For awhile there, it looked like the U.S. market for injection molding presses had leveled off - a welcome sign after the big declines a few years ago. But looks can be deceiving.
Machinery executives said shipments will decline in 2006. Estimates range from 5-15 percent down from the 2005 level of 3,706 injection molding presses. In 2004, 3,798 machines were shipped, according to the Washington-based Society of the Plastics Industry Inc.
All the economic tea leaves point to what should be a strong rebound.
Plastic part production is near record levels. Capacity utilization at the nation's plastics and rubber factories has been near or above the 90 percent level through 2006 - well above the 85 percent level that traditionally prompts widespread machinery buying.
Yet many processors are reluctant to open their wallets. Through the first three quarters of 2006, new orders for injection molding presses were 14 percent lower than in the same period of 2005, said Ronald Brown, chairman, president and chief executive officer of Cincinnati-based Milacron Inc.
Brown, in a conference call with analysts Nov. 3, pointed out that Milacron's orders are up slightly in North America.
``But overall, there is a disconnect between capacity utilization rates and new orders for equipment. Processors are not making the investment needed for new equipment, and they continue to push their existing equipment as much as they can,'' he said.
Brown has been using the term ``pent-up demand'' to describe the current U.S. market. Why hasn't it broken loose? Brown has blamed high prices for resin and energy to run the plants, both of which he said total about 80 percent of a typical processor's costs.
But other factors are tamping down demand. Auctions, fueled by bankruptcies and restructurings, continue to dump presses on a U.S. market that many industry observers say already suffers from too many brand-new machines. Moving into 2007, production cuts by General Motors Corp., Ford Motor Co. and DaimlerChrysler Corp., could hurt sales of large-tonnage machines - one of the bright spots of the U.S. injection press business in recent years.
Several machinery executives said it all adds up to a wait-and-see attitude, where orders - when they finally come in - are for machines geared to a specific piece of business.
``Each investment is scrutinized to an extremely large degree, no doubt about it. And I think the decisions are made with more financial rationale,'' said Rich Sieradzki, vice president of North American sales and service for Husky Injection Molding Systems Ltd. Customers are looking for a total solution - the machine, automation, mold and part design - to reduce overall cost of the part, he said.
Husky, based in Bolton, Ontario, hit record sales of US$935.3 million in fiscal 2006, which ended July 1.
What types of equipment is selling? Specialized machines, with automation, multicomponent molding, high levels of process control, quick-mold-change, in-mold labeling or even assembly inside the mold. All-electric molding machines are now around 40 percent of the overall market, measured by units. The average price per machine has gone up, reflecting interest in more-expensive, technologically advanced machines.
``We're in a period of consolidation, a little bit of a pullback,'' said economist Bill Wood of Mountaintop Economics & Research Inc. in Greenfield, Mass. He said the downturn of the Big Three automakers and slowing home construction are causing the slowdown, but that should not tip the U.S. economy into a severe decline.
Charts plotting expansions of the past would show a line moving in waves, not a straight 45-degree angle going up, Wood said. ``Three steps forward and one step back, and we're just in the step-back period,'' he said in mid-November.
``It is a sustaining market,'' said David Bernardi, senior sales and marketing manager of Ube Machinery Inc. ``It is steady, but it's not going to have any big jumps, and it probably won't have any massive declines downward. It'll just kind of float around, about where it's at.''
Despite the market doldrums, Bernardi said Ube, based in Ann Arbor, Mich., is having a good year, with higher shipments than 2005. In automotive, Ube sells to all the car makers, including the Japanese transplants, and that cushions the company against the Big Three woes. Molding work moving around to new processors also can spur equipment sales, he said.
``Automotive is not a dead market. There's still people buying big machines,'' Bernardi said. And the presses have more technology: ``It's almost become unheard of for us to sell a large machine without a quick-mold tooling package, and large valve-gate packages, etc.''
Strong automotive business at Krauss-Maffei Corp., accounted for a record 50 percent of the company's injection press sales, according to Executive Vice President Paul Caprio. ``Our business was up nearly 25 percent,'' he said.
Caprio said Krauss-Maffei of Florence, Ky., generated about $150 million in U.S. sales this year, for all three types of equipment the company sells - injection presses, extruders and polyurethane equipment. He declined to break out the injection number.
North American automotive customers have been buying the two-platen MX injection molding machine and the Injection Molding Compounder, or IMC, that pairs a Berstorff compounding extruder with a Krauss-Maffei press.
Caprio said automotive molders buy new machines to lower part costs and produce parts for new car models. ``Because their profitability is under scrutiny, you have to do it with new equipment,'' he said.
Big Three production cuts have hurt Demag Plastics Group of Strongsville, Ohio, said President Brian Bishop. ``We suffer from that. But we're re-creating ourselves. There are opportunities in other areas,'' he said. DPG, which also runs plants in Germany, India and China, is setting up focus teams for packaging, electronics, medical, and automotive.
Bishop also said Demag saw ``some real upticks'' in its large-tonnage business this year, in both automotive and appliance.
Globally, there is one less player making big presses, after the late-2005 closing of Battenfeld Kunststoffmaschinen GmbH's factory in Meinerzhagen, Germany, which could make machines with clamping forces over 2,000 tons. Battenfeld, now based at its other plant, in Kottingbrunn, Austria, got bought in mid-October by German investment firm Adcuram Industriekapital AG, and the new owners are studying whether to get back into large-tonnage machines.
Auctions are on the minds of every machinery executive, said Harry Wowchuck, vice president and general manager of HPM. ``I would agree the domestic market's going to be soft, especially for our key area, which is automotive. There are tons of machines out there, a lot of large machines on the used market, and fairly good equipment.''
On the positive side, overall sales of vehicles continue to be strong, as the transplants pick up market share. ``We're seeing a lot of the business not going away, it's just moving around,'' Wowchuck said.
Mount Gilead, Ohio-based HPM, a division of Taylor Industries LLC, also serves packaging and other markets through its line of Sandretto machines.
Engel Holding GmbH, an injection press maker in Schwertberg, Austria, is pushing technology through its Engel North America operation in Guelph, Ontario, and York, Pa. Peter Neumann, chairman of the managing board, said Engel has a 40 percent market share for multicomponent presses in North America. The company also reports growing sales of its all-electric presses.
Neumann made the comments during an Oct. 18 news conference at the Fakuma trade show in Friedrichshafen, Germany. He said the North American market should drop about 5 percent this year.
``I think that's a correct number,'' said Friedrich Kanz, president of Arburg Inc., at Fakuma. ``I would say at least a 5 percent drop, if the last quarter continues like the other three quarters of 2006.''
Kanz said business picked up after NPE for Arburg, a Newington, Conn., unit of German press maker Arburg GmbH + Co. KG. At the Fakuma show, the company introduced its largest press ever, with 500 metric tons of clamping force. Kanz sees the U.S. market running 3,000-3,500 presses a year in the future. ``Generally, the American market for injection molding machines is technically more and more demanding. That's a trend which started basically in 2001 and 2002 slowly, but it has picked up,'' he said.