Extrusion machinery holding ground as global headwinds linger

Extrusion machinery sales held their own in 2019, despite challenges of slowing economic growth, tariff wars and global uncertainty, machinery executives said.

The blown and cast film machinery sector could be a victim of its own success, as several strong sales years could leave an overhang for 2020, some company officials said.

In construction — a big market for extruders — vinyl is the top-selling choice for siding and windows for new single-family homes as well as remodeling. The newer category of luxury vinyl tile and luxury vinyl plank, which looks like wood flooring, has given new life to the vinyl flooring market.

The National Association of Home Builders said total housing starts continued to make steady gains in October, increasing 3.8 percent to a seasonally adjusted annual rate of 1.31 million units. The sector of single-family starts increased 2 percent, to a pace of 936,000 for the year.

The important rate of single-family starts has grown since May, said NAHB Chief Economist Robert Dietz.

"Solid wage growth, healthy employment gains and an increase in household formations are also contributing to the steady rise in home production," Dietz said.

Remodeling also remained strong this year. NAHB's Remodeling Market Index posted a reading of 55 in the third quarter. It has stayed above 50 since the second quarter of 2013. A rating above 50 indicates that a majority of remodelers report better market activity compared to the previous quarter.

"In a year that's been rough for many sectors, the overall extrusion market year-to-date 2019 is holding its ground in units compared to 2018, though off in dollars due to mix, average size and sustained competitive pricing pressure," said Gina Haines, vice president and chief marketing officer of Graham Engineering Corp.

Graham Engineering, based in York, Pa., makes Welex sheet lines for the extrusion market and American Kuhne extrusion systems for medical tubing, pipe, and wire and cable.

"Medical, profile, sheet, and wire and cable show good activity," Haines said. "Thin-gauge polypropylene applications, PET and barrier are drivers of our Welex activity."

Paul Godwin, president and CEO of Battenfeld-Cincinnati USA, said sales grew in 2019.

"Sales performance quarterly is as predicted, with a slight slowdown in [the] third quarter," he said.

Demand for plastic building products looks solid for the company in McPherson, Kan., Godwin said.

"The conduit market and corrugated pipe has shown good stability and growth this year, and forecasting steady growth into 2020," he said, adding that the ongoing recovery in housing starts "fuels the incremental growth in exterior cladding, fenestration, fence deck and rail."

Coming out of the Great Recession, there was a lot of excess extrusion capacity for building products, but Godwin said processors are investing to consolidate inefficient lines to optimize the yield per extrusion line and buying new machinery when efficiency improvements and demand supports an acceptable return on investment.

Fred Jalili said hot-melt extrusion and general compounding for automotive and sheet have stayed strong in 2019 for Advanced Extruder Technologies Inc. The company in Elk Grove Village, Ill., is celebrating its 20th anniversary.

Extrusion lines sold to recycling have picked up, as U.S. recyclers upgrade equipment to handle more material cut off from export to China.

"In general, the public is demanding industry to do more recycling and be more innovative," he said. Coupled with legislation, "all of that is coming together," Jalili said.

But overall, Jalili said, business was down in 2019, as it slowed in the third quarter and going into the fourth quarter. He is hopeful things will turn around in 2020.

The machinery world will be watching for how the new owner of Milacron Holdings Corp. — Hillenbrand Inc. — will have Milacron extruders, which make construction products like PVC pipe and siding, and decking, work together with Hillenbrand's Coperion compounding extruders.

Hillenbrand President and CEO Joe Raver, in a Nov. 14 conference call, said Milacron extrusion and Coperion can do some cross-selling and share innovation.

Davis-Standard LLC has completed the integration of thermoforming equipment maker Thermoforming Systems and blown film machinery maker Brampton Engineering Inc. into the company. Both were purchased in 2018.

President and CEO Jim Murphy said: "2019 will finish with stronger results than 2018. Although activity was slower during the spring of this year, we experienced much stronger activity in the second half of 2019."

Murphy expects "modest growth" for 2020.

"While trade uncertainties remain, we have seen improvement in market activity in Asia, Europe and North America," he said.

Murphy also said that some customers have delayed projects because of trade uncertainties. And he said K 2019 in October gave Davis-Standard a boost, with new orders of more than $17 million, representing the full spectrum of the company's product lines for pipe and tubing, blown film and coatings and lamination systems.

Murphy said packaging, medical and infrastructure are active markets. Infrastructure projects include new installations to support an expansion of electric grids and to support new fiber optic networks.

Dana Hanson said the 31-year-old Processing Technologies International LLC has seen some downturns.

"We've been through at least five major economic cycles. It would be reckless to assume there won't be another — and perhaps soon. We will continue marching and react accordingly, as we have in years gone by," he said.

PTi has experienced lower sales in 2019 when compared with the past five years of growth, said Hanson, who is president of the company in Aurora, Ill.

"Given that extended growth span, a slower 2019 is not surprising, and particularly given the macroeconomic factors our country and industry are presently faced with, including but not limited to tariffs and the uncertainty that surrounds them," he said.

Hanson said PTi commissioned several high-output multilayer sheet systems for direct extrusion of EVOH barrier film for extended shelf-life food packaging — a major technology for the company. Another strong area in 2019: extrusion systems that produce wood flour synthetic shapes and decking products.

And PTi's aftermarket business activities "are exploding," according to Hanson.

"We have realized a substantial year-over-year increase — healthy double digits — in overall aftermarket parts and service-related business volumes," he said.

US Extruders Inc. is completing its second year of business in Westerly, R.I., and its director of sales, Stephen Montalto, said the company is seeing good quote activity.

"I don't know if I want to use the word 'strong,' but it's definitely positive," he said. "We have a lot of real good projects that we're being asked to quote on, and there seems to be a lot of movement."

US Extruders is seeing activity in wire and cable, pipe and tubing, profile and medical.

"Those are probably our biggest markets. We've certainly done film and sheet for some single extruders as well," Montalto said.

Windmoeller & Hoelscher Corp. had a record year for sales and order income, President Andrew Wheeler said.

Wheeler said he anticipated the U.S. market would slow down a little, but it held up for W&H in 2019. What about 2020?

"If you asked me about two months ago, I would have said that I didn't see any possibility that we would reach the same level in 2020 as we did in 2019. But we have had a flurry of orders or shipments in 2020. So right now, I think that it is possible that we might get approximately around the same sales level in 2020 as we were able to do in 2019," he said.

W&H film equipment has earned a reputation as a high-value-added, high-technology solution for blown film and printing, according to Wheeler.

"In difficult times, you want to be able to set yourself apart from the other competitors, and I think that customers have determined that buying from us is a way to do that," he said.

Packaging, especially single-use plastics, is under a harsh environmental spotlight. Wheeler said that's mostly because of the high visibility of plastics.

"I think that the packaging industry, the flexible packaging industry, has been on its own coming up with ways to be more efficient, using less material, less waste, etc., and providing extremely safe packaging," he said. "And the thing that we probably need to do better at is improving upon the sustainable aspect."

Jim Stobie, CEO of Macro Engineering & Technology Inc. in Mississauga, Ontario, said the year started out strong, but U.S. sales were very low in the second and third quarters.

"Q4 has shown promise for an uptick, but we expect 2019 overall U.S. volume will be down significantly," he said.

The U.S.-Canada steel and aluminum tariffs were rescinded in mid-2019, easing an economic stress point for machinery makers. But the U.S.-China trade war and tit-for-tat tariffs have impacted capital spending, Stobie said.

"The ongoing trade disputes and resultant economic uncertainty has created a climate of caution with respect to major capital investment, causing delays in our customer's decision-making process," he said.

Other challenges for film are coming from Europe. Stobie said initiatives there are emerging to limit nonrecyclable coextruded film and/or laminations, which could have a dramatic impact on the multilayer barrier film market.

David Nunes sees some bright spots in the circular economy talk that dominated K 2019. Nunes is president of Hosokawa Alpine American Inc. in Natick, Mass.

At K 2019, Hosokawa Alpine AG highlighted blown film equipment touting energy efficiency and the ability to handle recycled and bio-based materials. The company's machine direction orientation (MDO) equipment for film will play a key role in single-material polyethylene pouches, which are recyclable, he said.

Overall, Nunes said, the U.S. blown film machinery sector has made plenty of sales in 2018 and 2019 — and the growth has been steady going back to 2011, after the Great Recession. Buying new lines, and upgrading with dies and cooling equipment, has generated solid business, he said.

Business peaked in 2019. "Then about halfway through the calendar year there was a drop-off for about five months," Nunes said.

He said Alpine American officials thought this signaled an economic slowdown, but then business picked up starting around mid-September.

"We're kind of scratching our heads. Is it going to be a slowdown, is it not going to be a slowdown? Is it just specific to our industry?" he said.

Regardless of what happens, Nunes said blown film machinery, with its long lead times, is a leading economic indicator.

"We're always six or seven months in advance of what's going to happen in terms of the economy," he said.

Steve DeSpain, president of Reifenhauser Inc., the maker of blown and cast film equipment, said the U.S. market "is still pretty strong for us."

"We've still got a lot of customers pretty active in looking at new equipment," he said.

For 2020, the backlog is still strong for the company in Maize, Kan. But even so, DeSpain agreed that the film processing sector has added a lot of new equipment and said: "I think they've got to swallow the amount of capacity that's brought on in the last few years.

"I think there's going to be a little bit of a downturn from the last year," DeSpain said. "I don't think we're going to be as strong, but I don't think it's going to be a bad year."