The U.S. extruder market depends on two gigantic end markets, construction and packaging, and both areas held up well in 2005, industry officials said.
Next year has some question marks. Soaring resin bills could hurt, but they also actually should spur sales of precise, resin-sipping multilayer film equipment and advanced winders. Although housing starts should decline, remodeling could pick up the slack, executives said.
In business news, the biggest story of 2005 was the merger of Davis-Standard Corp. and Black Clawson Converting Machinery Co., to form Davis-Standard LLC. That was followed by the combined company's purchase of Merritt Extruder Corp. Then on Sept. 9, longtime top executive Robert Ackley left Davis-Standard and retired.
Tom Brown of Milacron Inc. noted that new home construction - one of the most important economic indicators for sales of extruders that produce vinyl windows, siding and pipe - remains pretty healthy.
``Even though it's slowing, it's still from a reasonably huge number of housing starts,'' said Brown, Milacron's general sales and product manager for extruders.
After enjoying strong growth for several years, home construction should start to cool off, according to the National Association of Home Builders. But NAHB predicts only a modest decline, from 2.2 million housing starts in 2005 down to about 2 million in 2007. The numbers include mobile homes.
The housing-start numbers also include rebuilding from Gulf Coast hurricane damage, but NAHB's chief economist, David Seiders, thinks that means only about 38,000 additional starts.
Modest as it may be, the chill in the air comes from the fast pace of new home construction, worries about a real estate ``bubble'' and a steady diet of interest rate increases by the Federal Reserve.
Kurt Waldhauer, president and chief executive officer of American Maplan Corp., said the shortages of PVC and polyethylene immediately after Hurricanes Katrina and Rita were ``getting ironed out and processors are starting to get what they need.''
Waldhauer said the industry is approaching 2006 with ``cautious optimism,'' concerned that resin prices could hamper the customers' ability to compete but confidant in U.S. consumers to keep demand high for construction products.
``I don't think it's going to affect anybody's decision whether they're going to buy equipment. It's just more a matter of timing,'' he said.
Although housing starts will slow down, remodeling should pick up the slack, thanks especially to strong sales of vinyl windows and insulation, machinery executives said.
``Especially if natural gas prices remain high, remodeling will be up,'' Waldhauer said. ``People will open their mail and say, `Holy smokes, look at this natural gas bill I got this month!' So people are going to look at their windows. Dollars are going to be spent; it's just going to be in different areas.''
Vinyl windows continue to be a bright spot for extruder makers. Silver Line Building Products Corp., Veka Inc. and Chelsea Building Products Inc. are among the extruders that expanded and added equipment in 2005.
``Windows are doing well,'' said Milacron's Brown. ``It's going to be solid growth, but I don't think you're going to see double-digit growth of the past.''
Brown said the Cincinnati-based machinery maker has not seen much of an impact from resin prices on its extruder sales. Business has steadily improved each year since 2002, although vinyl could see pressure from other materials.
``We're on a good pace right now. But that's a big question mark out there right now, for the long-term outlook,'' Brown said.
Across the Ohio River in Erlanger, Ky., Milacron's arch-rival Cincinnati Extrusion GmbH of Vienna, Austria, is finishing up the first full year of its U.S. operation, Cincinnati Extrusion Inc. President Hans-Jurgen Matthesius said the company was well-received.
Companies gave a mixed response when asked if soaring resin prices and post-hurricane shortages postponed some machinery orders. Matthesius said they have - one reason he thinks the U.S. extruder market will slow down in 2006. Construction product makers typically want to get equipment running by March or April to ramp up for the spring construction season, but they may put off investments until next year, he said.
Dana Hanson, president of Processing Technologies Inc., said the uncertainty about material prices is what hurts, not the fact that prices are high. ``Historically, resin prices have been somewhat stable. They've been somewhat predictable,'' he said.
Matthesius said windows are still growing, but siding has ``matured.'' Fiber cement continues to squeeze vinyl siding.
One major deal as 2005 ends is the purchase of Louisiana-Pacific Corp.'s vinyl siding operations from Canadian siding maker Kaycan Ltd.
PVC pipe makers continue to buy some replacement machines, after years without much investment in new extruders, said Matthesius and other executives.
Makers of wood-plastic composites continue to grow. ``There's going to be additional capacity bought next year,'' Waldhauer said.
PTI of Aurora, Ill., had a huge 2004, so Hanson is not complaining that business cooled off a bit in 2005. ``The fall business looks fairly strong. We're seeing a lot of projects percolating for sheet and particularly for packaging,'' he said.
In October, PTI opened a sales and service office in the Czech Republic. Hanson said the company plans to open an office in China in early 2006. International business currently accounts for 10-15 percent of PTI's business. ``We're going to try and grow that to plus 40 percent. We see that level of market potential,'' Hanson said.
Advanced Extruder Technologies in Elk Grove Village, Ill., also sold machines to packaging, including thermoforming sheet. President Fred Jalili said business started out strong in 2005, then tapered off before picking up again in the fourth quarter.
High resin prices have boosted the company's sales of reclaim extruders. ``People are really trying to recoup every bit of scrap that they're generating back into their system,'' Jalili said.
What does Holton Harris have to say about 2005 for his tubing extruder maker, Harrel Inc.? ``We're still here.'' The company in East Norwalk, Conn., focuses on automating its machines so they run themselves. ``Our theory is the U.S. manufacturers are up against a serious labor-cost problem,'' he said.
Harrel has branched out beyond medical and into extruders to make tubing for appliances and automotive. Harris said those customers are interested in Harrel's technology that can change from a hard material to a soft material, all in a single extruder.
Davis-Standard's new president and CEO, Charles Buckley, said orders are strong at the Pawcatuck, Conn-based machinery maker. ``They've been picking up throughout the year,'' he said.
Buckley reported good business in equipment for wire and cable, blown and cast film and extrusion coating. Black Clawson brings strong offerings in fully automated film winders, which has boosted sales.
``The business is coming together,'' he said.
For American Kuhne Inc. of Norwich, Conn., business ``has been consistent. It's been really strong from beginning to end,'' said David Citron, director of sales and marketing.
Citron reports machinery sales to polyethylene pipe for the oil and natural gas industries, automotive sealing, coextruded film and zipper bags and the wood-plastic composites market.
Interviewed in early November, Citron said resin prices derailed only one turnkey system, as the customer re-evaluated whether to go ahead with the new product.
``In general, it's not about availability [of resin], it's more about pricing,'' Citron said. ``It hasn't seemed to affect our business today, but we fear in the near future it could hurt capital spending.''
All about the layers
Multilayer food packaging continues to grow, fueled in part by a steady trend of replacing rigid packaging with flexibles, such as the stand-up pouch. Think StarKist tuna in a pouch.
``We're seeing definitely a big amount of coextrusion,'' said German Laverde, director of marketing and communications at Battenfeld Gloucester Engineering Co. Inc. ``We have some monolayer business, but most of it - 70 percent - is multilayer, and a big portion of that is five-, seven- and nine-layer coextrusion.''
Battenfeld Gloucester recently got an order for a 10-layer cast line, he said.
Another good sign: increased sales of packaged, spicy ethnic food, like Indian, that needs barrier layers.
Laverde said the Gloucester, Mass.-based company saw sales recover this year. But what about the resin price hikes? ``That could be at some point a concern for all of us'' in plastics machinery, he said.
Paul Conley, sales manager at Macchi North America in Guelph, Ontario, said film-making customers are having problems passing on resin costs. ``There's a lot of capacity that came about because of the high prices of resin, and because of that, I know at least half a dozen projects [in the United States and Canada] that have been shelved'' until 2006.
Conley said 2005 started out strong for Macchi, which sold a five-layer line to a customer in Canada. Then it got tougher. ``There are fewer projects and everyone's fighting for the same projects,'' he said.
The Italian parent company, Macchi SpA, invested about $5 million on a major expansion at its plant in Venegono Inferiore this year. Conley said Macchi equipment has become well-known in North America, since the company opened in Guelph in 2000.
Packaging customers are buying new equipment, but they also want to retrofit existing lines to run more efficiently, said Bob Hawkins, president of Kiefel Inc. in Wrentham, Mass. ``You can offer trimless winders and winders that produce less scrap, or zero scrap in a changeover. That's a key issue in terms of waste. It's all about material,'' he said.
Hawkins said Kiefel is doing well. Officials want to do more business with larger film processors.
Andrew Wheeler, vice president of sales at Windmoeller & Hoelscher Corp. in Lincoln, R.I., said resin problems have caused a few customers to delay orders, although ``our order intake is still good.'' Most customers have a long-term outlook, to increase efficiency and invest in new film and printing equipment, he said.
``The issues are thinner, faster, better,'' Wheeler said. ``If you can give the same properties and the same qualifications to the product with a thinner product with less material in it, that benefits everybody.''
Mirek Planeta, president of Macro Engineering and Technology Inc., said customers ``are more cautious, definitely,'' because of expensive resin. ``But we are extremely busy right now,'' he said. ``We are really working on the weekends.''
The reason? Coextrusion. ``We don't sell many single-layer lines,'' Planeta said.
He is hoping resin stabilizes, so customers can plan more easily. But multilayer plastic food packaging is here to stay: ``You can't replace a nine-layer structure with newspaper. The English tried that with fish and chips.''