If the U.S. plastics industry does get back on its feet in 2004, machinery sales promise to be a compelling part of the story. But how the story turns out remains to be seen, even as we near the midpoint of the year.
The refrain of ``business will improve in the second half'' is getting old. But this year, it actually could be true. The macroeconomic signs are pretty upbeat. U.S. industrial production is increasing. Help-wanted signs are finally out - albeit sporadically - at the nation's factories. Orders for durable goods are rising.
There have been some big machinery purchases, especially in the automotive sector. Capacity utilization - the most important economic indicator for future machinery sales - looks good, at 82 percent for plastics and rubber processors. Executives are blowing the cobwebs from their wallets and replacing old equipment, or expanding into brand-new technologies.
The magic number is 85 percent utilization, when companies feel pinched and add capacity, according to Milacron Inc. and plastics equipment economists. The rate could reach 85 in the fourth quarter. But when it comes to the U.S. market, equipment makers have had their hopes dashed for three-plus years. Sales abruptly sank in 2001, then staged a minor rebound in 2002. But overall machinery sales sank in 2003, according to statistics released this month by the Society of the Plastics Industry Inc.
So the new dynamic of U.S. machinery sales is: cautious optimism. And with good reason. Read our classifieds lately? Auctions are baaack! On June 16, Newell Rubbermaid Inc. will auction 30-some injection presses from its closed plant in Wooster, Ohio. Large-tonnage presses were one bright spot in the SPI 2003 report. But the Wooster auction includes some large, late-model machines - and each one represents a brand-new press that will not be sold this year.
On May 13, auctioneers sold 31 presses from Plano Molding Co.'s plant in Plano, Ill., which is closing. And in March, buyers grabbed 41 used Milacron presses from the closed Sunbeam Products Inc. plant in Hattiesburg, Miss. Those are the larger auctions. There are smaller ones coming up, too. If prices hold up during the auctions, that could signal better times ahead for new equipment. It means processors are spending money.
Even so, each time the gavel slams down at another U.S. plastics factory, the sound - BANG BANG BANG - will pound in the heads of machinery executives as they recover from a massive hangover and sell some new machines.