AKRON, OHIO (Nov. 25, 10 a.m. EST) — First the good news: After a two-year smack-down, the U.S. market for injection presses apparently has bottomed out.
But there's still plenty of the bad: molding work moving to China, bankruptcies and auctions dumping late-model presses on the market, customers postponing buying decisions.
Two of the largest North American players, Husky Injection Molding Systems Ltd. and Milacron Inc., have lost money for two years in a row. Other companies are privately held, so they can hide their pain.
Machinery leaders say capacity utilization needs to hit 85 for a healthy pickup in sales. In too many molding plants unused machines sit idle as capacity utilization steadily rose to more than 80 percent through midyear, then fell back into the high 70s in the summer and fall.
The numbers don't look good, especially compared with the booming mid- to late 1990s, when U.S. press shipments regularly hovered above 6,000 annually and even set a record, topping 7,000. Explosive sales continued through the first half of 2000, and even though the brakes slammed on after that year's NPE show, U.S. shipments recorded a solid 6,420 presses in 2000, according to the Society of the Plastics Industry Inc. in Washington.
But in 2001 shipments plunged 44 percent, to 3,585. This year will be about the same, according to many machinery executives.
They say 2003 could be another slow year. And the hushed talk around water coolers and at hotel bars at trade shows is that competition from molders in China could hold the U.S. market at that lower level for several years.
“We do hear a lot of talk about fear of China,” said Jeff MacDonald, Husky's vice president of marketing. “But the molders that are taking it head-on, and realize the road to success is going to be more automation and running more efficiently, are the ones that are buying machines today.”
Michael Santa, president of Battenfeld of America Inc., said 2003 “is going to be a struggle.”
“The downturn has been a lot longer than anybody anticipated, but there are real signs that the worst is behind us,” said Santa of Battenfeld in West Warwick, R.I.
Santa agrees with industry leaders who think the definition of a “good year” will be ratcheted down to 4,000 or 5,000 machines. “I don't think we can expect the levels of 6,000 and 7,000 that we enjoyed in the 1990s.”
Paul Caprio, executive vice president of Krauss-Maffei Corp. in Florence, Ky., agreed that 7,000 is just a warm memory. “I don't think we're going to see that again for awhile, if ever.” He thinks 2003 will remain flat. “But we should see growth again as soon as 2004,” he said.
Caprio is not all gloom and doom. “We need the [original equipment manufacturers] to come out with new products, and that will spur on the mold-building and the new-machinery markets,” he said.
Husky of Bolton, Ontario, saw sales decline 9.3 percent to US$580.9 million in fiscal 2002, ended July 31. “We don't see that the market is going to grow significantly” in fiscal 2003, MacDonald said. “We think it's probably going to stabilize at this lower level from the peak times.”
Despite losing money last year, MacDonald said Husky has maintained a good cash flow and seen orders improve. Husky is well into its restructuring to supply a broader range of press types. The company also makes its own robots, builds hot runners and designs entire molding plants. “We're not just selling a commodity machine,” he said.
Scott Kroeger, Van Dorn Demag Corp.'s vice president of sales and marketing, called 2002 “a challenge” for the Strongsville, Ohio, company.
“We're showing steady business. It's not steadily increasing. But we do see some light at the end of the tunnel, as the quoting activity is higher and customers are seeing their business picking up,” he said.
On Nov. 19, sister companies Van Dorn Demag and Demag Ergotech GmbH announced they were merging into one company, while each retains existing assembly operations.
Kroeger said molders are buying new technology to break out of the pack. “We see very little replacement going on,” he said.
Kroeger said he thinks it will take a 1½ to two years to return to substantial machinery sales.
In its third-quarter conference call to analysts, Cincinnati-based Milacron said it expects to lose money for the full year of 2002. Milacron leaders said they might break even in the current, fourth quarter, and expect to break even for 2003.
Harold Faig, president and chief operating officer, told analysts activity has improved, but it's still hard to get orders. Faig said automotive, medical and housewares markets have held up this year.
Milacron has said spending on new plastics machinery will lag two or three quarters behind any solid manufacturing rebound.
Even if sales do increase next year, machine pricing remains weak. “We feel that the price deterioration suppliers encountered, especially in injection molding, will remain for some time to come,” said analyst Chris Staneluis of Cleveland-based Midwest Research Inc.
“Commodity machines are pretty difficult right now,” said Fried-erich Kanz, president of Arburg Inc. in Newington, Conn. Arburg is promoting its specialties, such as multicomponent, thermoset and silicone molding, and the MuCell process. The new All Drive press allows the customer to select a fully electric press or use hydraulics for the ejector and nozzle contact force.
Kanz said Arburg's U.S. sales improved slightly in 2002. For 2003, he said: “I think we have reached the bottom, but it will take awhile until we really see significant growth. However, the companies with the best technology and best support people are able to win market share in difficult economic conditions.”
But what if that market has shrunk dramatically? Kanz wonders about the rush to China. “Will these people who are moving their production plants to China, at the end of the day, be completely happy that they will remain in China long-term? The future will tell us,” he said. “On the other hand, this country needs to have more sophisticated molding, more molding with automation, so this country will be more competitive.”
Kanz said European molders, which face very high labor costs, already are highly automated. U.S. molders will need to do the same to compete with dirt-cheap Chinese labor. “I think the Americans have the same chance.”
Tim Glassburn, vice president of Toshiba Machine Co. America, said China “is going to have a long-term effect” on U.S. press sales. But he said new machines, especially all-electric presses, can help fight back by boosting quality. “If you make all good parts, you can automate more and you don't need to have people inspecting them as much.”
Glassburn sees some customers trying to win by molding large parts, which are harder to ship from China. That apparently has fueled some large-machine sales, he said.
For Toshiba of Elk Grove Village, Ill., 2002 is the same as the year before. “You get a really good month, then you get a bad month. Nothing's consistent, although it has stabilized at a certain level,” Glassburn said.
President Masahiro Ueno of Nissei America Inc. in Anaheim, Calif., is cautiously optimistic about next year, when he thinks the market could return to 4,000 presses. Packaging and auto-motive molders are buying machines.
Ueno cited the shift of computer and cellular phone production to China, which has hurt sales of small-tonnage presses. “It will be very difficult to come back to the U.S. again,” he said.
Business in midsize presses is picking up, said Bob Columbus, business development manager for Niigata Engineering Co. Ltd., represented by Daiichi Jitsugyo (America) Inc. of Itasca, Ill.
“We're seeing a lot of good budget planning, especially from the automotive industry,” he said.
For Kawaguchi Inc. in Wheeling, Ill., normal business resumed earlier this year when its Japanese parent emerged from protection from creditors.
“All of our customers are coming back and they're replacing older machines,” said Patrick Muira, vice president and general manager, although he allowed that several of Kawaguchi's U.S. customers have moved molding presses to China. “I don't think we can ever expect the same number of sales,” he said.
Strong automotive business has helped Ube Machinery Inc.
“Our sales were very good this year,” said Jason Forgash, regional sales manager at the company in Ann Arbor, Mich. Several Japanese transplant automakers have introduced new models, boosting Ube sales, he said.
Mount Gilead, Ohio-based HPM returned to injection press manufacturing last year — just in time for the bear market. “We're seeing an increase in activity with quotation requests and ordering,” said Gerry Sposato, director of sales and marketing for the HPM Division of Taylor's Industrial Services LLC.
Sposato said molders are waiting until 80-90 percent of molding time for a new machine is sold before placing an order. “They're more cautious. They want to make sure they have a firm commitment from their customers first,” he said.
Netstal Machinery Inc. “was able to pretty much hold [its] own and actually even gain some market share” in thin-wall packaging, said Rick Shaffer, president and general manager of the company in Devens, Mass.
Netstal is a major producer of presses to make compact discs and digital versatile discs. The U.S. market for audio CDs is flat. DVD players will be under many a Christmas tree next month, and that market is buying presses.
“It is something that's growing, but the growth is not quite as strong as it was predicted to be,” Shaffer said.
DVDs and automotive molders are helping Sumitomo Plastics Machinery of America LLC have a decent year, said Jerry Boggs, executive vice president of the company in Norcross, Ga.
“Our business this year was up considerably because of the DVD activity, compared to last year. And it's coming from the major producers,” he said.
Boggs agreed that the overall U.S. market has changed. “I don't see a return to the 6,000 range for some years down the road. It's going to be tough to get to that level in the next few years,” he said.
Robert Koch, president of Boy Machines Inc., said the Exton, Pa., small-press specialist is “well ahead” of last year, thanks to a diversified mix of medical, consumer electronics and automotive customers.
“Quote levels are extremely high. Orders are very brisk,” he said.
Sales are up 30 percent this year at Fortune International Inc., according to Patrick Rice, sales manager for the Somerset, N.J., company that sells Victor Taichung presses from Taiwan.
The company has added sales representatives as it tries to reach general-purpose molders in more parts of the country. “It's paid off this year,” Rice said.
A payoff. Some black ink. That's what machinery manufacturers are hoping for as they scan their crystal balls.