AKRON, OHIO (Nov. 24, 10 a.m. EST) — Lousy weather rained on the booming U.S. market for single-serve PET bottles. But company executives at PET blow molding machine suppliers issued a sunnier forecast for next summer.
Another sector of blow molding machines, accumulator-head machines, remains mired in a slump of the past few years that has seen the U.S. market shrink by more than half, according to machinery company officials.
And China is destined to play a bigger role in extrusion blow molding machines.
This year, Graham Machinery Group and Jackson Machinery Inc. announced plans to tap the China market by building machines with the local partner companies. SIG Plastics International GmbH already makes Blowtec shuttle machines in China, so the news in 2003 was that SIG started selling them in the United States.
PET machinery: Here comes the sun?
This year, damp, cold weather hit much of the United States at the worse time: the spring and summer travel months. Travel drives demand of 20-ounce PET bottles. “Then our customers didn't load up their machines,” said SIG's Peter Andrich. He knows you can't change the weather.
“But for next year, we think it's extremely unlikely that the weather is again such a factor,” said Andrich, vice president of sales for Corpoplast and Blowtec machines for SIG Plastics Technologies (USA) Inc. of North Branch, N.J.
For Corpoplast's PET machinery business, 2003 was a decent year, about the same as 2002. “But we did expect a lot more, I have to say, which really didn't happen in the beverage market,” he said.
Sidel Inc. in Norcross, Ga., reported a slow 2003, but Michel Picandet said the weather was only one factor. A global economic slowdown and SARS also hurt PET machinery sales around the world, he said.
“We see an opportunity to bounce back next year, as well as 2005,” said Picandet, vice president of sales for North America. Still, he is cautious. “The economic recovery in North America should show some significant improvements” by 2005. But he said, “2004 is a little early to say exactly what will happen.”
Thomas Jordan, vice president of the plastics division for Krones Inc., said the slow U.S. economy and war in Iraq hurt sales as much as the weather. “People didn't have that much money to travel on the weekend, so it hit single-serve,” he said.
Jordan said growth slowed this year across the board in water, soft drinks and custom hot-fill bottles. But he thinks some major deals will happen in December or the first quarter of 2004.
“We know that a lot of people had budgeted machine purchases. The money has been approved,” he said. “The trend is going up.”
On the other hand, he said some industry observers are predicting another wave of PET packaging consolidations, because some segments still have overcapacity. That could pinch future machinery sales.
Franklin, Wis.-based Krones is the U.S. headquarters of Krones AG of Neutraubling, Germany, which makes complete machinery systems for bottling. That turnkey expertise helps Krones grab business as big blow molders boost efficiencies by purchasing bigger machines and improving production lines, he said.
The market for machines to make bottles for packaging, from polyethylene, polypropylene and polycarbonate, has weathered some rough years. But equipment executives sound upbeat there, too.
“We have had a record year this year,” Andrich said of the SIG Blowtec business. “It's the best year in more than 10 years, which is very surprising given the market conditions.” He credited strong sales of SIG's high-output, long-stroke machine in markets such as 5-gallon PC bottles.
This year, SIG launched U.S. sales of lower-priced extrusion blow molding machines made at its long-standing plant in Shunde, China. “We're reacting to the fact that there are already about 50 Asian machines that came into the U.S.,” said Andrich, who discovered the presses while making sales calls. Most of those machines are listed in catalogs, and do not come with strong after-sales support, he said.
Graham Machinery in York, Pa., said it will work with two Asian equipment companies to build its extrusion blow molding machines, including Graham's packaging machines and accumulator-head industrial machines. Graham officials said the move is to broaden its presence in Asia.
As growth slows in the North American market, Graham Machinery's plan has been to forge strategic relations with customers, according to Steven Wood, chairman and chief executive officer. “We're living in a different competitive environment, and we're seeing a maturity in the plastics market that we have to learn to live with,” he said.
Graham also has made a few focused acquisitions. This year, the machinery company began making reciprocating-screw blow molding machines, after acquiring the technological rights to a line of machines from an unspecified company.
Sales were up about 25 percent this year at Bekum America Corp., President Martin Stark said. Packaging continues to be pretty strong, he said.
“I think we will have a good year in 2004. Right now the quoting activities are very strong. It seems the utilization of existing capacity is up in the mid-80s in our markets,” Stark said.
Wilmington Machinery Inc. also reported a good year, especially for multilayer packaging machines. “Going forward we are very optimistic for 2004,” said Jeff Newman, vice president of sales and marketing for the company in Wilmington, N.C
As capital spending picks up, R&B Plastics Machinery LLC of Saline, Mich., has picked up work re-tooling blow molding machines for food and household packaging, said James Sheely, vice president of business development. Customers want to run different products on existing machines, he said.
In food, R&B is quoting on jobs for multilayer PP. The company also is selling a new line of continuous extrusion blow molding machines that produce larger products.
Tough times accumulate
In the late 1990s, the glory days of expansion and groundbreaking new products like blow molded backyard sheds, manufacturers sold 100-120 accumulator-head machines into the U.S. market each year. Now it's down to 50 machines, or even less — what some industry officials say is a dangerously low level.
“The overall market has really, really slowed down,” said Wolfgang Meyer, president of the SIG Kautex business unit. “On the industrial side, it seems that in the first three quarters of this year, we are just around 35 machines.”
The SIG Kautex business has been for sale for the past year, with no takers as of mid-November. Meyer said the U.S. market now is probably too small to support a dedicated, accumulator-machine-only company.
On the plus side for Kautex, Meyer said the company took some orders for automotive fuel- tank machines this year, the first significant business for that sector in three years. Still, he said the North American market may be nearly saturated, as about 65 percent of cars here already have plastic tanks.
To diversify, SIG Kautex continues to push its three-dimensional suction blow process, which has been slow to catch on in North America.
The 3-D process can make a single part with molded-in brackets and alternating hard and soft sections, replacing assemblies made of metal and plastic pieces. More than 50 people attended a demonstration at Roush Industries Inc. in Livonia, Mich., on Oct. 9 — twice as many as expected.
“Now we have to see how this can be converted into business,” Meyer said.
Other accumulator-head machinery makers also report flat business, with cautious optimism for 2004.
“At 50 to 75 units, this industry starves to death, which is what it's been doing,” said Robert Jackson, president of Jackson Machinery Inc. “Now it's starting to come out of that.”
The small company in Port Washington, Wis., is pushing automation, through a work cell that blow molds large parts and does trimming and finishing, with no hand work. Even with the labor-saving technology, Jackson said the market is tough.
Jackson said U.S. manufacturing “is just shaking its head, looking around and getting ready to move forward.”
Jackson Machinery is making a play in China, through a joint venture that will build accumulator-head machines and sell them to customers in Asia, the company said at NPE 2003.
Frank Kennedy, sales director for Davis-Standard Corp.'s accumulator-head machines, agreed that U.S. sales have remained flat, at less than 50 a year. He did say that factory utilization rates are moving up for industrial machines.
“That's the good part, but I think there's still a lot of leeriness for new-machine purchases,” Kennedy said. “They're not rushing out to get new equipment until they get a better feel for what the economy's going to do.”
Davis-Standard is based in Pawcatuck, Conn.
Glenn Anderson of Uniloy-Milacron acknowledged the smaller market. “But we continue to gain share, and what has held up this year is the automotive segment. Next year we anticipate it being the same.” said Anderson, director of sales and marketing for extrusion and industrial blow molding at Milacron Inc. in Cincinnati.
Wood, the top executive at Graham Machinery, agreed the U.S. accumulator-head market has slipped below 50. “Our feeling is that markets are not going to rebound magically to a 100-machine market,” he said. “So you have to learn to work in a very competitive, smaller market.” Graham has focused on new accumulator heads and control systems.
Wood echoed colleagues at other companies who fear the extreme pressure to discount—which he said starts at big retailers and automakers, then ripples down to plastic processors and their machinery suppliers—will hurt the equipment industry's long-term ability to innovate.
“The real key here is that, who is left to continue to invest in technology? What has the pockets left to invest?” he said.
Graham doesn't want to be the 800-pound gorilla, making every type of machine — but losing money.
“Graham Machinery Group's goal is really not to have the infrastructure to support every small little company in the world, but to have more strategic relationships of value, with responsible growth,” Wood said.
Through the first half of 2003, U.S. shipments of blow molding machines totaled 68, for a total value of $45 million, according to the Society of the Plastics Industry Inc. in Washington.
For the full-year 2002, SPI reported total U.S. shipments of 108 blow molding machines, valued at $84.9 million.