AKRON, OHIO (Nov. 24, 10 a.m. EST) — Once upon a time, “cautious optimism” was just a buzzword. Ho-hum. But right now, it sounds pretty exciting to leaders of injection molding press suppliers, after a three-year period of desolation that some are calling the worst downturn in the history of U.S. plastics machinery.
Solid growth by the U.S. economy and rebounding business investment — it all looks good, according to 18 machinery executives interviewed for this story. Most are realists: They think the late 1990s boom period of 6,000-press years are not coming back.
In 2001 and 2002, U.S. injection press shipments held steady at about 3,500, according to the Society of the Plastics Industry Inc. Through the first half of 2003, the total was 1,646 machines, on track for around 3,300 for the year. Some machinery mavens think it could end closer to 3,000.
But all eyes are looking forward, to next year, thanks to increased business activity and the eye-popping 7.2 percent annual U.S. economic growth rate in the third quarter. New car models planned for 2005 and 2006 also are giving press sales a lift.
Michael Santa, president of Battenfeld of America Inc., predicts steady improvement next year. “The figures that we've seen over the last couple of months hopefully will continue,” he said. “We're anticipating an annual unit volume per month to be somewhere in that 330-350 level. You're probably going to be looking at 4,000 units a year as a 'normal' year.”
Santa said automotive-related business has held steady. Battenfeld is picking up work in medical molding, especially micromolding presses to make tiny parts. The company is moving from West Warwick, R.I., to the Chicago area.
Several machinery officials repeated a mantra heard at NPE 2003: For the U.S. market, growth is coming from specialty machines, not commodity models.
“That's the direction the market's headed,” Santa said.
Ed Freier, general manager of MIR USA Corp. said the price gets beaten down on commodity machines. “You have 30 competitors going after it, and customers know that,” he said. “The winner isn't always the winner!”
Walter Jungwirth, president of Engel Machinery Inc. agreed. “The strongest sales are coming from special machines, which are multishot machines, vertical machines and also special machines in automation,” said Jungwirth.
Engel, which builds injection presses in Guelph, Ontario, and York, Pa., also is building the standard Victory press under the global platform strategy of its Austrian parent, Engel Holding GmbH. The strategy allows Engel to build Victory machines quickly, anywhere in the world, at a goods price.
Jungwirth said Engel has just finished some large-press installations in automotive, but he could not give details.
Facing cheap-labor competition from China, U.S. molders are responding by adding robots. Jungwirth said more than 80 percent of large-tonnage machines his company sells are equipped with robots. The trend is toward automating smaller machines too.
“A lot of our customers are telling us this is the only way, not just to stay ahead, but to survive.
To keep the jobs here,” he said.
Up and downturns
Milacron Inc. has faced its problems this year — all out in the open, since the largest U.S. plastics machinery producer is traded on the New York Stock Exchange. Milacron is on track to lose money in 2003, marking its third straight year in the red. One big reason is the state of the U.S. market, which accounts for about half of the Cincinnati company's sales.
In a third-quarter conference call Oct. 31, stock analysts asked Ronald Brown, Milacron's top executive, how long it can go on. The chairman and chief executive officer was blunt: “This has been the longest, deepest downturn for plastics machinery since it's been an industry. I don't know how to answer that other than to tell you that it's not always going to be down.” The trend toward using plastic materials is continuing, moving away from traditional materials like metals and wood, he said.
Milacron officials believe the company can return to sustained profitability in the second half of 2004.
“We see a certain recovery in the market,” said Karlheinz Bourdon, vice president of global injection molding. “It's improving, but it's not rapidly improving.”
Bourdon said Milacron is seeing significant improvements in projects at molding companies. The actual sale could be weeks or months away, however.
“At a certain point in time, our customers need to buy new machinery just to keep up with the requests from their customers,” he said.
At Van Dorn Demag Corp., Bill Carteaux said automotive and packaging are doing well. But the general custom molder still is not buying new machines, he said. The Strongsville, Ohio, company has seen spare parts pick up dramatically in recent weeks, meaning that molders are starting up machines that sat idle.
“We are seeing more activity and it's really started to pick up over the last several months. It's quotes and real projects,” said Carteaux, chief executive officer.
Krauss-Maffei Corp. and Netstal Machinery Inc. both gained some U.S. market this year, according to Pepyn Dinandt, chief executive officer of the companies' parent, Mannesmann Plastics Machinery GmbH. Dinandt was speaking at an October news conference at the Fakuma trade show in Germany.
Paul Caprio, executive vice president of Krauss-Maffei in Florence, Ky., said that gain came in a market still struggling. “There are projects and there are orders, but it's just not at the pace we were used to,” he said. “We have to learn to live in that 3,000 range. And if it grows anything better, that's a bonus.”
In late October, the Commerce Department reported that gross domestic product grew in the third quarter at a 7.2 percent annual rate, after growing at a 3.3 percent rate in the second quarter. Business investment grew at an 11 percent annual rate. Machinery executives welcomed the good economic news. But most said one quarter does not a recovery make. “I just don't see it in manufacturing,” Caprio said. “Hopefully it's chewing up some of the utilization.”
Engel's Jungwirth said the third-quarter GDP number does not reflect reality in machinery. But a strong finish to 2003 could push molders to pull the trigger on delayed investments, he said.
Too much excess capacity at U.S. processors remains an albatross around the neck of companies that sell machinery. But now, the situation finally seems to be improving. After staying at 79 percent all year, capacity utilization at the nation's plastics and rubber factories moved to 80.1 percent in August then to 80.5 percent in September. Preliminary reports show the rate jumped one point, to 81.6 percent, in October.
Machinery officials say utilization needs to hit about 85 percent to spur significant orders.
Another good sign came when the Institute for Supply Management reported that manufacturing grew in October for the fourth consecutive month.
Ironically, surging U.S. productivity is another factor holding down unit press sales. Molders that bought new presses in recent years are able to pump out more stuff with fewer machines than they could a decade ago.
“The days are probably long gone, or if it's coming back, it's going to be a long time before the market sees the levels of the late 90s,” said Gerry Sposato, director of sales and marketing for the HPM Division of Taylor's Industrial Services LLC in Mount Gilead, Ohio.
Sposato is fairly optimistic. “We're seeing some loosening in the marketplace right now. That could be because of the end-of-year projects being funded,” he said. “We are seeing specific projects being funded.” Automotive molders still are running large-tonnage presses that are 15-20 years old, he said.
Large presses for automotive is a specialty of Ube Machinery Inc. of Ann Arbor, Mich. Business picked up this year, said Jason Forgash, regional sales manager.
Husky Injection Molding Systems Ltd. made money in its fiscal year ended July 31, after losing money in 2002 and 2001. The Bolton, Ontario-based company claims it has increased market share thanks to its restructuring plan to expand beyond PET preforms and packaging to become a broad supplier of presses.
Jeff MacDonald, vice president of marketing, said Husky's technical center in Detroit is busy. Automotive molders, he said, “are really putting a lot of attention in developing new technologies.”
MacDonald said that overall, Husky does not see strong evidence the market is getting ready for a major turnaround. “But we're starting to hear about some big projects again, and that wasn't the case six to 12 months ago. We've been successful in a few multiple-machine orders, like in the tens and twenties in the first quarter,” he said.
Tomohiko Naito, president and chief executive officer of Anaheim, Calif-based Nissei America Inc., also is predicting a flat U.S. market next year — 3,500-3,800 units, about the same as 2003. Electronics manufacturing, a key plastics market, has shifted to China and is not coming back. But some U.S. markets have held up, including automotive, medical, packaging and construction products.
Boy Machines Inc. of Exton, Pa., showed a vertical press with an articulating robot at NPE 2003. Insert molding is a way to add value and keep work from moving to China, said President Robert Koch. “Our business has been steady with positive trends since April,” he said.
Koch thinks overall machinery sales will increase in 2004.
Friedrich Kanz, president of Arburg Inc., said the company in Newington, Conn., sees interest in specialty machines. “Multicomponent is definitely a growing market in the U.S. We are having a lot of activity in this area,” he said.
Niigata Engineering Co. Ltd. is targeting molders that are looking to switch from hydraulic presses to all-electrics, said Peter Gardner, vice president and general manager of Nii-gata operations at DJK-Global Ltd. in Itasca, Ill.
The company sold five injection presses at NPE 2003, and has been busy since then. “They seem to be buying them for very specific contracts, very specific jobs,” Gardner said.
Bob Columbus, head of marketing for JSW Plastics Machinery Inc. in Elk Grove Village, Ill., said all-electric technology is spreading to larger-tonnage machines. “Automotive remains steady and strong. And with the electrics, a big part of our focus next year will be medical,” he said.
Ed Freier of MIR in Leominster, Mass., said insert molding and multicomponent presses are selling. “But people are still slow to pull the string,” he said.
Another executive, Patrick Miura of Kawaguchi Inc., said the U.S. market is “very bad.” The company in Wheeling, Ill., is focusing on serving its existing customers, from 40 years of selling presses in the United States. “Most of our business is replacing 20-year-old Kawaguchi machines,” he quipped.
As general manager of Negri Bossi USA Inc., Liam Burns spends lots of time telling customers about new federal tax breaks for machinery purchases. That is helping some customers push up their buying decisions before the end of the year. Burns said custom molders are “still very reluctant to move forward,” however. So the Newark, Del., firm is targeting medical, packaging and automotive.
Kingsley Qi Qin, president of Mississauga, Ontario-based Hai-tian Machinery Canada Co. Ltd., said the economy is starting to grow again, but it will take time. “People are a little bit scared to make an investment,” he said
Tough times for commodity machines doesn't phase Hettinga Technologies Inc., a firm in Des Moines Iowa, that manufactures special presses, including low-pressure machines that can make very large parts. President Jeanine Hettinga pegs the start of the machinery downturn earlier that most, back to the late 1990s.
“But I see the machinery business improving, just by the fact that people are putting out more quotes,” she said. “And making some sales.”