Industrial film extruders see steady growth.

* North American industrial film manufacturers are optimistic about growth in 2005 and 2006, as detailed in Mastio's most recent polyethylene film market study. This study defines industrial PE film as stretch film, shrink film, industrial and commercial product liners (formerly known as industrial liners and rack-and-counter bags), multi-wall sacks, bubble packaging, agricultural film, construction film, and heavy-duty sacks. In 2005, these films are expected to consume 5.5 billion lb, nearly 30% of total PE film resin. About 65% of that is LLDPE and 28% LDPE. With an average annual growth rate (AAGR) of 5.2%, these markets will hit 6.4 billion lb in 2008.

Stiff competition

Processors say demand for industrial films remains strong, but it is very difficult to be profitable in low-margin, commodity markets such as construction film, industrial liners, and heavy-duty sacks. Continued cost cutting will be essential to stay competitive.

Low-cost manufacturers in China, India, and Thailand are a major concern for domestic industrial film makers. Besides significant amounts of imported stretch film, imports of stretch-wrapped finished goods also depress domestic film demand. On the other side of the coin, several U.S. producers export 1% to 5% of their stretch film to Mexico and South America.

Stretch film is one of the largest, most rapidly evolving industrial PE film markets, topping 1.9 billion lb in 2005, an increase of nearly 36% over the last three years. But all stretch film producers seem to agree that higher resin costs have diminished their profit margins. The stretch-film market is expected to enjoy an AAGR of 6.8% and reach about 2.3 billion lb in 2008.

Commercial and industrial product liners are the second largest industrial film market and represent 918 million lb of PE resin, which should grow to 1.03 billion lb in 2008. However, liner manufacturers forecast a modest AAGR of 3.8% due to increased resin costs and imports of finished goods packaged in industrial liners. On the other side, conflicts in the Middle East have raised demand for liners to protect military goods in transit and storage.

Shrink films will exceed 792 million lb in 2005 and with a 5.8% AAGR, should top 939 million lb in 2008. Increased resin cost has been the largest negative factor affecting this market, and manufacturers have downgauged their films to save material.

Harder to predict

The construction film market remains very unstable, fluctuating with the housing industry, road building, and weather. Housing industry experts expect higher mortgage rates, which will start to cool the homebuilding boom next year. The current market of 623.4 million lb is forecasted to grow 3.2%/yr to 685 million lb in 2008.

Several factors make growth of agricultural films also difficult to predict--heavy rains, drought, and lack of awareness of the film's benefits to farmers can depress growth. An AAGR of 3.8% would increase the size of this market from almost 46 million lb in 2005 to 455 million lb in 2008.

Heavy-duty sack producers expect an AAGR of 4.6%, which will boost resin consumption from 518.4 to 593.3 million lb by 2008. Bubble packaging is projected to rise 5.5%/yr from 228 to 268 million lb over the next three years. Multi-wall sacks will see the slowest growth of 2.6%/yr from 94.6 to 102.3 million lb. New all-plastic heavy-duty bags have eaten into the multi-wall sack market.

Mastio & Company in St. Joseph, Mo., is a consulting firm specializing in industrial consumer opinion research and market trends in the plastics industry. For more information, call [phone] or visit www.mastio.com/pt/outlook.html.

INDUSTRIAL POLYETHYLENE FILM

2005-2008
                  % Average Annual Growth Rate

Stretch Film                   6.8
Shrink Film                    5.8
Bubble                         5.5
Packaging
Heavy-Duty                     4.6
Sacks
Commercial/                    3.8
Indust. Liners
Agricultural                   3.8
Film
Construction                   3.2
Film
Multi-Wall                     2.6
Sacks