``Hope'' is a good word to describe what executives of injection molding machine companies are feeling going into 2008: They hope that a sinking U.S. market can stabilize; they hope that all the used machinery out there could somehow, please, go away.
Back in 2004 and 2005, U.S. shipments seemed to level off at around 3,700, a far cry from the 6,000-press glory days of the 1990s, but still respectable, given the hammer brought down by globalization. Then in 2006, shipments dipped almost 7 percent.
Shipments will decline again this year, anywhere from 10-15 percent, according to machinery officials interviewed for this story. That could bring the market to the dubious landmark of 3,000, or even below.
``It seems like the market's still in a shrinking mode. We're all just struggling to get our piece of the pie - it's just the pie is shrinking,'' said Kevin Gipson, national sales manager of MHI Injection Molding Machinery Inc. in Bensenville, Ill., which sells Mitsubishi presses.
``Depressed'' is how Ronald Brown, the top executive of Cincinnati-based Milacron Inc., described the North American injection press landscape. ``We do not see any strong indicators of a rebound any time soon,'' Brown said in a third-quarter conference call with financial analysts in early November.
Milacron's press sales fell in North America because of a continuing consolidation of U.S. automotive molders and a ``glut'' of used machinery, Brown said.
In 2008, U.S. car and truck sales are expected to fall below 16 million for the first time in a decade. Home construction also is weakening, thanks to the subprime mortgage crisis. It's a double whammy, as two major users of plastic go down at the same time.
Where is the bottom?
The U.S. press market is probably there right now, according to Bill Wood of Mountaintop Economics & Research Inc. of Greenfield, Mass. ``This year represents the floor, if the cyclical patterns hold,'' he said.
That doesn't mean a boom is coming soon, but Wood thinks 2008 will be ``at least as good'' as 2007.
``I don't think it's going to fall much lower, when I look at the curves and the indicators, and what's going on in the economy,'' he said.
Jim Moran of Engel Machinery Inc. agrees. ``It's very difficult to project, but I would say we've probably reached our lowest point, and from here it can only go up. From the projects we've been in, we do see an increase in our business,'' said Moran, vice president of sales for North America at Engel in York, Pa.
Wood said residential construction and automotive ``both appear to be establishing a cyclical bottom right now.'' Typically, it then takes two or three quarters before a sector improves, and that points to an improved picture in mid-2008, he said.
Looking at the macro-plastics picture, total output of plastic parts is up 3 percent, Wood said.
Also, the Federal Reserve Board said production capacity utilization is above 85 percent this year. Though lower than the 90 percent level of 2006, utilization rates are still at the ``magic number'' thought to spur more broad-based machinery buying.
But the conventional wisdom appears to be changing, as more molders hang on to their old presses longer, several machinery officials said.
``The sales of injection molding machines are not bearing out the numbers,'' said Robert Koch, president of Boy Machines Inc. in Exton, Pa. ``The evidence that we look at, including our bookings as well as our spare parts, do not comply with the idea that we're at a point of utilization where people are buying new machines.''
Glenn Anderson, Milacron's general manager for North American injection molding, said: ``I think the [utilization] number's getting higher. People are waiting longer. They're trying to get more out of what they have.''
A flow of used presses continued to roll out of auctions this year, from shuttered sites like the old Hoover vacuum cleaner factory in North Canton, Ohio, and Reum Corp.'s auto parts plant in Waukegan, Ill.
Moran sees some relief coming. ``There are some recently built machines available. So the real turnaround is going to begin when we've exhausted that supply of machines from companies that have gone out of business, or consolidated. And that really is when you're going to start to see a different turn in the new machine business. It's got to happen sometime soon,'' he said.
According to nearly all injection press leaders, sales are going into new molding programs - including machines for very specific applications, loaded with automation and features such as multicomponent molding. U.S. processors are not buying many replacement machines.
``It's primarily new projects,'' said Paul Caprio, executive vice president of Krauss-Maffei Corp. in Florence, Ky. ``Even if they had capacity, the machines are not at a level'' needed for new projects. ``The customers are definitely not buying a new machine to replace an old one, then putting an old mold in the new machine. I don't see that too often.''
Caprio is not worried about the auto sector. ``They have to buy new machinery, and they have to reduce costs,'' he said. One big example is KM's IMC, an injection molding compounding machine that can compound glass-reinforced material directly into an injection press. Owners of the machine don't have to buy pre-compounded material.
``I think our automotive business will grow. I'm optimistic that the people we're dealing with in automotive, they want to improve and earn new business, and they can only do it through technology,'' Caprio said. He added that KM has increased its market share, even while the U.S. market has declined.
Netstal Machinery Inc. has nearly doubled its U.S. market share, according to Rick Shaffer, president and general manager of the company in Devens, Mass. ``It's been a real good increase across the board,'' he said.
Much of the growth comes from packaging and medical molding, Shaffer said. PET preforms continue to advance, with a short-neck design that takes out weight. Packaging is a demanding business, which is one reason Shaffer isn't worried about higher resin prices next year, spurred by oil and natural gas costs.
``As the material prices go up and up and up, it puts more of a focus on material reduction, thinner walls, more accurate molding,'' he said. ``The investment in a premium machine is quicker to justify and pay back than it was a year ago. Energy prices and resin prices really drive people to say, `OK, I've got to cut down as much material as I possibly can.' ''
In 2007, two big events rocked the injection press world in North America. In June, Demag Plastics Group said it was ending more than 60 years of press manufacturing in the Cleveland area by closing its assembly operation in Strongsville, Ohio. And Husky Injection Molding Systems Ltd. will get a new owner: Onex Corp., a Toronto private-equity giant.
At a K 2007 news conference, Klaus Erkes, Demag Plastics Group's top executive, didn't pull any punches. ``America is down on a very rock-bottom range of requirements for injection molding machines, and it doesn't look like it will grow from there in the near future,'' he said at the show, held Oct. 24-31 in Dsseldorf, Germany.
Another big problem for DPG was the strong U.S. growth in all-electric machines. DPG did not make all-electrics in Strongsville.