WASHINGTON (Dec. 4, 11:30 a.m. ET) — For extruders, there's good news for 2012 and beyond: Home construction and remodeling are back! The bad news? It may take awhile to filter down to new equipment sales.
The mortgage crisis smashed construction like Wreck-It Ralph, and helped sink the overall economy. So while multilayer film extrusion lines always seem to hold up the packaging market (the “gotta eat” principle), sales of extrusion machines to make vinyl windows and siding went into the dumper.
Now the Washington-based National Association of Home Builders projects that total housing starts will reach about 757,000 for 2012, an increase of 24 percent. NAHB expects starts to gain by 20 percent or more in 2013 and 2014. Currently, the Federal Reserve is projecting that interest rates will remain low.
Spending on remodeling projects also is increasing. NAHB said its remodeling market index, in the third quarter of 2012, hit its highest level since the same period in 2005.
The American Architectural Manufacturers Association of Schaumburg, Ill., predicts that sales of windows will steadily rebound through 2015. Vinyl, the most-used window material, will grow faster in new construction than remodeling, AAMA said.
For people who sell extruders into the construction market, that leaves a central question: With capacity utilization still low, how long before building product makers need new equipment?
“Our processors put capacity in place to meet the huge boom [before the recession], and that capacity for the most part still exists,” Kurt Waldhauer, president and CEO of Battenfeld-Cincinnati USA in McPherson, Kan., said in an interview.
“For the most part, there's still a ton of capacity out there.” He said capacity utilization finally is surpassing 50 percent, “which is great, but it's still not enough to have them consider capacity expansions.”
Dave Lawrence, a top executive of Milacron LLC, agrees, but he said Milacron's ServTek parts and service unit has seen a pickup. New extruder sales will follow.
“There is some idle capacity. We still think that for many of those people, their capacity is still low,” Lawrence said. “But it appears that there's a restarting of some equipment.
“We've seen a sizeable bump-up of our aftermarket supplies, as people activate equipment that hasn't run in awhile. We've seen some interest in capacity expansion.”
KraussMaffei Corp. President Paul Caprio also is optimistic, even for the window extruder market. He saw what happened in injection molding, as processors yanked parts off idle machines during the downturn.
“That 50 percent capacity probably remains. But I think they've also been cannibalizing a lot of the equipment that they have. So I think there's no question that as the market is coming back, it will be new machinery purchased,” Caprio said. “It won't break any records, but it's definitely going to move in the right direction.”
Through September, the American Chemistry Council reported that U.S. and Canadian PVC sales into extruded windows and doors increased 23.6 percent over the year-earlier period. Siding was up 8.5 percent. Vinyl sales into fencing and decking were up 3.3 percent.
PVC pipe sales increased 10 percent during the period, and Waldhauer said some companies are looking at investing in large-diameter production.
In pipe, the big star continues to be high density polyethylene pipe. Sales of smooth-wall HDPE pipe increased 10.4 percent through September, to 1.46 billion pounds, according to ACC. A big reason: the pipe is used to supply water to gas and oil wells made by hydraulic fracturing, known as fracking.
PE pipe extruder WL Plastics Corp. of Mills, Wyo., is building a plant in Rapid City, S.D., lured by the oil boom. Other pipe makers are ramping up production to serve the shale gas regions of New York, Pennsylvania and Ohio.
“The smooth-wall business was really good this year. And the corrugated business had some nice movement as well. So all segments of PE pipe have done fairly well this year,” said Waldhauer of Battenfeld-Cincinnati.
Three business deals involving extruder manufacturers made headlines in the past 12 months. Canadian private equity biggie Onex Corp. bought Davis-Standard LLC right before Christmas of 2011, and then in September, grabbed KraussMaffei Group. On Oct. 1, Graham Group bought single-screw extruder builder American Kuhne Inc.
American Kuhne President Bill Kramer said the Ashaway, R.I., company had its highest-volume year in 2012. He declined to give a sales number. “During the year, we've seen some pretty good strength in a lot of the markets, like packaging and consumer goods, wire and cable, and industrial. We've seen some fairly decent growth in most of those,” Kramer said. American Kuhne also has a big presence in medical tubing, he said.
U.S. sales have improved for two straight years at Davis-Standard, according to Jim Murphy, vice president of product line management at the Pawcatuck, Conn., company. “We've seen steady improvement. It's not off the charts but it's steady, with year-over-year improvement.”
Murphy said D-S has had “reasonably good activity in North America” for packaging lines.
Davis-Standard is a global manufacturer. At NPE2012, leaders announced plans to open an assembly plant in Suzhou, China.
“In the extrusion market, packaging leads the way,” said Al Hodge, president of R&B Plastics Machinery LLC in Saline, Mich. R&B has seen a seasonal slowdown in the fourth quarter. “I think there's no reason not to believe 2013 to be a good year,” he said.
Hodge said R&B's single-screw compounding extruders are winning some work away from twin-screw lines, because of lower cost and easier material changes for short runs.
David Nunes said Hosokawa Alpine America is having its best year in the history of the blown film equipment company in Natick, Mass.
He credits pent-up demand left over from the recession, when film makers had trouble getting loans and held onto their cash. “But since 2010, people have been trying to catch up,” he said.
“It's almost a perfect storm” in 2012, Nunes said, citing the bonus depreciation, low tax and interest rates, and good resin pricing. Customers are upgrading equipment, adding new air rings and even shutting down plants to replace entire blown film lines.
Nunes said machine technology has improved so much “it's almost like you can't afford not to upgrade your equipment.”
According to Andrew Wheeler, vice president of Windmoeller & Hoelscher Corp., “it's been really very, very good” this year for the company in Lincoln, R.I.
W&H's printing equipment business has been “off the charts,” and the company has developed new technology, including a fast-change Vistaflex flexo press and a winder, he said.
At Gloucester Engineering Co., the company continues its comeback under ownership of Blue Wolf Capital Partners LLC.
“The company was $20 million [in sales] last year,” said CEO Mark Steele.
“We're on pace for $35 million this year. Our backlog is positioning us to be in excess of $50 million next year,” That sales number for 2012 includes Future Design Inc., a maker of air rings, collapsing frames and other blown film equipment, but it does not include a later acquisition, Pearl Technologies Inc., an aftermarket parts supplier.
The company in Gloucester, Mass., had made some of those products in the past. “You have to restart the innovation engine of a company like this, so we have acquired technologies that are complementary to what we do,” Steele said.
Reifenhäuser Kiefel Extrusion GmbH has booked more than $12 million worth of equipment since its fiscal year started July 1, said Steve DeSpain, vice president and general manager of the business in Danvers, Mass. “We've had an unbelievable run ... that's a phenomenal way to start the year,” he said. “We thought we'd see things picking up, but honestly we didn't think we'd see it this fast and this much.”
DeSpain said business has been split about evenly between replacing older equipment and adding new capacity. “We're seeing that, more and more, people are looking at getting more pounds per square inch out of their factories,” he said.
Multilayer film lines continue to be popular. But seriously — 29 layers? At NPE2012, Alpha Marathon Film Extrusion Technologies Inc. ran a 29-layer film line using nanolayers. Victor Khalif, general manager, said the film is very strong because microlayers create a different molecular structure.
“We had a lot of response from the show,” Khalif said. Alpha Marathon is based in Woodbridge, Ontario.
In Aurora, Ill., Processing Technologies International LLC has hosted 140 visitors at four open houses this year to show its twin-screw system for dryerless extruding of PET and polylactic acid sheet.
PTi President Dana Hanson said that, so far, the company has sold five dryerless lines in North America, all for PET sheet. One customer bought a second line.
“One of those systems is the largest in-line direct feeding of a thermoformer, in the world,” Hanson said. He declined to identify the customer, but said the line is running 5,500-6,000 pounds an hour.
“We've done well with our dryerless technology, and we're seeing more people starting to get on that bandwagon,” Hanson said. “They've recognized the virtues, and the risk is less as we get more and more systems installed. We've pre-ordered systems in our pipeline for sales, to keep our deliveries compressed.”
Hanson plans to hire 15 people — engineers, technicians, sales and supply-chain managers. Currently the company employs 85.
“We're looking for some punch in 2013 with the economic recovery,” he said. “The economy's starting to chug along.”