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New heavyweight entry in HDPE bags.

A company affiliated with Taiwan-based Formosa Plastics Inc. may add some unwelcome capacity to the domestic plastic bag market this year, potentially enough to wreak havoc in a commodity bag business already bloated with excess capacity.

Inteplast Corp. of Livingston, N.J., has started assembling a mammoth HDPE film extrusion and bag-making plant in Lolita, Texas. But its effect depends on timing, product mix and marketing intentions - all factors that have not yet been disclosed.

According to Inteplast v.p. Marss Kuo, the company intends to convert at least 200 million lb/yr of film into T-shirt bags and can liners. He said 100 extrusion lines would be a "good estimate" of the equipment order. Additional plans call for the production of 120 million lb/yr of BOPP film on four lines and possibly the future manufacture of unspecified "specialty films." Kuo placed the cost of the total machinery order at roughly $200 million.

He told PLASTICS TECHNOLOGY that the company has a "professional" plan for bringing on the new capacity slowly, beginning at mid-year. The speed with which the company reaches its "goal of 200 million lb/yr" depends on market conditions, he added.

Inteplast eventually plans to buy its resin for the new facility from Formosa Plastics, Florham Park, N.J., which is building a new PE plant in nearby Port Comfort, Texas. Asked if the new resin facility would result in a competitive economic advantage for the film operations, Kuo claimed Inteplast would not enjoy special privilege with regard to material costs. "The resin will be obtained at market price," he said.

Formosa marketing manager Phillip Chen said the resin-making plans call for production of 440 million lb/yr of HDPE and 528 million lb/yr of LLDPE at new plants scheduled to start up in early 1993. In the meantime, the affiliated film operations will process HDPE from other suppliers.

VEILED IN MYSTERY

Aside from estimating eventual capacity and throughput goals, Kuo was vague on Formosa's specific near-term intentions, explaining that the company's final plans haven't been formalized. He did, however, name Battenfeld Gloucester Engineering Co. of Gloucester, Mass., and Kiefel Inc. of Wrentham, Mass., as the major equipment suppliers for the project.

Kiefel sources declined to discuss details of the order. A Battenfeld Gloucester spokesman, interviewed in December, admitted that Formosa had ordered 30 film lines with in-line bag making and that 11 of the lines were then being assembled.

Kuo declined to divulge the firm's marketing plans other than to say the products would be sold both domestically and abroad. He said the proportion of T-shirt bags to can liners has not been set. Officials at Formosa proper merely confirmed Kuo's estimates but would not reveal further details.

A BAG BUST IN THE MAKING?

The potential impact of 200 million lb/yr may alarm some bag makers, in spite of Inteplast's claims that the extruders will come on-stream gradually. SPI statistics for 1990 place total sales and captive use of HDPE film resins at 527 million lb for all types of bags. Year-to-date figures through October 1991 show nearly a 23% increase over 1990.

Even with a gradual start-up, the new capacity could potentially outstrip any growth in the HDPE market, industry sources said. Meanwhile, a sampling of bag makers interviewed all noted that the market already suffers from excess capacity. Thomas Roland, president of Himolene in Danbury, Conn., said additional capacity from Formosa or any other company could have a "generally detrimental effect on the industry and cause some degree of shake-out." Roland noted that the impact would be greater, for instance, if Formosa threw all its efforts into T-shirt bags, rather than a mix of products.

George Makrauer, president of Amko Plastics in Cincinnati, agreed that various commodity bag markets are already suffering from overcapacity. And he argued that the current "deep-felt recession" limits growth throughout the bag-making business, exacerbating this overcapacity. New entries to the market at this time would only "force prices downward," he said.

Makraue.r added that overcapacity is nothing new in bag making, but rather a perennial burden. To him, the potential threat of even such a large new competitor as Formosa is "just another challenge."

But Inteplast sees the market differently. Kuo placed the size of the entire PE bag market at 2.8 billion lb/yr and said 10% of that capacity is imports. "We feel we can produce a better, less expensive product to compete with these imports," he said, noting that the company also plans to export bags. He did concede that Inteplast may take some market share from "high-cost, low-efficiency" domestic bag-makers.

Formosa likewise insists there is room in the resin and bag markets for other players without forcing existing ones out of the game. "It's not our intention to drive anyone out of business," he said. "We just want a share of the pie."
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Title Annotation:Industry News
Author:Ogando, Joseph
Publication:Plastics Technology
Date:Feb 1, 1992
Words:813
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