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Do molders and toolmakers need to invest in more capacity?

By: Don Loepp

August 15, 2013

Is there pent-up demand for machinery and equipment among U.S. molders and mold makers? That's the word from economist and plastics specialist Bill Wood.

Wood, writing for the MoldMaking Technology blog, says he's been keeping a close eye on Federal Reserve Board data, and he notes that despite two years of "robust growth" in total output, there's been very little change in capacity utilization.

In other words, molders and toolmakers have learned to keep up with rising demand from their customers without investing very much in new capital equipment.

"This situation is not sustainable over the long term," Wood writes. "Manufacturers have been reluctant to expand their production capabilities, and this is creating some pent-up demand. We expect that very soon the capacity utilization rate will start to rise in order to keep up with expanding demand for plastics products. As the utilization rate rises it will spur demand for new molds and new equipment."

Plastics News has been writing for a while about how processors and toolmakers are under pressure to invest in new capacity, mostly from automotive OEMs. (See "Analyst: North American mold makers need to expand," and "Auto suppliers need equipment, workers," as recent examples).

Many companies have been slow to add capacity, following the economic meltdown of the Great Recession. But according to Wood, we're getting to the point where the industry just can't keep up with demand without investing in efficient new equipment.