Machinery shipment values rise in second quarter

The value of shipments of primary plastics machinery for injection molding and extrusion increased to $413.2 million in the second quarter in North America — up 21.4 percent from the prior quarter and 28.8 percent from the prior year.

Shipment values were 19.4 percent higher for injection molding presses; 10.2 percent higher for single-screw extruders used to manufacture pipes, window profiles, rods and sheet; and 86.6 percent higher for twin-screw extruders, used for mixing, compounding and producing wood fiber blends.

Compared to the second quarter of 2021, shipments of single-screw extruders fell 11.1 percent, while shipments of twin-screw extruders climbed 53.1 percent over the same period. Injection molding machine shipments rose 30.7 percent from a year earlier.

The statistics were compiled and reported by the Plastics Industry Association's Committee on Equipment Statistics (CES).

Following last year's "robust" plastics machinery shipments, Perc Pineda, the association's chief economist, said in a news release that it is reassuring to see the trade group's estimates of shipments in Q2 2022 significantly above those from Q2 2021, especially considering the economy contracted in the first half of 2022.

"It is still expected that plastic products manufacturing will increase this year. By extension, it should continue to generate demand for plastics equipment," Pineda said. "However, equipment demand growth rates could be reverting to its long-run trend after double-digit growth rates since the economy bounced back from the COVID-19 recession."

Rising interest rates, the ongoing recovery of the supply chain and the tight labor market are headwinds, Pineda concluded.

The trade group's equipment committee also released results of its quarterly survey of plastics machinery suppliers, which asks about present market conditions and expectations for the future.

In the second quarter, 35 percent of respondents expected market conditions to either improve or hold steady in the third quarter.

Looking ahead for the next 12 months, 35 percent of respondents expect market conditions to be steady to better. That's 5 percentage points lower than the previous quarter's survey results.

"The survey results, particularly the 12-month outlook, reflect cautious optimism of survey participants considering the U.S. economic slowdown in the first half of the year and the prospect of lower economic output this year compared to last year," Pineda said.

The equipment statistics committee also reported that plastics machinery exports increased by 14 percent to $221.4 million in the second quarter of 2022. Mexico and Canada remained the top export markets of plastics machinery from the U.S.

The combined exports to U.S.-Mexico-Canada (USMCA) trading partners totaled $121 million and comprised 54.8 percent of total U.S. plastics machinery exports. Imports saw a meager decrease of 0.8 percent to $482.1 million in the second quarter.

"All told, the second-quarter results were positive and speak to the resilience of the plastics equipment suppliers and the plastics industry as a whole," Pineda said. "However, broader micro and macro challenges will impact the plastics industry's value chain, which, at the moment, is still projected on a growth path for the second half of 2022."

Extruder and press shipments showed resiliency in the second quarter based on the data released by the Plastics Industry Association.

However, the report does not indicate if shipment values were up because of market growth or simply because more companies participated in the survey, which could skew comparisons, according to Bill Wood, Plastics News economics editor and founder of Mountaintop Economics & Research Inc.

"Based on this data we have, the numbers from the second quarter are quite strong and that's good news," Wood said in a phone interview. "Corroborating that is the fact the numbers from the overall plastics industry in terms of what processors are producing were also quite strong so far this year — surprisingly strong to me."

For example, Wood said the capacity utilization rate in the plastics industry, according to the Federal Reserve, exceeds 88 percent.

"That's sparkling. That's spectacular," Wood said. "You start to see a significant expansion in machinery sales when the number gets up over 84 or 85 percent."

Also, year-over-year plastics output is up about 6 percent based on August data, Wood said.

"That's really good," he added. "We've had annual average growth of just under 2 percent for forever. The plastics industry usually grows about the same rate long term as the overall economy, but this year the numbers coming out of the Federal Reserve for the plastics industry surprise me. It was supposed to be grim but so far in 2022 the plastics industry is above average."

The medical market is growing 6-7 percent a year, retail sales are solid and consumer products are selling fairly well, Wood said.

"The real thing the plastics industry is worried about is consumer activity. How much money are people spending? Those numbers never went negative and held up pretty well mainly because people had [federal stimulus] money."

Another factor affecting machinery sales is interest rates to borrow for capital investments, Wood added.

"Everyone knew interest rates would go up and that may have been an impulse to buy ahead of the increases if you're going to rely on financing," he said. "The Fed started hiking rates in the third, but they told everyone in second quarter. That might have pushed sales forward."

Bryan Fairbanks, CEO of composite decking extruder Trex Co. Inc., described the abrupt change in demand for its products made from a polyethylene and wood fiber blend in his Aug. 8 second-quarter 2022 earnings call with investment bankers.

Homeowners had been creating and updating outdoor living spaces during the pandemic but decking distributors sense a pullback and are reacting.

"Towards the end of June, we experienced a sudden reduction in our demand from our distribution partners, spurred by concerns over a potential easing in consumer demand due to rising interest rates, declining consumer sentiment and expectations of a general slowing in the economy," Fairbanks said.

Orders for new decking are expected to slow for the next six months.

"We expect our channel partners to meet demand partially through inventory drawdown rather than reordering product and maintaining current inventories. We believe the current drawdown will likely impact the next two quarters and will be meaningful in nature," Fairbanks said.

Then, in September, the CEOs of major banks gave a dim view of the U.S. economy, pointing to financial distress many Americans are facing from inflation in addition to high interest rates.

The first half of 2022 also boded well for Italian builders of machines that process plastics and rubber. They saw a 10 percent increase in orders compared with the first six months of 2021, according to the trade association Amaplast.

The forecast for the third quarter is positive, too, thanks to sales and orders from abroad, the group reported in an Oct. 3 news release.

About 70 percent of Italian production historically is shipped abroad. In the first half of 2022, Amaplast reported "an intensification of flows" to non-EU European countries, South America and Asia markets. The European Union and North America markets registered a slight slowdown.

Looking at the top 10 markets by value for the first two quarters, Amaplast reported an increase in machines bound for Germany, Poland, Mexico, Spain, India and the United Kingdom. At the same time, deliveries were down to the U.S., China, France and Turkey.

Sales of extruders are up 25 percent, driven in part by a subcategory of machines to extrude filaments, according to Amaplast, which didn't break out orders for other plastics processing machines.

Going forward, Amaplast warns that economic conditions, particularly drastic increases in energy prices, have worsened in the past weeks, exacerbating components and raw materials shortages recorded in previous months.

Machine builders continue to power through economic ups and downs, Amaplast said. More than 250 Italian machinery suppliers will attend K 2022 from Oct. 19-26 in Düsseldorf, Germany, along with 150 companies in their supply chains. The 400 businesses account for more than 5 percent of the Italian manufacturing industry.