Buyers have built up stock, as they feared potential shortages because of a series of planned cracker maintenance outages. No production issues have occurred to interfere with HDPE supply, however, and by the end of the first quarter, they were using up stock. Lower prices have been offered for spot imported volumes, while contracted prices have remained relatively firm.

Echoing those comments, Blackford Capital founder and managing director Martin Stein noted that IMC’s seasoned leadership team and deep expertise in the plastics injection molding industry will be a “capability multiplier for our customers.” The acquisition, he added, builds a “solid foundation for accelerated and sustained growth within the Davalor platform, paving the way for continued expansion and innovation.”

Suppliers have lost some of the spread built up between ethylene and HDPE in 2016, but it remains well above what it was at the end of 2015, and it has been stable to slightly higher in 2017, with some grades such as HDPE pipe, gaining a little more ground than other HDPE grades.

High-density polyethylene (HDPE) is used extensively in blow-moulded products such as milk bottles, packaging containers, drums, car fuel tanks, toys and household goods. Film and sheet are widely used in wrapping, refuse sacks, carrier bags and industrial liners. Injection-moulded products include crates, pallets, packaging containers, housewares and toys. Extrusion grades are used in pipes and conduit.

Meanwhile, much depends on how Asian markets fare. Low prices in Europe have deterred importers, but falling levels in Asia, coupled with firm contracted pricing in Europe – and new capacity coming on stream – is leading to expectations of more imports into Europe, even before the onslaught of the new North American shale-based material.

By April 2017, more imports were being offered from Asia and Mexico among others, as Asian prices faltered and European contracted levels rose. Demand in Europe is said to be running at a modest increase over 2016.

“We are excited to welcome the IMC team to Davalor. We are committed to providing our customers with the most advanced, most reliable injection molded plastic products available," said Davalor CEO John Boeschenstein. "As we seek to expand our capabilities beyond our core plastic injection molding offering, we are thrilled to have found a strategic partner with a great management team, a professional and highly capable staff, and a strong, design-for-manufacturing approach to injection molded plastics. I look forward to working together to expand our capabilities on a national scale."

Founded in 1947 and based in Lubbock, TX, IMC molds precision components for global customers in a variety of end markets. The long-tenured management team will continue in their current roles, said the news release.

Spot upstream ethylene is still strong, and some HDPE output has been reduced for the lack of ethylene, but when the cracker outages end, a normal balance is expected to return to the market.

Blaige & Co. served as the exclusive financial advisor to NN Inc. on the transaction. Greenberg Traurig LLP served as counsel for Blackford Capital, with legal entity support from Varnum LLP. Parliament Capital Management provided lending for the acquisition, with legal support from DLA Piper. Plante Moran advised on financial and tax diligence, and Signature Associates CRE brokered the Sale Leaseback transaction with STORE Capital.

The supply/demand balance in the European HDPE sector has changed significantly in the past three years, following some definitive planned closures that took place between the end of 2012 and 2015. Closures were made as profitability has been poor in this sector, and producers reacted to the increase of low-cost imports by closing older non-competitive plants.

The unusual situation of 2015 continues to have an impact in HDPE pricing and buying activity. An unprecedented series of force majeures in 2015 meant converters did not have enough product to continue keep all lines running. Apocryphal stories told of empty bottles being airlifted into European sites, and prices soared. The events of 2015 led to many converters changing their buying methods. Security of supply became more important than pricing, and imports have become an integral part of HDPE supply in Europe.

Private equity firm Blackford Capital has acquired Industrial Molding Corp. (IMC), the first add-on acquisition for its portfolio company, Davalor Mold Co. IMC is an independently run subsidiary of NN Inc., a precision metal manufacturer based in Charlotte, NC, with a global footprint. NN Inc. said total net cash proceeds would reach approximately $16 million. IMC is NN’s sole plastics processing plant and, as such, was targeted for divestment because it was not core to its strategic direction.

First-quarter spot prices have not been buoyant in the blowmoulding and injection sectors, however. Film prices have held up better, in line with spot prices in associated polyethylene (PE) film markets.

New supply is coming on stream in North America, and while delays mean that growth will have some time to catch up with supply, an impact from new capacities is expected by the end of 2017/beginning 2018, according to sources.

The Informa Markets Engineering network of B2B media sites includes Design News, Battery Technology, Medical Device & Diagnostic Industry (MD+DI), Packaging Digest, PlasticsToday, and Powder & Bulk Solids.

Founded in 2010, Blackford Capital focuses on the acquisition and management of founder- and family-owned lower middle-market companies in the manufacturing, industrial, and distribution sectors. The company is based in Grand Rapids, MI.

Headquartered in Chesterfield, MI, Davalor provides injection molding services primarily for the automotive industry. It was acquired by Blackford Capital in 2016, and the addition of IMC to the portfolio “marks an initial stride toward establishing a global, full-service plastics injection molding business with a range of capabilities and a diversified, global customer base,” said Blackford Capital.

With supply and demand upstream returning to balance once planned cracker outages are over, HDPE output will also get back to normal. European HDPE buyers expect new production to be available to them as early as the third quarter 2017, but that product will only be available in volumes sufficient to affect the market materially by the end of 2017, beginning 2018.

An increase in import duties from the major importing region of the Gulf Cooperation Council on 1 January 2014, from 3% to 6.5%, combined with a later crash in crude oil prices and also a crash in the value of the euro against the dollar, meant that some European HDPE buyers were unable to get hold of all the HDPE they needed from local sources. Europe subsequently became a net importer of some HDPE grades.

European HDPE producers have managed to keep hold of much of the margin they gained in 2015. Fear of more supply disruption saw 2016 contract prices rise, and again 2017 contracts were tougher for many buyers as weak prices in Europe left imported volumes low.