, as well as increases in raw material costs for commodities such as plastics and steel.
Flexible bulk packaging demand
(million dollars)
| Item | 1999 | 2004 | 2009 | 2014 |
| Source: Freedonia Group |
||||
| Overall Demand | $4,829 | $5,930 | $7,010 | $8,450 |
| Shipping Sacks | 2,295 | 2,330 | 2,550 | 2,800 |
| Film Wrap | 1,140 | 1,805 | 2,385 | 3,110 |
| Strapping | 618 | 745 | 805 | 975 |
| Drum/Box/Bin Liners | 481 | 675 | 805 | 995 |
| FIBC | 85 | 255 | 335 | 430 |
| Other | 110 | 120 | 130 | 140 |
Rigid bulk packaging demand
(in million dollars)
| Item | 1999 | 2004 | 2009 | 2014 |
| Source: Freedonia Group |
||||
| Overall Demand | $4, 060 | $4,995 | $5,995 | $7,210 |
| Drums | 1,285 | 1,390 | 1,475 | 1,565 |
| Pails | 930 | 1,250 | 1,520 | 1,870 |
| Material Handling Containers | 740 | 990 | 1,295 | 1,680 |
| Bulk Boxes | 710 | 815 | 935 | 1,065 |
| RIBCs | 395 | 550 | 770 | 1,030 |
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