By: Don Loepp
April 11, 2013
ORLANDO, FLA. — It may be a K show year, but that's not stopping a major German machinery company from making 2013 all about North America.
Part of the reason is the shale gas boom and its looming impact on the global polyethylene market.
Troisdorf, Germany-based Reifenhäuser GmbH & Co. Maschinenfabrik, a major manufacturer of extrusion equipment, is pursuing a USA-first attitude this year. The company is moving its North American headquarters to Wichita, Kan. — the home of Westland Corp., a screw maker the German company bought in December.
Reifenhäuser also is sponsoring a series of free, one-day flexible-packaging seminars in June across the U.S., to talk to customers about key trends in the market.
Managing Director Ulrich Reifenhäuser said the company sees great growth prospects in the North American flexible packaging market, in large part because of shale gas.
"This fiscal year [in North America] is very, very strong, the best in 15 years. Last year we had a focus on China; it was our China year. This year is for the U.S.," Reifenhäuser said at a news conference in Orlando.
"What we see is our customers are looking at new investments. They are fed up with Chinese plastic goods coming here. They want to make products themselves," he said.
The real impact of shale gas on the PE market is a few years away. Ethane from natural gas can be used to make PE feedstocks, and new natural gas discoveries have led to a surge in PE expansion announcements. But most of the new capacity, an estimated 11 billion pounds, will come online in the next five years.
Reifenhäuser said his flexible-packaging customers already are preparing to take advantage of the boom.
On the film extrusion side of the market, the first companies to add capacity may be those that make sacks used to transport resin, said Steve DeSpain, vice president of sales and general manager of Reifenhauser Inc., the company's North American unit. Resin industry analysts expect North America to boost PE exports significantly as new capacity becomes available. Much of that resin will be transported around the world in PE sacks.
"We're already seeing customers looking well enough ahead, and more are going to be doing so," DeSpain said. "We see near-term growth, but also long-term. We see the flexible packaging industry growing.
Reifenhäuser added: "When we talk to customers, the willingness to invest is there. They grasp the possibilities offered by this shale gas."
Longer term, he expects growth in food packaging, where Reifenhäuser offers 7- and 9-layer lines that offer benefits over commodity films.
Another important part of Reifenhäuser Group's emphasis on North America this year is the fresh acquisition of Westland, which is now called Reiloy Westland Corp. Reifenhäuser's Reiloy Metall unit makes screws and barrels in Germany.
Buying a U.S. company was a big step for Reifenhäuser, which until now has done all of its manufacturing in Germany. The family-owned company was founded in 1911 and got into plastics after World War II.
"It's a strong step. It's a first step," Reifenhäuser said of the Westland deal. "It symbolizes how we want to participate and react to this [U.S.] market, which is still the largest global market."
Reifenhäuser talked about how the company recovered from the 2008-09 recession, when sales dropped to about 100 million euros — just 30 percent of the 2007-08 level. But the company managed to keep its expertise, thanks to a German government program that allowed employees to work short schedules and still collect partial unemployment benefits. As a result, Reifenhäuser has seen sales recover sharply, to about 450 million euros. But much of that growth is outside Europe — with the exception of a few markets like Poland and Russia, much of Europe remains in a recession.
But as growth returned to Germany and export markets outside Europe, lead times for equipment got too long. The Westland acquisition helps on that front, since now Reifenhäuser has a North American base where it can manufacture screws and barrels. The next step will be to improve service and aftermarket support, DeSpain said.
"If we're going to grow the business in North America … we have to improve our sales, service and aftermarket support," DeSpain said.
The company is making some concrete changes. Reifenhäuser now is stocking more spare parts in North America; it has developed a proprietary web-based tool that customers can use to find the right parts and order them online; and it hired Jim Snell as project manager, who will serve as a technical expert to Reifenhäuser customers.
The next step will be to move the North American operations — Reifenhauser Inc. — to Wichita, from Danvers, Mass. Reifenhäuser said it makes sense to base the regional operations where the company is making screws and barrels.
Workers in Danvers have been offered positions with the company, and in the meantime they have committed to staying on through the end of the year. The Danvers operation will close in September.
Wichita, meanwhile, will be adding equipment and personnel. The plant currently employs about 50, but it should be up to 60 within a year, said Dave Larson, president of Reiloy Westland. The plant also has $1 million in new equipment on order.
"The announcement of this acquisition, it's been so much more than I expected," Larson said. "We see growth in North America. We see a lot of opportunities coming back from Asia. We think that there's a lot of very positive things happening in North America with the plastics industry. I know there are still a lot of people saying negative things, but we're not seeing it," he said.
The company's flexible packaging seminars, which will be invitation-only events, will take place June 25 in Grapevine, Texas, near Dallas; June 26 in Atlanta; June 27 in Rosemont, Ill., near Chicago; and June 28 in Mississauga, Ontario, near Toronto. The seminars will include speakers from other suppliers, in addition to Reifenhäuser, highlighting machinery and material developments in flexible packaging.
Reifenhäuser Group will run seven machines at the show, which will take place Oct. 16-23. The lines will represent the company's whole range of extrusion technology, Reifenhäuser said.