(Dec. 5, 2005) — Our Machinery Outlook package this week shows how interconnected the plastics industry really is, both within the industry and in the broader U.S. and world economies — even linked to the weather.
For machinery makers, and the entire industry, higher resin prices continue to be the specter clouding what otherwise should be a bright 2006.
Hurricanes Katrina and Rita blew through the petrochemical-rich Gulf Coast in late August and September. Resin prices, already moving up before the storms, zoomed higher and processors had trouble getting some materials. OK, resin goes up, resin goes down, but what happened in 2005 was something historic.
Polyethylene, the hardest-hit resin, costs nearly 40 percent more than it did in early August.
Of course, the world economy is affected by high oil and natural gas prices. But for plastics, the fourth-largest U.S. manufacturing industry, resin prices are the tail that wags the dog — from processors to machinery producers.
For the machinery report, Plastics News senior reporter Bill Bregar interviewed more than 45 executives at companies that make injection molding presses, extruders, blown and cast film lines and blow molding machines.
Most of them said that, whatever the price, resin needs some stability in pricing and supply, so their customers can plan capital spending.
For U.S. processors, it seems that resin has replaced China as the whipping boy. As has often been said, resin is the lifeblood of the industry. After the hurricanes, when suppliers cut back, plastics converting machinery shut down.
But let's forget resin for a minute. Machinery makers have reason to be optimistic.
According to the Society of the Plastics Industry Inc., U.S. shipments of injection molding machines, by far the largest equipment sector, rebounded in 2004 to 3,798 units — up 15 percent from the year before, and the best year since 2000.
As 2005 winds down, machinery officials are saying unit shipments should end up about the same as 2004 in units — in other words, a pretty solid U.S. market that's nearing the mark of 4,000 injection presses a year.
And the average price of an injection press continues to increase, reflecting a higher level of technology, strength of large-tonnage machines, growing demand for all-electric machines and other factors.
The U.S. economy looks strong. The Commerce Department reported that gross domestic product grew at a 4.3 percent annual rate in the third quarter, up from its original forecast of 3.8 percent and a full percentage point faster than second-quarter growth.
Importantly for plastics machinery makers, capacity utilization stayed around the key 85 percent mark this year, then increased sharply this fall.
Savvy processors — those making a profit and able to buy resin — know they need to invest in new technology.
To quote Michael McMahon, sales engineer at compounding extruder maker NFM Welding Engineers: “This too will pass, and people realize they need to look long-term.”
