Blow molding industry adjusts to post-pandemic business levels

January 2023 started strong for some blow molding machine builders, including R&B Plastics Machinery LLC in Saline, Mich., which had a decent backlog from the end of the previous year.

"Our business in general is up as we execute a strategy laid out a couple years ago," said Fred Piercy, president and general manager of R&B. "We've been pretty strong all year in the blow molding segment and our extrusion markets."

The company continues to invest in technology related to its all-electric extrusion blow molding shuttles, which are designed for continual use and durability, and it has made some decent inroads on supplying new accumulator heads to the market for technical parts and large containers.

At Bekum America Corp. in Williamston, Mich., Gary Carr, vice president of sales, said 2023 will conclude "as a reasonable business year but definitely slower than seen in the pandemic period."

Carr added: "2023 saw the blow molding industry adjust to post-pandemic business levels, as did Bekum."

A lot of blow molding machine builders may be nodding in agreement, in part because the market for general containers dried up following the buildup of capacity for hand sanitizers and disinfecting wipes during the pandemic.

"There's a significant amount of container blow molding capacity in North America," Piercy said. "I think that will be the case for a while. There was pandemic capacity added, and there's pressure on customers — the bigger CPG [consumer packaged goods] companies — to use less plastic or an alternative away from plastic. This has created more capacity."

The excess of consumer-related blow molding capacity added during the COVID-19 pandemic is expected to level out next year.

"We see that capacity being more fully utilized in the second half of 2024, requiring a return to normal machinery procurement patterns," said Manuel Heusinger, vice president of sales and service Americas at Kautex Machines Inc., based in Flemington, N.J.

Still, the foreseeable future has other challenges, he added.

"Many projects in our target (and premium) segments continue being postponed due to economic uncertainties forcing us on a group level to rightsize our production facility in Germany, adjusting it new market conditions," Heusinger said.

The Bonn, Germany-based operations of parent company Kautex Maschinenbau GmbH are insolvent due to what the company calls "a multitude of exogenous factors." Company officials are looking for new investors.

On the bright side, Heusinger said, "We continue having strong focus on the industrial packaging segment and see continued demand in more sustainable packaging solutions, for example, through lightweighting based on new or improved product designs and conversion ... from metal to plastics. For many years now we are in prototyping and testing phases with selected partners for hydrogen liner applications with the expectation of growth in future mobility."

Carr said Bekum officials are seeing "a modest trend" toward companies looking to manufacture their own bottles.

"Supply chain challenges during the pandemic have resulted in companies wanting to control their own packaging needs and also enjoy freight and manufacturing cost savings," Carr said.

Another opportunity is multilayer large containers.

"We're seeing more specialized multilayer industrial applications for regrind and post-consumer capabilities to hit sustainability and recycling goals," Piercy said. "These are multilayer in the 4- to 6-gallon range for retail and industrial applications."

Kautex's Heusinger said more blow molding machines are being added for new capacity vs. replacements. "We think companies are holding back with replacing still-functional machines due to high capital costs and economic uncertainty," Heusinger said.

Carr agrees.

"The industry is ripe for old asset replacement, particularly with control obsolescence and the advent of all-electric technologies and significant energy savings," he said. "Unfortunately, a running machine, no matter how old, is a very difficult justification for the industry."

Piercy said R&B Machinery staff is seeing a growth market vs. asset refresh.

"Probably 70-80 percent of the market is people looking for capacity and new machines for growth, and about 20-25 percent is asset refresh, where customers take super-old equipment out and replace the whole blow molding system," Piercy said. "When they do replace old equipment at the end of its life cycle, a lot of them are making the switch to more capabilities."

Environmental responsibility, social impact, corporate governance, lawmakers and end users paying more attention to packaging materials for recycled content and recyclability are contributing to greener products.

"More packaging regulations are pushing machine manufacturers to further innovate and find solutions to ensure stable production with higher percentages of PCR [post-consumer recyclate] and new resins," Heusinger said.

Kautex was one of the pioneers of the R-Cycle project, which aims to create a digital passport for plastic products, enabling its proper valuation when going into the recycling stream, Heusinger added.

At Bekum, Carr said, the focus is on technology to manage the use of recycled content at optimized levels. "Innovations are being made both by material suppliers and machinery manufacturers," he added. "Machine and materials must work in harmony to ensure reliable, efficient blow molded article production."

Kautex's Heusinger said that "all R&D projects on our development road map are directly connected to sustainability," then pointed to a reduction in material usage, creating material combinations, improving output and energy consumption, and using higher-grade automation to reduce labor costs.

Kautex employees help processors decide on the most competitive packaging solution for their products even if it could mean not doing it in extrusion blow molding, Heusinger said.

"In the product definition phase, Kautex uses state-of-the-art simulation technology with proprietary knowledge and comprehensive total cost-of-ownership models to compare different scenarios," he said. "These are reviewed together with our customers to jointly agree on the best solution to make their project a reality."

At R&B, most machines produce at least three-layer containers in response to processor demand. "Letting the customer introduce recycled content has definitely driven opportunities," Piercy said. "We're seeing investment made there, and we're in a position to supply the machines to help customers hit their sustainability goals. There's a lot of pressure on plastic packaging for sure."

Kautex expanded its footprint in 2023 by opening its second U.S. office in Georgia, extending its local supply chain and increasing stock levels in New Jersey, "ensuring higher and faster availability of spare parts in the Americas region," Heusinger said.

Kautex also installed multiple machines from its new Skyreef machine series and introduced new features for its drum and production systems, Heusinger added.

However, Kautex's plan to upgrade its entities to the same enterprise resource planning system in 2023 has been postponed and will become a 2024 investment, he said.

At Bekum and R&B, the big investment for next year will be North America's premier triennial trade show.

"NPE2024 will be Bekum America's major business focus in 2024," Carr said, adding that Bekum Europe also will host a customer open house in Traismauer, Austria, on Feb. 20-21, 2024.

R&B will promote its blow molding machinery and single-screw extruders, which Piercy said is another segment of the business. "We supply a lot of extruders, whether it's for sheet, pipe, profile, different industrial applications," he said.

Kautex staff consider automation of North American blow molding operations to be in an early-adopter stage.

"Many companies have started looking into automation and have set up one production line to try things out; however, most of the companies have not multiplied the setup and learnings to their other production lines yet," Heusinger said. "We see the biggest demand in automated post-molding operations — deflashing, assembly solutions, smart quality checks, etc. — for large-format parts."

The big driver behind automation for the blow molding industry, particularly product handling, packing and palletizing, is the tight labor market, according to Carr.

"These are jobs where you can't get people," Piercy added. "The automation is needed because some processors can barely get enough people to run their factory."

North American processors also are starting to embrace smart factories with interconnected machinery operations.

"Our machinery is fully Industry 4.0-capable, and more and more groups are using this capability," Bekum's Carr said.

Kautex's Heusinger added: "Processors are assuming that new machinery is integrated with Industry 4.0 features allowing them to meet their goals toward productivity and machine predictability. All of these benefits combined will be required to achieve overall sustainability objectives."

Special control components are still the biggest challenge to obtain, but thanks to Kautex's global supply chain initiatives, Heusinger said, the machine builder is "coming closer to normal levels."

"What remains a challenge is the cost of some components, still affected by political disruptive events," he added.

Carr said the supply chain in general is improving and lead times are getting a little shorter, but electrical and electronic parts can be a problem. Piercy agrees: "As far as machining and materials, it's not completely pre-pandemic, but it has largely rebounded to lead times that are significantly better in 2023."

For Bekum, Carr said, aftermarket automotive products such as motor oil, lubricants and cleaners remain a strong segment.

As for the automotive manufacturers, Piercy said a lot of customers are working on new investments linked to launches that are one or two years out. "Those we're told are continuing to move forward, and we are continuing at this point to supply products to the automotive market," Piercy said.

At Kautex, Heusinger sees an increased need to modernize and upgrade existing machinery.

"As mentioned earlier, we believe hydrogen-powered vehicles will gain market share over the next years. This will require a bulk transport and storage infrastructure in addition to vehicle conversions," Heusinger said.

Kautex officials are bracing for the impact of interest rates remaining higher for longer that will result in some postponed projects. So is R&B's Piercy.

"The high cost of capital interest continues to be a challenge. Some projects could get pushed off a little bit into the later part of 2024," he said.

Bekum's Carr added: "Legislative pressures associated with single-use plastics will continue to challenge the entire blow molding industry. Where there is challenge also comes opportunity."

At Kautex, Heusinger described the outlook as cautiously optimistic, while R&B Machinery's Piercy said the year is looking slow to flat right now.

"The phones are ringing. There's activity, but there are a lot of unknowns right now," Piercy said. "Cash continues to be tight. And when the market gets tight, companies get more aggressive and there's volume shifting or trading off without real growth. That puts pressure on converters. They end up with excess capacity. … We expect 2024 to be flat to steady, not strong or robust."

Overall, the container market is significantly down and there's a lot of excess capacity installed in North America today.

"In terms of the machinery business, that means tough sledding for quite a few years here," Piercy said.