By Pete Julius
For many years, the plastics industry has shown up near the top of just about every new and expanded analysis that we conducted. Then the industry seemed to all but disappear. The chart below provides a four-year insight into the number of new and expanded facility announcements within the plastics industry. In 1999, a total of 520 new and expanded facility announcements were made across the country. Then came a sharp decline, and by the end of 2001 there were only 284. By the end of 2002 however, that trend began to reverse, with 46 new and expanded facility announcements.
Source: Conway Data Scoreboard
It’s easy to speculate about several factors that might have contributed to the industry’s dramatic decline. Economic hardships, the burst of the technology bubble, a rapid decrease in capital expenditures, or companies moving their manufacturing facilities overseas could all play a part. In fact, it’s harder to see why the industry seems to be making a comeback.
Two things must be emphasized. First, this is only a one-year upswing. It appears as though the plastics industry is in the process of making a significant comeback, but there are still too many existing variables that could stunt this increase in new and expanded facility announcements. Those variables include a shaky economy, the threat of war with Iraq, the continuing threat of terrorism, and lingering ripple effects of the accounting scandals. Supplier linkage relationships or any other inter-industry activity that may increase or decrease could also affect plastics.
Second, this is only one measure. Other statistics must be considered, such as growth and emerging trends. However, new and expanded facility announcements are a powerful indicator. Through our research, companies relocate or expand because of significant changes within an organization. These changes can be summed up in new and expanded announcements. They provide strong indicators of activity but neither detail nor causes. However, this chart includes a very intriguing statistic.
As the chart indicates, 46 more new and expanded announcements were made in 2002 than in 2001. The intriguing detail is in the vast difference between the number of new announcements and expanded announcements for the same time period–39 expanded facility announcements in 2002, but only 7 new facility announcements. This indicates that plastics companies are more inclined to expand and stay in their current surroundings, as opposed to establishing a new facility in a different location. So what does this mean to economic development organizations? It suggests that organizations should focus their efforts on retaining current plastics companies, as opposed to attracting them to their community.