End market diversity is the blessing for manufacturers of extruders.
Extruders are used to make pipe and siding in the construction market, sheet and blown film in packaging and tubing for medical. Not to mention custom extrusion for everything from aerospace to writing instruments.
One slow market segment can be offset by another hot one, machinery officials said.
In construction, single-family housing starts were up 8 percent year to date through October, from the same period a year ago, on pace to hit an annual rate of 877,000 in 2017, according to the U.S. Census Bureau. Starts are beginning to get a boost from reconstruction activity from Hurricanes Harvey and Irma.
That annualized rate matches the post-recession high rate set in February, according to Robert Dietz, chief economist for the National Association of Home Builders. He said it signals solid builder confidence.
But that housing-start rate is still well below the 1.3 million considered the “normal” level of the early 2000s — and 40 percent below the 50-year average. Machinery officials say there is still some overhang in extruders from capacity expansions in sectors such as vinyl windows and siding. But that equipment is getting a bit long in the tooth.
“It's getting a little better,” said Matt Sieverding, president of extrusion technology for KraussMaffei Group in Munich. Sieverding, who runs KM's U.S. operation in Florence, Ky., said there has been an upswing in the market for replacement equipment.
The U.S. vinyl window market remains attractive. For evidence, German window extruder Aluplast GmbH this year bought Chelsea Building Products in Oakmont, Pa., from Graham Partners.
Paul Godwin, president and CEO of Battenfeld-Cincinnati USA in McPherson, Kan., said the U.S. market for extruded building products has had some activity even in the slow period.
“While it is true that there is an ongoing recovery, the volume is still significantly below the peak of 2006,” he said “What we have seen in this long recovery period is manufacturers in this segment have been making investments to improve plant efficiencies. There have been some consolidations of manufacturers over the last eight years as well.”
One wild card, especially for home building in high-tax states: The Republican tax reform proposal calls for ending the deduction for state and local taxes and capping the mortgage interest deduction. The plan calls for nearly doubling the standard deduction.
The slower pace of home construction has spurred a solid remodeling market, another driver of replacement windows, siding and doors. Harvard University's Joint Center for Housing Studies said spending, now at record levels, should grow at a 6 to 7 percent rate.
Godwin said the remodeling sector has increased activity in the window industry but not enough to cause much new production capacity.
“I believe the forecasted spending is a direct result of the natural disasters of 2017,” he said.
Milacron Holdings Corp. has seen a “solid uptick in capital investment” in the construction sector as processors make investments in their installed base, according to Shawn Reilley, president of advanced processing technologies. Rebuilding after the natural disasters also has given extrusion companies a “bump in their business, which could soften the historical seasonality of their business,” he said.
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KraussMaffei's Sieverding said the plastic pipe market for hydraulic fracturing — or “fracking” — is rebounding.
“It took a very big drive at the end of 2014, 2015 and 2016, but now that the prices are going up with a higher oil price, it's really helped stabilize their market,” he said.
Water pipe projects also are driving extruder sales, he said.
Jim Murphy, president and CEO of Davis-Standard LLC notes “improvement in building and infrastructure projects with new opportunities in wire and pipe applications.”
Godwin said the food packaging market — thin-gauge sheet — is “steady and driving business.” Other executives seconded that, and then some.
Sheet extrusion is the biggest market for Processing Technologies International LLC in Aurora, Ill., and President Dana Hanson said PET is the strongest end-use resin. He said packaging represents “the lion's share of what's driving our markets, and it continues to be strong.”
“We also continue to see strength in the barrier sheet markets, which is six-, seven-, eight-layer plus applications, which is both in styrene and propylene,” Hanson said.
For PTI, Hanson said 2016 was a record year, so a slow start to 2017 did not have much impact. “And as this has progressed, it's gotten busier and busier,” he said. Hanson is optimistic for a major 2018, an NPE year. “Our active quote log, which shows what projects are coming down the pipeline … is the biggest it's ever been.”
Packaging also is the biggest market for Davis-Standard.
“We continue to see good growth in Asia and North America,” Murphy said. “This growth is driven by increased demand for packaged food products and innovative new packages that gain share from traditional packaging materials like glass and metals.”
This year, the Pawcatuck, Conn.-based Davis-Standard bought the European maker of wire and cable coating equipment, Maillefer International Oy. That followed another major acquisition, in 2015, when the company bought film equipment maker Gloucester Engineering.
Murphy said Maillefer “broadens the company's portfolio of application technology and complements our strong position in extrusion processing technologies.”
Murphy called 2017 “a very good year” for Davis-Standard.
“Order activity was lowest in the first quarter, and we have seen continued improvement in activity and orders as we progressed through the year.” The company has built up a good backlog heading into 2018, Murphy added.
“Sheet extrusion, especially on the automotive side, still continues to be strong,” said Fred Jalili, president of Advanced Extruder Technologies Inc. The same goes for compounding lines sold to both automotive and industrial packaging, he said.
Extrusion machinery for construction products “has not been as strong” as Jalili anticipated going into 2017.
“There is demand, but growth is very slow,” he said. In the remodeling sector, the Elk Grove Village, Ill.-based Advanced Extruder is experiencing some growth in profile extrusion. But, he said: “We were hoping to see maybe more growth and the need for new construction translating into a request for more WPC [wood-plastic composite] product, but we have not seen as strong of a demand for that yet.”
Jalili is optimistic for a better 2018, but he said the skilled worker shortage continues to be a big problem. “I think that's going to remain a challenge for us,” he said.
Gina Haines, vice president and chief marketing officer at Graham Engineering Corp., said packaging, pipe and profile, industrial tubing and wire and cable have been healthy this year.
“Importantly, we have not seen ongoing consolidation among the customer base in medical slow investment,” she said.
She said the extension of the Navigator control platform to Graham Engineering's American Kuhne extruders has helped gain sales.
“And the long-awaited recovery in capital investment that began in 2016 in the packaging sector has been a particular boost in the company's Welex sheet line and Graham Engineering extrusion blow molding product lines,” Haines said.
Graham is based in York, Pa.