MAPP survey: ​ More of the same expected in 2019

When it comes to the current state of the plastics industry, more of the same certainly isn't a bad thing.

According to Troy Nix, executive director of the Manufacturers Association for Plastics Processors, the organization sees more of the same for the plastics industry in 2019.

MAPP recently conducted its keystone benchmarking study, the annual State of the Plastics Industry Report. The study resulted in a report that analyzes and highlights information on the anticipated outlook for the U.S. plastics industry for 2019.

"More of the same isn't necessarily a bad thing," Nix said in a telephone interview. "You can't keep increasing your growth year after year without leveling off at some point. I believe that is what we are seeing now."

Nix noted that the report, which includes input from MAPP members and outside participants, highlights data on sales trends, production tooling, raw material, capital expenditures, money and profits, production employees and challenges facing the industry.

"We look at this as a way to provide industry executives an overview of conditions of the plastics industry for 2019," he said.

The survey examines historical trends, fourth-quarter performance and anticipated business conditions for the next 12 months. From customer diversity and managing changing industry demands to sales and profits, the report covers more than 40 economic and business indicators to help plastics executives understand expectations for the industry in 2019.

While assembling the report, Nix compared the final two quarters of 2018 and said he saw no key indicators to show any sort of negative growth.

Respondents indicated that the end market with the most opportunity is medical, followed by automotive. Ironically, automotive also proved to be the segment that respondents are least optimistic about.

Nix noted that it may simply be a matter of which automaker you are working with. Despite the seeming pessimistic outlook, many respondents serving the automotive market indicated that they are ordering new tooling and machinery for new programs.

"Some see the legacy programs dropping off. And if it weren't for a new program, they would be in trouble," Nix said. "Others may not be seeing any hit as legacy programs drop off."

In fact, for the fourth year in a row, the automotive industry is rated both one of the most and one of the least optimistic markets. However, it is the first time in three years that it wasn't ranked as the most optimistic market.

Nix also sees plenty of bright spots in the survey with 59 percent of respondents expecting to see increased growth in the first quarter of 2019. Only 14 percent indicated they anticipate a decrease. Almost 75 percent expect to see increased sales in the next 12 months.

"As plastics companies plan their year, many are focused on automation, continuous improvement initiatives and new business developments, which will hopefully combat current barriers to higher margins," Nix said.

Capital investment expected during 2019 dropped from levels during the previous year. A total of 41 percent expected to make significant capital expenditures this year, down from 57 percent a year ago.

One key reason for this, according to Nix, is the tax breaks that many companies took advantage of during 2018.

"They put a lot of money into their businesses," he said. "It isn't the kind of spending that can be carried over from year to year."

And when it comes to challenges, the key hurdle for virtually every company today is finding skilled labor.

"Executives are telling me that they have work and can't meet all of the orders," he said. "Some companies are looking at getting better prices."

In 2012, 45 percent of plastics companies reported recruitment/retention as a major challenge. Seven years later, that has more than doubled, with 100 percent of companies indicating this is a major challenge as they head into 2019.

Finding skilled labor also is a problem for mold makers, and Nix said it reinforces the fact that companies need to be mining local colleges and high schools to develop a pipeline of young talent.

"If you are not investing in talent and tapping the educational market, you are going to lose ground," he said. "If you lay down the pavement, you will build a road to your plant and have a solid pipeline to the best of the future workforce."

Recruiting and retaining talent is cited by respondents as the top challenge, followed by new business development and rising compensation, health and benefits costs.

To circumvent the skills gap, respondents indicate that they are investing in automation.

"We see automation as the primary investment that companies are making," Nix explained. "It makes sense to address the labor issue."

And while Nix acknowledged he would like to see processors buy all of their tooling from U.S. companies, 66 percent of respondents say they get tools from overseas, with China the primary location. On the positive side, that is down from 73 percent in the 2018 survey.

"Tariffs may have had some impact," he said. "It may not have been a direct correlation, but it had to have an impact."

MAPP collected data from 193 industry executives for the survey. They were given the opportunity to respond to 33 economic indicator questions, covering the fourth quarter of 2018 along with forecasts and expectations for 2019.

Participating companies serve a variety of market segments. The top markets served by plastics organizations in the study are automotive, medical, industrial and consumer goods. Other main industries include appliance, electronics, construction, transportation, agriculture, aerospace, and food and beverage.