Going into 2007, building and construction is a mixed bag - and the sector is sending mixed signals to suppliers of extruders for making key plastic products like windows, siding, decks and pipe.
In the other big market for extruders, packaging, machinery officials say innovations in multilayer packaging for food and industrial goods continue to drive sales of cast and blown film lines, and sheet extrusion equipment.
Housing starts, however, are headed south. The National Association of Home Builders predicts starts will decline nearly 12 percent in 2007 to 1,620, from 1,835 in 2006. News stories analyze whether the ``housing bubble'' has burst, with ramifications for the entire U.S. economy.
But the less cyclical remodeling business should pick up some of the slack. Remodeling will chug along at about 5 percent a year during the next decade, said economists speaking at NAHB's recent Remodeling Show in Chicago.
Gopal Ahluwalia, NAHB's vice president of research and a remodeling expert, said the more than 30 million homes sold over the past five years will keep demand for remodeling strong for several more years, unless interest rates climb above 7.5 percent.
Slowing growth of vinyl siding - much of it caused by competitor fiber cement - has sparked consolidation. Ply Gem Industries Inc. is buying Alcoa Home Exteriors, in a deal that brings together two of North America's largest siding makers. Jancor Cos. Inc. started a subsidiary called Infinite Building Products Inc. that bought an Owens Corning siding plant.
Consolidation and a flat market point to slow extruder sales for siding, machinery officials said.
``Vinyl siding has reached maturity and is actually being deselected by some homeowners,'' said Hans-Jurgen Matthesius, president of Cincinnati Extrusion Inc. in Florence, Ky. Vinyl siding players will fight back against fiber cement with new innovations, like foaming with some fiber content, he said.
At archrival Milacron Inc., Tom Brown agrees that siding is no longer growing at double-digit rates. ``The siding market is no- to low-growth,'' said Brown, director of sales and marketing for extrusion at the Cincinnati company.
Brown said that even though housing starts are declining, starts are at a high level historically.
Milacron officials continue to see growth in wood-plastic decking, an industry that has purchased more than 280 Milacron extruders. ``It's still a very strong market,'' Brown said.
Matthesius said vinyl window producers are operating at only about 70 percent of capacity. ``I don't expect any expansion investment there, except for replacement,'' he said. Increased window imports from China will prompt U.S. window profile extruders to retire some older equipment, he added.
The plastic pipe market will continue to grow, as plastic replaces concrete and other traditional materials. ``The infrastructure, the water supply and sewers need improvement, to put it very mildly,'' he said. ``It's crumbling.''
``Infrastructure'' can be defined very broadly, based on the experience this year of American Maplan Corp. in McPherson, Kan. This year, Maplan sold three huge lines to extrude 63-inch polyethylene pipe. Two extruders went to PolyPipe Inc. Maplan shipped the third to pipe giant J-M Manufacturing Co. Inc. Kurt Waldhauer, president and chief executive officer, said Maplan will ship a fourth 63-inch line in 2007, but he declined to name the customer.
One of the hot applications right now is the mines industry, where huge pipe removes slurry from copper and metals mining. Copper prices have soared.
``Right now, we're just enjoying the ride. The mining industry's going great guns, which creates a lot of demand for large-diameter PE pipe,'' Waldhauer said. Maplan has a good backlog of orders as it enters 2007, he noted.
Davis-Standard LLC of Pawcatuck, Conn., had a strong fiscal 2006, which ended Sept. 30. The maker of extruders, cast and blown film machinery and extrusion coating lines generated about $250 million in sales, said President Charles Buckley. Orders were up about 20 percent, as its extruder customers ran at high capacity rates.
Buckley said material substitution, such as stand-up pouches replacing cans, was solid. The medical market also was strong.
Buckley expects Davis-Standard to rack up sales of $275 million in 2007. He discounts the impact of resin prices. ``I've always believed that, over the long term, typically what happens is, as the price goes up, your customers are concerned with higher throughput, better quality,'' he said.
Fred Jalili, president of Advanced Extruder Technologies, knows that high resin costs can drive sales. ``We've done very well this year with reclaim, because of the resin costs,'' he said. ``People want to capture what they have in-house.''
The machinery company in Elk Grove Village, Ill., also reports sales of multilayer sheet lines, and extruders for custom profiles and compounding.
Sales grew 25 percent at American Kuhne Inc., which builds single-screw extruders in Norwich, Conn., according to David Citron, sales and marketing director. Business was ``mildly soft'' early in the year, then turned around, he said. NPE 2006, the fourth for American Kuhne, generated the most leads per day.
``July, August and September were all strong following NPE,'' Citron said.
Robust markets for Kuhne include high density polyethylene pipe lines, both smooth feed and grooved feed extruders, and the cross-linked PE market for plumbing pipe. Much of the business is going to overseas plants of American Kuhne's customers - a theme echoed by several other extruder executives. ``A greater percentage of machines than ever are shipping out of the country for us,'' he said.
Kuhne also built 10 turnkey medical extrusion systems this year, Citron said.
Medical tubing is an important customer segment for Harrel Inc. of East Norwalk, Conn. ``We were just booming this year,'' President Holton Harris said. ``It was a slow first quarter. But after that, the roof fell in on us. We're occupied up until the middle of next year.''
Harrel's strength is its Alternate Polymer technology, which can run tubing with two alternating materials and hard and soft sections. Catheter makers like the extruders.
``Any time you're doing a catheter tubing, for example, to get in there you want it to be stiff. But once you get there, the last thing you want to have is a hard part in there running around your heart. You want a soft tip in there,'' Harris said.
A diversified list of end users helps business at Wayne Machine & Die Co. The Totowa, N.J.-based firm builds turnkey systems with small-diameter extruders for laboratories and small production. Wayne also custom-builds larger extruders and does rebuilding. President Joseph Scuralli said Wayne does business in wire coating, fiber-optics, film and sheet and compounding.
``It helps us because when one market is down, another one is likely to be up,'' he said.
Frank Nissel, president of Welex Inc. in Blue Bell, Pa., said sheet line sales have been ``extremely good'' since NPE 2006 in June. ``I can't explain it, because I thought with resin prices going up too high, people would stop buying machines. But on the contrary, people are buying machines like they're going out of style,'' he said.
Multilayer, thermoformed food packaging is booming. Nissei said packaging is less cyclical than other markets.
Another sheet line supplier, Mount Gilead, Ohio-based HPM, is getting machinery orders for a range of customers, from makers of refrigerator liners to boats, to slip sheets for pallets to portable toilets, said Gerry Sposato, vice president of sales and marketing.
``When Katrina hit down in New Orleans, there was a big demand for port-a-johns,'' Sposato said.
Sposato thinks HPM will do well in 2007: ``It should be a good year, based on what we have forecast. We're seeing across-the-board demand for different lines.''
Dana Hanson, president of Processing Technologies Inc., said customers are adding capacity to make barrier packaging, and buying PTI sheet lines. A stroll down the grocery aisle shows why: single-serve pudding, fruit cocktail, soup and other convenience items.
``We've seen a lot of activity in barrier packaging,'' Hanson said.
PTI of Aurora, Ill., also is getting more active in the wood-plastic market. Hanson said the extruder maker signed a long-term agreement to supply machines to a major wood-plastic deck-board producer he declined to disclose.
More about layers
Executives at companies that manufacture equipment for making blown and cast film say business is brisk, largely thanks to innovations in food packaging.
Battenfeld Gloucester Engineering Co. Inc. built a 17-layer cast-film line for food packages such as retort pouches for soup, as well as medical film, said German Laverde, director of new business development at the Gloucester, Mass.-based firm. He, too, declined to name the customer
``The market for barrier packaging is still growing at a healthy rate, about 5-7 percent,'' he said.
John Wise of Reifenhauser Inc. in Ipswich, Mass., said barrier film and technical films are less sensitive than commodity film to resin prices. ``People are willing to invest,'' he said.
But Wise, general manager of sales and marketing, said the competition is tough. ``We find that there are no shortages of projects to bid on, but it's fiercely competitive. Especially on the blown film side, it seems like every project, you have up to six bidders competing. And it becomes a war of price and throughput,'' he said.
Seven-layer lines are the most common multilayer food packaging line sold by Windmoeller & Hoelscher Corp. of Lincoln, R.I., said Andrew Wheeler, vice president of sales.
``We've seen a bit of an upsurge in five layers, not for food, but for high-output film lines,'' he said. ``Next year already looks excellent. Our backlog going into the new year is the highest it's ever been.''
Brampton Engineering Inc. ``started the year gangbusters and it's really carried on,'' said Jim Stobie, sales vice president for North America. One big reason is its AquaFrost, which blows film downward, using a water-quenched process to cool the film quickly. The result is film with excellent clarify and softness, less waste than cast film and less energy consumption than air-cooled lines, according to the Brampton, Ontario, company.
``We're seeing an enormous interest in it,'' including from makers of stand-up pouches.
At NPE 2006, Brampton sold its first AquaFrost line to North America, to Packall Packaging Inc., its neighbor in Brampton.
Kiefel Inc.'s NPE news was a line running machine-direction-orientation film, the company's entry into MDO. Advantages include better control and lower scrap rates than previous MDO machines, a big selling point when resin is so expensive, said President Bob Hawkins.
``If you're not making the scrap, you've got a much better utilization,'' he said.
Kiefel of Wrentham, Mass., expanded into some new niche markets in 2006, Hawkins said, including form, fill and seal; and shrink hoods for pallet wrapping.
Mirek Planeta, president of Macro Engineering & Technology Inc., agreed that high resin costs spur film processors to look at better technology.
``People are really looking how to make it faster, cheaper, how to use less resin, how to make a product thinner,'' he said.
Macro of Mississauga, Ontario, has booked orders until mid-2007, Planeta said.
Macchi North America Corp. moved in October from Guelph, Ontario, to Gainesville, Ga., and hired Steve Gammell, formerly of Brampton Engineering, to be its North American sales manager. Gammell said Macchi's main business there is three-layer machines for industrial and commercial packaging, and seven-layer lines for food and medical packaging.
``This year has been relatively good for Macchi,'' Gammell said in mid-November. ``In recent weeks, we've sold several lines, and earlier this year as well. Capital spending, based on what I've seen, is very strong, late last year and into 2006, and it appears it will remain strong into 2007,'' he said.
Also optimistic is David Nunes, president of Hosokawa Alpine American in Natick, Mass. ``The outlook is as positive as we've been here in a long time,'' he said.
Nunes said business has remained solid for three-layer blown film lines used for breathable produce films, mailing envelopes and industrial packaging. In Natick, Alpine American has installed a seven-layer blown film line that also runs three-layers.