The fourth quarter of 2008 has been quiet for the blow molding machinery sector, and this time it's not just the perpetually troubled accumulator-head market.
Even machines that turn out packaging PET bottles and extrusion blow molded containers report business has slowed down, as the year winds down and customers hold onto their cash and wait for economic clarity, several executives said. And some officials think changing consumer preferences in a recession could hurt the single-serve market, one of the bright spots for blow molding areas in recent years.
Bekum America Corp. enjoyed steady business throughout the year, until the fourth quarter, said Gary Carr, national sales director of the company in Williamston, Mich.
``We've seen basically, since the financial turmoil in the general economy over the last few months, that programs that we anticipated to break before year-end, have been postponed until after the New Year,'' Carr said. ``There's kind of a wait-and-see mentality right now.''
Carr said owner-operated, small and midsized blow molding companies seem to be faring well. Despite the rough economy, ``those plants are busy,'' he said.
Carr and officials from other companies said customers are investing but in spare parts and service to improve existing blow molders, not in new capital machinery.
``Our quote activity at the moment is actually fairly robust. Proposals and discussions are still going on,'' Carr said. ``But quoting and turning that into business are two different animals, and right now, that is difficult to pinpoint.''
Kyle Grodzinski, also sees lots of interest, from his post as sales vice president of Aurora, Ontario-based Techne North America Inc. ``There's an uptick on projects, but whether or nor that translates into sales before end of the year ask me Jan. 1,'' he said with a chuckle.
Techne North America has experienced one of its best years ever, he said. Sales grew in several markets, like agricultural chemical and personal-care products.
At NPE 2009, Techne will show its Advance blow molding machine that caused waves at K show in Germany last year. Up to four clamps shuttle beneath a single, stationary extrusion head, accept the parisons and then move away for blow molding.
Dave Skala, vice president and general manager of Uniloy Milacron, also is concerned about the financial meltdown. ``I have seen a little bit of a stutter-step in terms of packaging,'' he said.
Skala said 2008 has been the best year in the past four or five years for Uniloy Milacron, but that is because of increased international business. ``We hope it still will be there [in 2009], but the question is how much this [economic trouble] will spread around the world,'' he said.
Uniloy Milacron is based in Tecumseh, Mich.
Robert Jackson said the outlook for packaging is good, but right now ``there are orders that have been canceled all over the place.'' The president of Jackson Machinery Inc. in Port Washington, Wis., thinks the future will become clearer once Barack Obama gets sworn in as president Jan. 20. ``I'm still very optimistic. There's too much pent-up demand for it to go any further,'' Jackson said.
Al Hodge, recently named sales vice president at R&B Machinery LLC, said some blow molding markets are investing. ``If you're outside of automotive and outside of the home construction market, people are busy. Packaging is still driving it, and the commercial building market is still very active,'' he said.
In a recession, people still buy laundry detergent, shampoo, spray cleaners and other household basics. But many will trade down to less-expensive brands and private-label products.
Jackson said: ``You've still got to buy mustard, you just might buy private-labeled or generic mustard.''
R&B President Robert LaGanke said the Saline, Mich., company is poised to land some major new-machine orders in that segment next year. But overall, R&B is doing more remanufacturing than new-machine sales. Experience learned from rebuilding reciprocating-screw blow molders has caused R&B officials to look at building new reciprocating machines, LaGanke said.
R&B also plans to sell stand-alone extruders, using the expertise of Hodge, who is a former Davis-Standard executive. R&B already builds extruders for its core shuttle and wheel blow molding machines.
Jeff Newman, vice president of sales and marketing at Wilmington Machinery Inc., said inquiries and orders have ``dropped off considerably'' in the fourth quarter. The Wilmington, N.C., firm continues to push high-output machines to blow mold small bottles, such as its SB wheel.
Dave Yenor of Graham Engineering Corp. in York, Pa., also has seen customers put plenty of blow molding equipment projects on hold. ``It used to be, in the past, you had money to spend, and you'd spend it in the fourth quarter. But that's not happening this year. They're saving it,'' said Yenor, vice president of global business development.
Food packaging will remain a solid business next year, but Yenor said a down economy could pinch demand for single-serve beverages, as people cut back spending.
``It will be interesting to see whether people will brown-bag it more and maybe take their own juices and beverages,'' said Yenor, vice president of global business development.
Several machinery executives say consumers have changed their habits at gas stations a key place for selling single-serve 20-ounce beverages. When gas hit $4 a gallon in midsummer, people filled up their tanks and didn't buy anything else. Now with gas under $2 but the economy weak, that takeaway drink all of a sudden might seem extravagant.
``We have seen the convenience channel particularly hit hard by the recession. The million-dollar question: Is that a structural change, or is it situational?'' said Gina Haines, Sidel Inc.'s vice president of marketing and communications. Will consumers return to their old ways? she asked.
U.S. demand for bottled water is slowing down, but still growing in single digits. ``This is from the maturation of that segment and the recession,'' she said.
The self-manufacturing trend by beverage makers is giving a boost to PET blow molding machinery, Haines said. ``Anybody who's in water today, at any scale, is highly integrated. They're manufacturing their own bottles and, in many cases, they're molding their own preforms,'' she said.
Jon Elward also sees more self-manufacturing. ``The companies that traditionally buy bottles from a converter, they're looking at manufacturing,'' said Elward, vice president of sales and marketing at Sipa North America Inc. in Atlanta.
Haines said the Norcross, Ga.-based Sidel has seen a shift from new equipment orders to retrofit work on customer machines to boost efficiency. Continued moves to make PET bottles lighter have kept work flowing for new molds and neck finishes. Sidel opened a tooling center in Guadalajara, Mexico, in April to serve Mexico and Central America.
Jamie Pace, vice president and general manager of Nissei ASB Co. in Atlanta, said it is taking longer to get final approval on deals, although customer interest still seems high. Nissei ASB should benefit from the eating-at-home trend, as the firm sells one-step PET blow molding lines for grocery products like peanut butter and liquid dish detergent.
``Our market base seems to be very stable. There is, more than ever, a very large drive for conversion out of glass and other plastics into PET,'' he said.
Pace cited beer and pickles as two U.S. markets ripe for conversion.
Frank Varuzza of Italian blow molding machine builder Automa SpA, which makes one-step PET machines and extrusion blow molders in Bologna, Italy, is looking forward to NPE 2009 in Chicago. ``We do have a number of quotes being generated in the last two weeks,'' said Varuzza, sales manager for North American and northern Europe. ``Hopefully there's going be a turnaround in the second quarter of next year,'' he said in late November.
Sales of accumulator-head blow molding machines are still beaten down, said officials of that sector.
``The last couple of years, used machines have been killing the market,'' said Frank Kennedy, sales director for accumulator-head machines at Davis-Standard. Some major automotive auctions have flooded the market, he said.
``There's overcapacity in the industry. The only people buying equipment are a few custom molders and some of the Japanese transplants,'' Kennedy said.
Yenor, of Graham Engineering, echoed the gloom: ``It's been a very disappointing market for everyone.''
Multilayer machines for fuel tanks will get some good news from Environmental Protection Agency emissions rules that now cover gas tanks for lawn and garden equipment. ``This has stimulated the increased activity there,'' said Wolfgang Meyer, president of Kautex Machines Inc. in North Branch, N.J.
For single-layer accumulator-head machines, Mexico is seeing some expansion of packaging and industrial molding, but Meyer said the U.S. market is in bad shape.
``Every year, regularly since 2004, we have seen annual declines somewhere in the neighborhood of 30 percent,'' he said. ``And if you do this ever time, there's not much left at the end.''