Construction and packaging buoy extruder market

Manufacturers of extruders report a solid 2018, as markets such as packaging, medical and construction remained steady.

On the blown film extrusion side, machinery officials say, barrier food packaging continues to drive multilayer equipment purchases, with flexible pouches continuing to replace rigid bottles and cans.

For construction, vinyl siding remained the top-selling exterior cladding for new single-family homes. But that important sector faces some question marks going into 2019: higher interest rates and rising home prices, plus weakness in both the top and bottom ends of the market. The National Association of Home Builders reported that home sales stumbled in September from interest rate hikes, even as U.S. unemployment hit a 50-year low.

Even so, single-family home sales were up at an annual rate of 3.4 percent from the year-ago period, NAHM said. More interest rates hikes could come in the new year, pushing up mortgage costs.

NAHB reports that the positive home pricing environment and good consumer confidence have kept remodeling high — also a driver of plastic building products. NAHB's Remodeling Market Index has remained above 50 since the second quarter of 2013. A rating above 50 means the majority of remodelers reported better market activity compared to the previous quarter.

For vinyl windows and siding, the overhang in extruders from earlier capacity expansions appears to be easing.

"There are some investments being made for improving efficiency," Paul Godwin, CEO of Battenfeld-Cincinnati USA in McPherson, Kan., said.

Paul Caprio, president of KraussMaffei Corp., said KM's extrusion business for windows has been solid, although he said interest rate hikes now cloud the picture for 2019. Sales of lines to extrude polyethylene pipe for the oil and natural gas sector are very strong, he said.

"Extrusion had very good year in terms of orders and sales, and it is really from across the board. Extrusion is very diversified," Caprio said.

Godwin said demand for plastic building products looks good.

"Most indicators show that the economy will remain strong through 2019," he said. The pipe market has shown the highest level of growth this year, he added.

"Spare parts activity has been strong this year, indicating good operation hours at the plant level," Godwin said.

Gina Haines, vice president and chief marketing officer at Graham Engineering Corp. in York, Pa., said the overall extrusion market was up in dollars though behind in units through October — a reverse from last year. She attributed that to "a combination of size mix and price competition."

"Medical, profile, OEM, industrial, and wire and cable are quite active," Haines said. "And the recovery in the packaging segment — particularly food, household and personal care — continues to boost the opportunities seen by our Welex sheet line and Graham Engineering extrusion blow molding product lines. Thin-gauge polypropylene applications along with PET sheet lines are drivers of much of our Welex activity."

Other machinery officials also say sheet line business continues to be a bright spot.

"Packaging remains one of our ​ strongest focal points, and the reason being is there is such a regeneration, a renewal, of market activity … within the packaging market," said Dana Hanson, president of Processing Technologies International LLC. "We had a banner year this year in barrier sheet."

Hanson said the customers were in wait-and-see mode about the federal tax reform this year, to see how it impacted their businesses.

"I'm still optimistic that we'll see greater traction going forward as companies realize the net benefit on their balance sheets," he said. That could lead to replacement sales. "A lot of companies, a lot of folks out there, have old, tired equipment," he said.

Synthetic decking is the biggest construction market segment for PTI in Aurora, Ill.

"For us, it remains strong," Hanson said.

Sheet and hot melt extrusion have been busy sectors for Advanced Extruder Technologies Inc. in Elk Grove Village, Ill.

"We've had a very good backlog to the second quarter of next year. It's been great," President Fred Jalili said. Extrusion lines to make heavy-gauge sheet for thermoforming are keeping the company busy.

Jalili said smaller laboratory lines also are selling well.

Advanced Extruder Technologies is adding a 4,000-square-foot expansion to its plant.

"We're very optimistic for the new year," Jalili said.

R&B Plastics Machinery LLC makes single-screw extruders in Saline, Mich.

"It was a very strong year in the extrusion business," said Fred Piercy, president and general manager. "We had a great year and still have a strong outlook for 2019."

Piercy said R&B does not compete in commodity single-screw extruders but makes special control systems and integrates production lines according to a customer's application. "We're focused on providing custom solutions," he said.

Davis Nunes said tax reform and the 100 percent immediate writedown are spurring companies to replace aging equipment assets. That is helped by technological improvements in blown film.

"Today the equipment is so good that companies are recapitalizing to stay competitive," said Nunes, president of Hosokawa Alpine American Inc. in Natick, Mass. He said all flexible packaging segments are growing.

That includes custom bags for gaylord liners and other applications, which are being reshored to North America. Film for pouches is a strong equipment market, Nunes said.

Nunes said business has been strong: "2018 was as good if not better than 2017. We had really high backlogs to begin last year, and this year is similar."

Jim Stobie, CEO of Macro Engineering & Technology Inc. in Mississauga, Ontario, agreed that the 100 percent depreciation helped U.S. sales.

"We're seeing, at least on a quoting level, an awful lot of equipment projects on the horizon in packaging markets, in the U.S., in the agricultural markets and even some medical markets. So we're optimistic," Stobie said.

On the other hand, Stobie said, the Canadian company is paying more for steel and aluminum for rollers and structural components for its equipment because of U.S. tariffs. Stobie thinks the renegotiated NAFTA will result in the United States and Canada dropping those tariffs, but they were still in place as of late November.

"It's had a significant impact on our bottom line, that's for sure, and our competitive position because obviously the North American manufacturers, we're all working kind of in the same boat. But a lot of our competition is from Europe, and I'm not sure they're seeing the same increases that we're seeing here," Stobie said.

Business started strong in 2018 for Macro Engineering, as the company had a good backlog going into the year. Especially good areas included high-barrier food packaging and large specialty winders construction and agricultural film and roofing membranes, he said.

Then uncertainty about all the trade friction caused business to slow down in the second quarter and the early part of the third quarter, Stobie said.

"Then in late Q3 and the early part of Q4, we've been encouraged," he said. "We've found both the quoting activity and the order volume has picked up again, so we're bullish on 2019."

More "noise" from antiplastics campaigns have caused some concern. Stobie said Macro has developed tandem foam extrusion lines that can process polylactic acid, the bioresin, instead of polystyrene.

Andrew Wheeler, president of Windmoeller & Hoelscher Corp. in Lincoln, R.I., said 2018 was a strong year and business should stay good in 2019. "Current customer activity is still high," he said.

With stable resin pricing and a strong U.S. economy, W&H is looking forward to the new year: 2019 is a K show year where the company presents new technology and the 150th anniversary of German parent company Windmöller & Hölscher.

Multilayer films continue to grow.

"New trends in packaging and shipping due to the growth of the e-commerce sector, lamination films and barrier food packaging are driving this growth," Wheeler said.