Plastic resin distributors set sights on automotive sector, Latin America

Distributors of plastic resins have experienced strong growth in the past five years and, for one, the next course of action is to strengthen links with end users in a handful of selected industries including the automotive sector.

M. Holland has been distributing plastic resin in North America since 1950. The business has doubled in size in the past five years through a policy of selling materials to a broad base of customers, Peter Nutley, VP Operations, told Petrochemical Update.

Last week the company announced the formation of a business-development organization to coordinate sales and sourcing strategies aimed at end users from specific markets. The new team will be comprised of market managers, strategic account managers, and applications development engineers. It will target end users in the automotive, flexible packaging, color and compounding, and medical sectors. The decision to focus on specific segments was brought about by a recognition that “our suppliers are looking for more concentrated development in specific market segments,” Nutley said.

M. Holland spent one year preparing for this step, in which it consolidated and organized data from customers about the end users with which they work. This was no simple task, Nutley noted, because suppliers’ visibility about their end users can become blurred by the multiple resale and distribution channels that they use to move their products.

These developments have been taking place against a backdrop in which prices for most resins were flat to lower entering the second half of 2016, with polyethylene unchanged from the same time the previous year, according to The Global Plastics Letter, which reports on pricing trends in plastics.

Consolidating the marketplace

The formation of a business-development unit is a relatively new marketing strategy for M. Holland, whose role as a distributor is to consolidate the demands of the marketplace and bring those demands to their partners – the producers of plastic resins, Nutley explained.

The director of sales and operations planning at another large North American distributor described how the industry is able to serve end users more effectively than the suppliers would if left to their own devices. Distributors ship out the plastic resins on shorter lead times because they stock materials in their own warehouses. They can also group together materials from multiple suppliers and put them all in the same truck for delivery. A major advantage of selling products through a distributor, the source said, is that it gives suppliers access to customers that they would not necessarily be able to access alone.

“A lot of the minimum-order quantities of these large vendors make it impossible for customers to do business with them. At the extreme point, some of the vendors have rail-car minimum buys. As a distributor, we come in, we buy a rail car, we package it off and we sell that rail car to many different customers,” he said. The end result is “one destination versus many to get to the end user, to get to the actual customer.”

Like M. Holland, PolyOne Distribution has “solid relationships” with some of the world’s largest plastic resins producers. A major challenge is keeping those customers who are very price-focused. “This goes hand in hand with the way economy is: it’s a cutthroat world out there,” the source said.

Next stop: Latin America

Both the distributors who spoke to Petrochemical Update noted that their companies are looking to expand beyond just their usual end users in the United States, Canada and Mexico. Nutley said he expects U.S. demand for the products marketed by M. Holland to grow at 4% per year. In Latin America, the company hopes to double its business over the next five years. To achieve this, it will need to shift from its historic “export mentality” and toward a focus on “rateability”.

Nutley, explained: “Typically, the way that export works in the U.S. today: it’s a release valve for excess material, excess inventories. Their availability is suspect, [because it is] based on inventory positions; and what distribution brings to a marketplace is consistency, rateability, forecastability."

With expansion into Latin America, the aim is to bring “that rateable, consistent, planned monthly volume to a market segment that’s largely been served by available inventory as a release valve. When there’s excess, there’s material to export; when there’s not, there’s no material to export. And we look to bring stability to our customers in Latin America.”