(Dec. 3, 2007) — Selling plastics machinery to the U.S. market is not for the faint of heart.
For proof, check out the Page 1 story this week on the outlook for injection molding machines. Then skip to the inside story quoting people who have the daunting job of selling extruders into the vinyl siding and window market — in a residential construction industry so hard hit by the subprime mortgage crisis that some economists are worried it could cause the U.S. economy to tip into a recession in 2008.
Of course, parts of the machinery universe are more blessed than others. Blow molding machines going into PET, and PET preform injection presses, are doing well, reflecting strength in end markets. The same goes for film and sheet machinery.
The strong euro is causing some pain for the European machinery makers, including those from the kingpin country of Germany. The strong euro makes capital equipment from those countries more expensive in the United States, where the dollar has weakened.
At K 2007, concern about currency issues was on the lips of nearly every machinery executive from the euro-zone. K was held in Dusseldorf, Germany, on Oct. 24-31. Then, one euro would get you $1.40. A few weeks later, the euro was approaching $1.50. The greenback also has fallen this year against the Canadian dollar and the Japanese yen, two other important plastics machinery-producing nations. Most of the Europeans said at K they are trying to hold the line on U.S. pricing. But in reality, they can only eat into so much of the profit until they lose money on every sale. A more likely scenario: a combination of modest price hikes and profit erosion.
For this issue, our annual Machinery Outlook report, Plastics News senior reporter Bill Bregar interviewed more than 50 executives at machinery companies, on the telephone and in person at the K show.
The important injection molding machinery sector seems to be the hardest hit in the United States. Demag Plastics Group has closed the former Van Dorn assembly operation in Strongsville, Ohio — a sober reminder that it's tough to make a profit building injection presses in the U.S., with the market sinking toward 3,000 machines.
The U.S. plastics industry is still shaking out, after years of competition from low-wage China and other developing nations. Automotive is still in some turmoil.
Plant closings, auctions and consolidations are taking their toll on new-machine sales. Nothing new there. But now several machinery officials think that could slow down, and the glut of used machines will finally get sopped up, paving the way for broader sales of new iron.
But U.S. plastics processors will continue to watch their capital spending closely. The red light has changed to yellow — but now it seems stuck on yellow.
Domestic processors, and the overall U.S. economy, are certain to face more pressure and uncertainty as the new year gets under way. The fading dollar should help boost exports, and even attract global manufacturers to invest here. That could help, but life in the plastics machinery industry certainly won't be much easier in 2008.