- March 01, 1996, Robert W. Marsh
The metallizing industry today is marked by change, challenge, and competition, but opportunities abound in the years ahead.
To assess the current - and future - state of the metallizing industry, Paper, Film & Foil CONVERTER went to the people who make it happen, those who do the metallizing and their suppliers.
A lot of the talk centered on materials. Metallizers started to scramble for polyester film early last spring and continued to struggle through summer and into autumn. Now, guess what? "The polyester film shortage is over," declares Ray Woody, president of Himac. "Prices are going down as fast as they went up. It's going to take a while to get back to pre-1995 price levels, but certainly they'll be most of the way back there by September."
Himac imports all of its polyester film, and Ray Woody says, "Containers of film due in March are coming in at about 50 cents a pound lower than I paid in July. Supply will be no problem."
Adds Ward Thompson, president of Rexam Metallising, "At some point in time, in 1996 or the first half of '97, there's going to be enough capacity coming onstream for supply to exceed demand by a significant amount...and...there's going to be significant pressure on prices."
Bob Korowicki, president of Vacumet Corp., agrees that the shortage ended last fall and predicts, "From the middle of 1996 through the year 2002, there will be a 4 percent price reduction in polyester per year."
But, says Woody, "...when prices start going down, you start to get squeezed from every angle. And for this industry, that's not necessarily good. Unless film prices are going up, you can't raise metallizing prices. Stabilized prices are nice, but going down is not necessarily good for us. There is definitely a lot of price pressure from the packaging converters. A lot of packaging converters were unable to pass through any price increases. Now, they're putting the pressure on us, and I can't blame them."
In a niche market, MSC Specialty Films sputters window film products and lighting reflectors. "We have stringent film requirements," says VP Greame Fairlie. "Our suppliers have been responsive to our requirements and our delivery dates, although supplies have been tight."
The World-Wide View
A global view of the polyester film situation comes from R.W. Graham, Mylar business manager for packaging films at the DuPont Co. "During the first nine months of 1995 in particular, the polyester film industry globally ran right at 100 percent of capacity. It eased off to about 98 percent during the fourth quarter, particularly in the United States and to some extent in Europe. We are anticipating that for 1996 the world-wide polyester film industry will operate at 94 percent of capacity, give or take a point."
Graham says minor growth in capacity occurred during 1995, "but there's a significant amount of capacity coming onstream in 1996. That's the primary reason why capacity utilization will go down. And there will be pressure on pricing." That pressure, he says, will come from a combination of capacity and competition from other substrates, such as polypropylene.
George Stephens, VP/sales and marketing at Darly Technology Co. Ltd., echoes Graham's comment and adds, "Polyester film lost share to other substrates. Metallizers tried to use polyethylene or nylon or polypropylene. If the barrier was good enough, they'd try to substitute it even if there was some argument from the converters."
If the purchase of intermetallic boats is any indication of the health of the metallizing industry, things are looking good. "Our business is up," says J. Michael Morris, market/applications manager, Advanced Ceramics Corp. "Our current customer base, for the most part, is using more material." In addition, "two or three chambers have been added in North America in the past year. Internationally, it's a different story: very aggressive growth. A lot of it is in southeast Asia, China, and India. They're buying new, top-of-the-line metallizing chambers. They're metallizing mostly for local consumption."
A Look at Global Growth
Paolo Raugei, executive VP, Galileo Vacuum Systems Inc., comments: "The growth pattern of the metallizing industry worldwide is still bullish. The trend of the market in the emerging countries is still toward middle-size flexible machines, while in the industrialized countries, the trend is toward 80 inches and above."
In North America, Raugei expects that squeezed profit margins and higher expectations of product quality will drive the market toward the replacement of old machines with fewer, new, state-of-the-art metallizers.
Rexam's Ward Thompson pegs the health of the metallizing industry at "somewhere between well and poor, depending on the individual company" ...and... "the criteria that you are looking at. Growth is still strong. There continues to be good substitution of foil applications." But, he says, "There's not enough being done throughout the industry to develop new products and markets. In Europe, capacity is growing faster than demand. Demand certainly needs to be created there, or, we think, a consolidation will occur. Near term, that's going to put pressure on markets."
The market for his metallized paper looks healthy, according to Francis Shea Jr., commercial director, Van Leer Metallized Products (USA) Ltd. Shea is optimistic, because "The consumer isn't looking for the so-called natural look. Today, consumers are attracted by the integration of graphics and metallizing."
Products made with Van Leer's metallized paper "are unicomponent structures," Shea says. "They are repulpable. More than 99 percent is paper itself, and in most printed, metallized labels there's less metal than ink." Today's labels, he says, are "valuable to the consumer for the information about the product they provide or even as collectibles."
Reflex Technologies is focusing on applications that may replace polyester with thin PP, according to VP David Koopman. Reflex Technologies became the exclusive sales agent, except for capacitor films, for Bolmet Inc. in January. "We're working with them to develop markets in wide widths such as food packaging, graphic arts, industrial, decorative, and security," says Koopman.
Predicting a Resurgence
Koopman sees "a resurgence" in metallizing. "Fabricators have back orders for machines. Metallizing in general is still growing in terms of the consumption figures that I've seen. Our focus will be - and some of the end-users of metallized film are going to be concerned with this - looking at alternative sources to polyester but also getting better adhesion."
The applications that are making metallizing grow, says Koopman, include security devices, electronics, anticounterfeiting applications, static-control packaging, cellular products, MRI machines, and medical diagnostics."
The flexible packaging sector of the metallizing industry will grow at about 3, 4, or 5 percent this year, says Mary Ann Otto, VP and general manager, Scharr Industries Inc. "We have several exclusive contracts with large converters where we have 100 percent supplier status. And they're predicting growth in the 3 percent range."
Anthony A. Broomfield, manager, GVE Americas, is optimistic about his portion of the metallizing industry. He says, "In terms of supplying machinery into the metallizing business, we currently have a very large paper metallizer in the final stage of construction in England that will be delivered to the States in about two months time. We're also talking to others who are planning to increase capacity in metallized paper. So I think the dip we saw in the market is being regarded as a temporary situation."
Some Fixing Is Needed
Every industry has its problems, and the metallizing industry is no exception. Ray Woody points to one of them: "...it's fragmented. The result is problems for the metallizing-only companies. The industrial coating and laminating companies also have metallizers. And when the going is slow, some of those companies will do something irresponsible pricing-wise to fill the metallizers up. With that kind of price pressure, it makes it hard for the industry to grow beyond a cottage-type industry to a full-scale industry."
Woody sees another potential problem in "the BOPP [biaxially oriented PP] business [where] the film producers themselves do the metallizing. When is the first polyester producer going to do that? It was done years ago, and the question is, when is it going to come around again?"
Ward Thompson has a problem with low inflation. It's "one of the difficulties that the industry faces," he says. "A very-low-inflation economy is good, but that puts a lot of pressure on industrial products pricing, and when we've had raw materials price increases, as we've had in paper and film in the last two years, that puts a tremendous amount of pressure on converters, because the major consumer products companies resist price increases very strongly. I'm not one of those people who just sit back and whine about the compression of margins - it's a fact of life, and you have to deal with it. I'm convinced that if you add value to your products and services, your customers will reward you for it."
Terry Carroll of Core Connections Inc., North American representative for Hanita Coatings in Israel, sees "...a lot of dinosaurs out there," indicating that 20-year-old equipment cannot remain competitive much longer. "The demand for resistance deposition product is beginning to phase out, and the metallizing industry would be healthier if it spent more resources on developing new technologies."
David Koopman's vision is different. "The most difficult problem is that of not promoting the growth of the industry in general. Instead of knocking competition, let's encourage people to talk to as many metallizers as possible to promote the use of metallized film rather than always be focused on beating the other guy down on price. Our industry could do a better job of promoting itself.
"There's a host of opportunities with substrates that aren't films, such as nonwovens, textile-related, and paper. By taking a broader view, and considering what the properties of aluminum and other metals could do thermally and electrically, we can take advantage of those opportunities."
"Overcapacity in metallizing is the biggest problem facing the industry," says Mary Ann Otto at Scharr, "because it drives prices down. Also, captive metallizing by polypropylene producers is another problem the industry faces. Our approach to these problems is to keep the metallizing division a commodity business. And we're going to run the wheels off our holographic and sputtering technology."
Looking at Europe, Tony Broomfield, GVE, sees a shortage of the right quality of paper for metallizing. "There is a desperate shortage, because cigarette companies have made the switch, or have made the decision to make the switch, from aluminum foil/paper laminates to metallized paper because of the difficulties of disposing of aluminum/paper laminates. That soaks up a lot of paper metallizing capacity and also the paper-making capacity in Europe. One of the major paper metallizers here in the US imports a lot of its raw paper from Europe. Whether that will become a problem for the metallized paper business, I don't know."
Customers Demand Quality
Opportunities do exist, says Himac's Ray Woody: "One of the great opportunities is the use of metallized film in medical packaging. We've got a lot of tests going on right now, and if we could make a breakthrough, it would open a huge opportunity for us and film-makers, too, because it gives them the opportunity to make some unique films that could then be metallized."
But "a shiny face on plastic isn't good enough," says Bob Korowicki of Vacumet. "Our customers have become very, very savvy on quality. It's not just a look anymore -- we're selling a performance-based product. The industry is really focusing on a quality performance product through the whole chain. Those who are dedicated to that, those who know how to produce that, will survive. Those who have been trying to sell a cheaper product, not understanding the requirements of the market, have done an injustice to the metallizing industry at large and to our customer base."
Opportunities for equipment sales appear good, too, but not in America. As Darly's George Stephens sees it, "The demand for good, high-tech equipment is stronger outside the United States. In the Pacific Rim they're growing at about 13 percent, and they're thinking they should cool it down to about 10 percent."
Rexam sees "opportunity in metallized paper in new applications and not just in the traditional markets of labels and gift wrap and so forth," says Ward Thompson. "We just think there's an awful lot of opportunity for metallized paper in printing applications. And the label market is not saturated by any means. On the film side, we see significant opportunities and are working very hard to develop new products with improved barrier properties. There's a great opportunity to reduce the amount of layers in laminations and maybe eliminate laminations completely with some very high-barrier products."
Opinions on the Future
What of the future? It lies "in the metallizer's ability to understand the end-use applications of the products it produces," says Shea. "Instead of just producing a production order, the metallizer may be able to provide a better product at a better value if he understands what the end-use requirements are."
According to Ray Woody, "The greatest opportunity facing this business is price responsibility, not only from the commodity metallizers but those other guys who snipe around the edges."
For Bob Korowicki, "Foil replacement is still the greatest opportunity for the metallizing industry, considering volume, need, and a functional product. He urges metallizers to "service their customers and not just sell a pretty metallic surface. The alignment with the supplier, the metallizer, and the customer is the real future of our industry. By that I mean a working relationship. The supplier knows what my problems are, I know what the customer's problems are, the customer knows what the film supplier's problems are, and the customer knows what our problems are, so it's a relationship that creates understanding through the whole system of how to better service the end-user."
George Stephens believes that 1996 will be a challenging year for the metallizing industry. "First, there has been a significant switch from metallized polyester to metallized polypropylene in the past 12 months. It's the difference in price between the two and the fact that the performance gap between metallized polypropylene and metallized polyester has been narrowed somewhat. And a lot of the metallized polypropylene is being produced by the polypropylene producers themselves. The issue of excess capacity in the metallizing industry is probably going to be more acute during 1996 than it has been.
"What's going to further complicate things is that the new Asian polyester film producers have installed their own metallizing capacity. So what you'll see is metallized polyester being exported into the United States, rather than just plain polyester. It will be serious competition for US metallizers. Yet, the US metallizing industry will still see fundamental growth in 1996. There will be growth in the need for improved barrier, but there will also be an increased amount of fighting to see who gets it."
So there they are: the problems and the promise of the metallizing industry. Interesting times lie ahead.
Advanced Ceramics Corp., Cleveland, OH; ph: 216/529-3900; fax: 216/529-3954.
Core Connections (rep. for Hanita Coatings), Newtown, PA; ph: 215/860-7479; fax: 215/860-6984.
Darly Technology Co. Ltd., Bloomfield, CT; ph: 203/243-5518; fax: 203/286-0162.
DuPont Co., Wilmington, DE; ph: 302/992-3100; fax: 302/992-6994.
GVE Americas/General Vacuum Equipment, Charlotte, NC; ph: 704/588-5915; fax: 704/588-8059.
Galileo Vacuum Systems Inc., East Granby, CT; ph: 203/653-5911; fax: 203/653-6540.
Himac, Atlanta GA; ph: 203/743-6069; fax: 203/653-6540.
MSC Specialty Films Inc., San Diego, CA; ph: 619/576-0200; fax: 619/571-3605.
Rexam Metallising, Oak Brook, IL; ph: 708/586-0200; fax: 708/586-0208.
Reflex Technologies (agent for Bolmet Inc.), North Andover, MA; ph: 508/681-7666; fax: 508/685-1048.
Scharr Industries Inc., Bloomfield, CT: ph: 203/243-0343; fax: 203/242-7499.
Vacumet Corp., Wayne, NJ; ph: 201/628-0400; fax: 201/628-0491.
Van Leer Metallized Products (USA) Ltd., Franklin, MA; ph: 508/541-7700; fax: 508/541-7788.