Automotive and construction plunged in 2009, taking a big chunk the U.S. compounding extruder business down with them, machinery executives report.
Sales of general compounding machines face a long climb back. Customers remain cautious. More than a year after the financial crisis hit, machine financing remains tight, said the executives in November interviews.
The news isn't all bad. Business remains solid for small and mid-sized extruders geared toward small-lot production — as compounders need to run a variety of materials because their customers want smaller inventories as the economy slowly rebounds.
Another bright spot: laboratory-sized compounding extruders for research and development into new materials such as bioresins and nanotechnology. Many material companies have continued to invest in R&D during the recession, machinery officials said.
“There are a few people out there in the compounding industry that are trying to run 50 pounds at a time,” quipped John Effmann, director of sales and marketing at Entek Manufacturing Inc. “The days of massive pounds of output of any particular thing are gone.”
U.S. car and light-truck sales should end 2009 around 10.1 million units, far below the steady pace of 16 million to 17 million from 2000 through 2007, according to CSM Worldwide. For 2008, sales were 13.2 million.
Northville, Mich.-based CSM is predicting a modest increase for 2010, to 11.8 million.
As the severe recession hit the automotive and the equally beaten-down construction sector, processors slowed their material purchases to a trickle, Effmann said. “People just depleted their inventories,” he said. “They absolutely stripped out every piece of inventory that they had, before they reordered.”
There is some action in China, India and the Middle East, home to new resin production and compounding capacity. Right now, most orders for the big production equipment come from those fast-growing regions, while lab extruders are going to U.S. compounders, according to Bob Urtel, president of Century Extrusion of Traverse City, Mich.
“We had a nice business in lab lines and also in the refurbishment of existing lines. That is also carrying over into 2010,” he said.
Bioresin bright spot
Entek's lab has been busy at company headquarters in Lebanon, Ore., according to Effmann. Customers want to test new bioresins and some exotic new plant-based blends. “That's the one thing that's remained very busy, which is a good thing. Some of the stuff we have run through this lab this year, as an old veteran in the industry, I just shake my head at. It's some incredible stuff,” Effmann said.
The development of new materials helps the machinery sector. For example, wood flour, the mixture of wood and plastic extruded into deck boards, kicked off a run of solid growth for Entek that lasted seven or eight years, he said.
Effmann and other compounding extruder makers said the wood flour machinery business has slowed down, but bioresins could pick up the slack.
Urtel is optimistic for full-scale compounding extruders next year. “The quote activity for production machines has been really good. And we're hopeful that our customers will convert those quotes into orders in 2010.”
But most executives say that, for general compounding machines, 2010 will be a year to hunker down. “Just keep scratching and clawing. We've just kept our nose to the grindstone,” said Charlie Martin, general manager of American Leistritz Extruder Corp.
The Somerville, N.J.-based Leistritz did sell a good number of machines in 2009, mainly for medical and specialty applications, such as direct extrusion. “They tend to be fewer, more specialized and higher value-added products,” he said.
At NPE2009, the company introduced a twin-screw extruder called Nano-16, for running small amounts of medical-grade material.
But overall, selling compounding extruders to U.S. customers remains tough, extruder makers said.
“It's a down market, so compounding equipment's going to be down for awhile,” said Paul Roberson, vice president of business development at NFM/Welding Engineers Inc. “Even after the market starts up-trending, it's going to take a year or two to get back to where that capacity is fully utilized.”
Demand for big-ticket compounding lines is cyclical. Roberson said the downturn in car and truck production has hurt the U.S. market. At the same time, Massillon, Ohio-based NFM has moved into new areas such as nanotechnology and bioresins.
“We're still in overcapacity from the resin suppliers. They're not in need of [new] compounding extruders, they still have to turn on lines,” said Paul Caprio, president of KraussMaffei Corp., including Berstorff compounding machines. The business is based in Florence, Ky.
But Caprio said KraussMaffei Berstorff is selling lines to smaller, specialty players serving niche markets such as office furniture or color masterbatch.
Coperion Corp. President Ulrich Bartels, said his company has kept its North American market share steady at around 30 to 35 percent — but the market for new twin-screw extruders is weak.
“The year definitely was not easy in terms of machine sales. It definitely was down a lot. On the other hand, if we are looking into the service area, that means spare parts and field service and refurbishments, we had a good year,” Bartels said.
When it comes to the North American market, Bartels said that these days, Ramsey, N.J.-based Coperion is selling extruders to small and medium-sized compounders, instead of large multinational companies.
William Flaherty at Farrel Corp., agreed with other executives that customers, especially in automotive and construction, are not buying many lines.
“It's a capacity issue. There's adequate capacity for the size of the market right now. Normally we're in a growth mode where people are looking at adding efficiency to be more cost competitive,” said Flaherty, vice president of worldwide sales and marketing at the machinery maker in Ansonia, Conn.
Flaherty also has seen the trend toward shorter production runs. And customers seeking financing say “the banks are much more demanding,” he said.
Diversity of markets and processes has helped B&P Process Equipment and Systems LLC weather the storm, according to Todd Caccamo, global director of sales and marketing for the Saginaw, Mich., company. Even so, he said the global recession and weak consumer spending has cut a wide swath through all capital equipment.
“Most industries have suffered a significant downturn,” he said. “Anytime there's a weak demand for raw products, it's certainly going to impact demand for machinery.”
SteerAmerica Inc., the U.S. headquarters Indian extruder maker Steer Engineering Pvt. Ltd., had a good year, according to Wayne Stagner, president and CEO. The facility opened in Uniontown, Ohio, in 2008.
“NPE was an excellent show for us and since then, we've seen a definite uptick in our business. We're getting a lot of inquiries,” he said. At the show, SteerAmerica introduced its lab-sized Omicron 12 extruder.
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