It's a buyer's market for fibcs
By Staff -- Purchasing, 4/8/1999
More than ever, the import of flexible intermediate bulk containers (fibcs) is pushing the price of commodity-type bags down even further--prompting domestic manufacturers to pursue niche markets with more specialized bags.The impact from imported bulk bags cannot be overstated. According to data from the U.S. Department of Commerce, just under 14 million fibcs were imported into the U.S. in 1998. Where are the bags coming from? The Philippines and Turkey are two large exporters, but the biggest amount comes from Mexico--1.1 million bags last year.
Lower labor costs keep prices down for these bags from Mexico, and many U.S. suppliers have either linked up with foreign producers or opened plants in Mexico. This has resulted in most suppliers offering dual product lines: imported "commodity" type products, and domestically made bags directed for niche markets or specialty applications.
The other factor inhibiting prices is low raw-material costs due to the financial crisis in Asia. Polypropylene (PP) tags and polyethylene (PE) have declined over the past year. fibcs are mostly made from woven PP, with PE liners sown or tabbed inside. Bulk bags are the most common form of fibc--collapsible containers for dry, flowable products.
Already economical--now more so
For several years fibcs have reaped business from the trend away from smaller containers such as bulk boxes and sacks. This was prompted both by rising landfill costs and the economic benefits of transporting in larger bulk quantities. But with the downward price pressure fibcs have experienced over the past couple of years, a bulk container that already provided key economic advantages now comes at a much lower price.
The lower price comes not only from lower raw-material tags and cheaper imported bags, but also from a very competitive marketplace. "It is even more competitive than last year," says Ron Kirsch, VP at King Bag.
While imported bags now make up over a quarter of the total fibc market, these bags can differ dramatically in quality from manufacturer to manufacturer. This has prompted some domestic producers to open manufacturing facilities in Mexico, where they can control the quality of the bags produced. Still, the quality of imported bags is improving, as some U.S. companies form stronger links with overseas producers.
Most U.S. producers look to their specialty-bag products as the true opportunity for growth. Markets such as pharmaceuticals, foods and beverages, and agriculture are increasingly using fibcs for shipping and storage. But there remains competition from the foreign-produced bags. "There is increased competition from foreign suppliers--even between commodity and specialty markets," says Grant Patterson, vice president at Bulk-Sak.
Suppliers stress the specific attributes of their specialty bags. Bulk-Sak, for example, lays claim to being successfully audited by the American Institute of Baking's Food Safety & Hygiene program. "We specialize in food-grade bags and are the only fibc supplier to be successfully audited," says Patterson at Bulk-Sak.
New designs are continuously being created: lined-bags for liquids, bags for high-purity applications, or for viscous products. A big trend in fibcs has been in baffle-designed bags. This design helps prevent bulging and supports stacking of the bags--making the bags fit like a box. They are manufactured square and remain square, allowing more material to fill the bag.
Despite the fact that most manufacturers guarantee a bag only for one-time use, many bags are reused. If so, the bags should be recertified for reuse. Some producers offer closed-loop refurbishing services, which clean and test bags to be sure they're safe, and add a new bag-liner. Buyers should insist that the bag is fully documented.
For buyers, the news will continue to be good. "The price pressure will probably continue for the next four to five years," says Kirsch at King Bag. The good news for suppliers is that the bulk-bag market is still growing. But here's one warning from a producer: "We're seeing good economic times in the U.S. right now, but when the economy starts to slow there are going to be too many players in this business."
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