AKRON, OHIO (Dec. 1, 1:25 p.m. ET) — Here's a message from people who sell injection molding machines: The joy is back.
Sales have increased for two years in a row, after a steady 10-year decline. That should continue in 2012. The U.S. injection press market is nearing pre-recessionary levels — but it's not there yet — according to most machinery executives interviewed for this story.
“Right now it's really fun again in this business. There is life going on again, and people are ordering machines,” said Friedrich Kanz, president of Arburg Inc. of Newington, Conn.
This year, the U.S. market continued its comeback from the dark days of 2009. The story is told in numbers from the Society of the Plastics Industry Inc. in Washington. SPI projects 2,400 U.S. shipments in 2011. That would be an increase of about 15 percent from 2,111 in 2010, which was a big jump of 64 percent from 2009 — when just 1,285 presses were shipped.
Many machinery executives credit a resurgent automotive industry for many of the 300-or-so extra presses sold this year. The reason: a slew of new models and the recession-driven culling of weaker molders. U.S. car and light-truck sales have rebounded to about 13 million this year, and industry watchers predict a modest rise in 2012.
The strong survived.
And they're beefing up technology, said Bob Columbus, sales manager of JSW Plastics Machinery Inc. in Lake Zurich, Ill. “We've had an awful lot of fallout over the last decade, but the people who are left are in good shape,” he said.
“The American automotive industry is really coming back strong, and that is really contributing to these very improved numbers,” Kanz said.
Kanz thinks a “normal” U.S. injection press market can reach 2,500-3,000. Press sales fell below the landmark 3,000 level in 2007. A return to 3,000 would give the industry a psychological boost.
And the automotive picture should get steadily brighter, according to a presentation in October at the Fakuma trade show in Friedrichshafen, Germany, by Michael Taylor, SPI's senior director of international trade. Citing forecasts from CSM Worldwide, he said North American automotive capacity utilization could go above 90 percent in 2013.
That would spark even more demand for equipment. And machinery officials want President Obama and Congress to extend the accelerated depreciation tax break into 2012, since it helped plastics processors buy machines and modernize this year.
“Automotive is a big driver on the revenue side. They're the ones that buy all the large-tonnage machines,” said Mark Sankovitch, president of Engel Machinery Inc. in York, Pa.
David Bernardi of Ube Machinery Inc. said there are still plenty of aging presses running in U.S. plastics factories.
“From what I see, we're still looking at pent-up demand. We're looking at situations on the replacement side. The fleet is still ridiculously ancient, and there are projects for new models of cars,” Bernardi said.
This year, sales increased by 24 percent over 2010 at Ann Arbor, Mich.-based Ube, said Bernardi, senior sales and marketing manager. “The customer base is moving forward and a lot of projects that were back-burnered, they're saying let's get them moving again,” he said.
Plastics will play a key role in making cars lighter, to reach the government-mandated 34.1 mpg by 2016 and 54.5 mpg by 2025.
“Automotive is definitely helping the surge of manufacturing,” Sankovitch said. “They're being forced by the CAFE [Corporate Average Fuel Economy] laws. They're being creative.”
While some segments are strong, the overall rate of capacity utilization at U.S. plastics and rubber factories has bounced around the 75 percent mark this year. That's too low to spur widespread machinery sales, said Peter Mooney, president of Plastics Custom Research Services in Advance, N.C. “We can go for quite a while before requiring a new wave of investment in plant and equipment,” he said.
Economist Bill Wood said the pent-up demand that sparked the machinery spike in 2010 has largely been sated. “It's steadily improving and I don't see any reason why it won't continue to gradually improve,” he said. Manufacturing is poised for a major upturn if the U.S. economy begins to hit on all cylinders, he added.
With unemployment stuck at 9 percent, economists are debating how to create jobs. Don't look to the factory floor, where automated machinery is advancing rapidly, according to Wood.
“Manufacturing does no longer equal jobs. It's no longer a labor-driven enterprise. Manufacturing is now a technology-driven enterprise,” said Wood, who runs Mountaintop Economics and Research in Greenfield, Mass.
But of course, someone has to build those machines. And plastics equipment makers hired people to meet the stronger demand. Milacron LLC has hired about 150 for its assembly plant in Batavia, Ohio, and a machining plant in nearby Mount Orab, since it emerged from bankruptcy in 2009.
Milacron will generate sales of about $800 million this year, a 30 percent increase from 2010. That puts Milacron back at sales levels higher than before the recession.
“If you watch the news and read the paper, it's gloom and doom, and we're not seeing that in machinery,” said Dave Lawrence, president of worldwide plastics machinery for injection, extrusion and mold technologies.
“I think the bulk of the pent-up demand occurred in 2010. What we're seeing right now are replacements, improving technology, improving energy efficiency and in some cases, expanding capacity,” Lawrence said.
Paul Caprio also sees the disconnect.
“It's like two different worlds. There's the manufacturing world and there's the financial world, and right now they don't seem to recognize each other. We're listening to the news and it's horrible, and we're getting orders every day for our machinery,” said Caprio, president of KraussMaffei Corp. in Florence, Ky.
Sales of KM presses are strong into packaging and automotive. “We've sold more to automotive than we ever have in North America,” Caprio said.
Peter Gardner, who sells Niigata machines as vice president and general manager of DJK Global Group in Wood Dale, Ill., said some molders are moving work back from China.
“I think it's just going to be continued steady as she goes. It doesn't seem like it's going to slow down,” he said.
Wittmann Battenfeld Inc. has increased its large-press offerings, just in time for the strong market, according to Michael Kirschnick, injection molding divisional manager. The company in Torrington, Conn., has a good backlog going into the new year.
“We haven't seen anything let up yet. And we have customers who are talking about projects that are still six months out, so I don't see it slowing down,” Kirschnick said.
Today's molders survived the Great Recession by learning to wring out every excess cost. That attitiude is having an impact on the machinery sector, according to several injection press leaders.
“Generally customers have a much better understanding of the cost of making a part, the lifetime cost of running a product and running a machine,” said Mike Urquhart, vice president sales for North America at Husky Injection Molding Systems Ltd. “They're sophisticated. The name of the game is lowest-cost part.”
Husky of Bolton, Ontario, targets packaging and medical molding, and offers expertise in hot runners, high-cavitation molds and automation. “We had huge growth in 2010 and we have very significant double-digit growth in 2011,” Urquhart said.
Netstal Machinery Inc.'s Mike Sansoucy said molders of caps and closures and packaging, “where tenths of seconds mean everything,” are attracted to new molding presses. “There's a desire to use newer technology to become more efficient, to bring your costs down,” said the president of the Devens, Mass., firm.
“So it means, I have an existing machine that's not fully utilized, and if I put a new job in there I can't make any money running it; so now I'm better off with an electric machine, or a machine that can run more advanced and efficiently,” Sansoucy said.
Some equipment people think 2012 gains will be modest.
Glenn Frohring, president of Worcester, Mass.-based Absolute Haitian Corp., said molders are investing now that the industry has enjoyed two good years, “Now that there's hybrid machines, along with fully electric machines, there's really no reason not to replace older equipment because of the benefits of the energy efficiency,” he said.
“This year's been good. I think next year, everybody's going to be cautiously optimistic,” Frohring said. “It would be hard to think that we're going to see three years in a row of growth.”
Although automotive machinery is strong, Bill Duff, national sales manager of Negri Bossi USA Inc. of New Castle, Del., thinks the economy is still sluggish. “People are still in a wait-and-see mode. They're being very cautious.”
Companies that had cut back, now will ramp up by adding a third shift instead of buying new presses, he said. Duff expects NPE 2012 to free up some business. “It's going to be a very slow recovery, as it has been. I think we'll see that continue,” he said.
Jim Mitchell said 2012 will show whether recovery is real. “Are they going to hold their money or are they going to invest their money?” said the executive vice president of Sumitomo Plastics Machinery in Norcross, Ga.
“It depends what the next six months are going to do,” said Marko Korneef, vice president of sales and service for Boy Machines Inc. in Exton, Pa. “At this point, it's hard to say which direction it's going to go.”
For Boy, the medical market “is still looking very strong,” Korneef said.
The record-high yen has pushed up the cost of equipment made in Japan, said Tom Geddes, national sales manager for MHI Injection Molding Machinery Inc., which sells Mitsubishi presses in Bensenville, Ill.
Geddes thinks 3,000 units is the magic number to show the U.S. market is back. “I don't think we're back up there yet,” he said.
“We're trending toward it, and there has been a good recovery from 2009. But I still think there's some trepidation in the market, some hesitation.”
Toyo had a solid year, according to Ronald Zara, national accounts manager for Toyo injection presses at Maruka USA Inc. in Rockaway, N.J.
“There's a lot of projects that are happening,” Zara said. “Mostly people are buying to increase productivity.” A new all-electric press can do the same work of two old hydraulic machines, he said.
Sodick Plustech Co. Ltd., which makes precision machines with two-stage injection systems, is expanding into larger presses and higher-cavitation molds, according to Len Hampton, national sales manager of Sodick's U.S. operation in Schaumburg, Ill. “We're looking forward to continuing to gain market share, and look for other opportunities,” he said.
Illinois Precision Corp. plans to introduce the Echo MD, its insert-molding machine aimed at medical parts, by the end of the year, said Dan Davis, general manager of the company in Bicknell, Ind.
Davis said business was solid, but has slowed in recent months. “I've quoted a lot of equipment but nobody's pulling the trigger.”
After two good years, growth may indeed slow next year. But nobody thinks the industry will sink back to the morass of 2009. “Everybody was holding back and spending no money. It was an artificial environment,” said Arburg's Kanz.