Injection molding machinery makers adapt to chronic uncertainty

For 2019, uncertainty became the new normal for suppliers of injection molding machines to North America, as they adapted to the unknown, prepared for the unexpected and struggled to convert interest into hard sales.

The injection presses business — a bellwether for the overall plastics industry — has grown almost every year in the decade since the Great Recession — some years sharply, some years modestly.

But after nearing the 4,000-unit benchmark last year, shipments of injection molding machines declined about 10-15 percent in 2019 to around 3,500, according to injection press executives. But most industry observers don't expect a return to the volatile up-and-down cycles of the past.

If you read the papers, you already know the major reasons: political headwinds of trade wars and economic uncertainties, customers delaying orders, lower capital investment in the key automotive sector, including the longest General Motors strike in 50 years.

Looking ahead to 2020, if machinery makers had a Magic 8 Ball, the answer would be: "Reply hazy, try again."

How will a global slowdown impact multinational corporations? Will it hurt exports from a still-solid U.S. economy, enjoying low unemployment and decent consumer spending? Will Congress approve the United States-Mexico-Canada Agreement aka the new NAFTA?

Then there are the impeachment hearings. Then there's the presidential election — likely to be a historically brutal and nasty slog that's ready to kick off Feb. 3 with the Iowa caucuses. Happy New Year!

Friedrich Kanz has some advice to block out the noise: Stop looking at social media and get back to work.

"Yes, there is uncertainty due to all kinds of things going on in the world. But when we are getting worried about these things … we will not get anything done," said Kanz, president of Arburg Inc. "Therefore, I think people will focus on what is going on in their companies. So, I think we will still feel optimistic about 2020 because there are still things going on in the U.S. economy that are very good."

Kanz said he is "realistically optimistic" for the coming year — and he's not into drama.

"There's no reason to get crazy. We're still OK right now," he said.

The U.S. is the largest export market for German parent company Arburg GmbH & Co. KG. Arburg Inc. is building a 23,000-square-foot expansion of its U.S. headquarters in Rocky Hill, Conn., nearly doubling the size of the facility.

For plastics injection machinery, the strongest areas are medical and packaging, most executives agreed.

"Medical is good for us because we have a pretty good position. Packaging in the United States is a steady market," Kanz said.

But after beefing up on new machinery, the automotive molding sector is taking a breather. That's amplified by automakers charting an investment path for electric and autonomous cars, as they cut back on those brand-new model changes that drive investment in machinery and molds.

"At the end of the day, automotive, it's the king," said Steve Cunningham, general manager of the injection molding division at Niigata Machine Techno USA Inc. "And so, if the automotive market is down, then injection molding machine sales will be down."

At K 2019 in Düsseldorf, Germany, large manufacturers of injection molding machinery said European automotive investment is practically nonexistent. The U.S. automotive press market is better than Europe, but it still has declined, machinery leaders said.

Mark Sankovitch, president of Engel Machinery Inc. in York, Pa., said the Austria-based parent company was "very pleasantly surprised at the K show" with busy activity — just not in automotive.

"I think [Europe] is taking a bigger hit from the automotive [sector] than we are. We still have the SUVs and the trucks that people are buying. They're high margin, so that the automotive companies are still making money. It's just that the volume has come down," he said. "And so the big greenfields that we had — the big orders that came in — in previous years are not there. I think if you talk to my competitors, I'm sure they'll say the same thing. It's just, that's not there. It's now the onesies and the twosies are what you're seeing in the market."

Automotive is still very important, but Sankovitch said diversification helps: "If all your eggs are in that basket, you probably are struggling quite a bit."

Sankovitch agreed that lots of disruptive issues are hitting the U.S. economy. But, at least by now, they are a known quantity, and machinery makers have settled into the new reality.

"You have to adapt. The uncertainty is no longer an uncertainty," he said.

Sankovitch added: "Everybody is kind of getting to the point where you've now said, 'OK, this is what it is, at least this is the environment we have to play in, so we need to adapt to that.' It is what it is, until it gets addressed. If you haven't taken your organization and kind of sized it [up] to take [action] accordingly, then you're probably on a different planet because this has been [going on] long enough."

Most machinery officials don't think U.S. manufacturing is in a recession, but economic data shows that factory activity has slowed down. The Institute for Supply Management's Purchasing Managers Index (PMI) said manufacturing remained below 50 for the third consecutive month in October, rising to 48.3 from 47.8 in September. That September reading had been the lowest one since June 2009, the last month of the Great Recession.

A figure under 50 shows a contraction of manufacturing activity. And the key manufacturing production index was 46.2 in October, down from 47.3 in September, suggesting the manufacturing output slowed for the third month and the pace of decline accelerated.

You've heard the term cautiously optimistic? Well, comments from survey participants indicate manufacturing confidence is "more cautious than optimistic," the Institute of Supply Management said.

The National Association of Manufacturers said its third-quarter 2019 Manufacturers' Outlook Survey showed that for the second consecutive quarter, there was "a significant drop in manufacturers' optimism amid uncertainties, a softening global economy and worsening workforce shortage."

Nearly 68 percent of manufacturers had a positive outlook for their business in the third quarter, but that was down from 79.8 percent in the second quarter and 89.5 percent in the first quarter.

And according to the Plastics Industry Association, the dollar value of North American injection molding machinery shipments decreased by 15.5 percent in the third quarter of 2019, from the year-earlier period.

Bill Wood, Plastics News economics editor, said machinery sales had a gradual increase through the long recovery.

"I don't know that we ever left cyclicality. We just kind of stretched it and tugged on it. There has been a chronic underinvestment in almost everything in America since the last recession," Wood said. "So for 10 years, everybody's been really reticent to invest at the levels that they would have historically."

He said the capacity utilization rate for plastics and rubber has drifted downward for the past couple of years to about 75 percent.

"When output picks up, utilization rates pick up, then you start to get expansion," said Wood, who runs Mountaintop Economics & Research Inc. in Greenfield, Mass.

Right now, Wood said, processors are experiencing the benefits of their more productive machines bought in the 4,000-unit years, "but they're not all being used at their maximum capacity."

And Engel's Sankovitch said industrywide orders are down around 18 percent in units through end of September. That doesn't bode well for 2020.

Glenn Frohring, president of Absolute Haitian Corp., believes the U.S. market could see a little bounce back next year with processors improving technology, especially if the tariff issues get resolved.

"I think that automotive programs will start ramping up. It's still going to be driven a lot by replacement machines," he said.

Strong markets for Absolute Haitian of Worcester, Mass., include housewares and appliances. And Frohring said the tight labor market will spur investments in automation.

Schaumburg, Ill.-based Plustech Inc. is boosting its automation offerings for Sodick injection presses. The company has hired a full-time automation integrator, according to Len Hampton, national sales manager.

Plustech, which sells machine tools in addition to Sodick injection presses, is building a 138,000-square-foot headquarters in Elk Grove Village, Ill. It will feature a 17,000-square-foot turnkey robotics center. Also, a 13,000-square-foot production-style showroom will allow Sodick to do 35-40 mold trials a year. Hampton said the company's current facility measures about 70,000 square feet.

The solid medical sector is a big user of Sodick machines. But what about the broader press market?

"Confidence is still there. It's just a little soft spot. I see it bouncing right back. It's still busy. People are very active and confident," Hampton said.

The big business news of 2019 was a new owner for broad-portfolio plastics machinery builder Milacron Holdings Corp. Hillenbrand Inc. completed its $1.9 million cash-and-stock deal for Milacron on Nov. 21.

Hillenbrand is building a plastics group. The Indiana-based public company already owns Coperion compounding extruders, some auxiliary equipment and Batesville burial caskets.

Japanese injection molding press manufacturer Nissei Plastic Industrial Co. Ltd. also made news, announcing Nov. 21 that it expected to buy 75 percent of Italian press maker Negri Bossi SpA by January and pick up the rest within a few years. The deal will give Nissei better access to Europe and much larger presses, since Negri Bossi builds them in clamping forces up to 7,000 metric tons.

Nissei also has opened its first-ever U.S. assembly factory in San Antonio. Takashi Sunohara, president of Nissei America Inc., said the Texas factory will help Nissei gain business.

"They have been assembling 460-1,300-ton machines in San Antonio, and our customers are welcoming the fact that we are assembling these machines here in the United States," he said.

Sunohara said Nissei America is in the same boat as its competitors when it comes to automotive.

"However, we are optimistic about our existing customers replacing energy-eating old machines with our energy-efficient new machines," he said.

Toshiba Machine Co. America, which, starting April 1, will change its name to Shibaura Machine Co. America, also has faith in automotive.

"Overall market demand for machines in the automotive industry has declined. Despite this, we see an opportunity to increase sales in this segment as automotive molders continue to recognize the significant improved operational efficiencies associated with large, electric machines," said Chuck Gorman, national sales manager of the company in Elk Grove Village.

Like other executives, Gorman reported that sales have declined this year.

"Overall business activity still appears strong; however, customers are delaying machine purchases until they have firm orders," he said.

Medical and packaging customers are buying machinery, Gorman said. Overall, he added: "Our customers are staying busy and continue to plan for investment in capital equipment. While there are a lot of uncertainties out there, we are still optimistic about U.S. plastics manufacturing."

Cunningham, of Niigata, also thinks business will improve, including from processors reshoring molding from China.

Niigata Machine Techno now is handling sales, service and parts directly from its North American headquarters in Elk Grove Village, after contracting that out. Cunningham, a veteran of plastics machinery sales, joined Niigata in late summer.

Processors are holding off on orders.

"Their customers are not letting out the [purchase orders] and letting out the orders for new projects because they're uncertain," Cunningham said. "But there is a trend to see things coming back. I would say that 50 percent — this is anecdotal — but 50 percent of the new projects are from companies finally just saying, 'OK, that's it. We're bringing things back.' And they're bringing it back and taking back the manufacturing of those products."

Machinery executives said most press sales this year went for new production capacity, not to replace older equipment. And long gone are the days of molders buying machines in anticipation of future business. Now they invest when they have the business in hand.

"Yeah, it's not a 'field of dreams' out there," quipped Bill Duff, general manager of sales and marketing at Yizumi-HPM Corp. in Iberia, Ohio.

That's why the company holds an inventory of 35-40 machines from its Chinese parent at an off-site warehouse.

"Thirty percent of my sales come from customers who need a product immediately. If I tell a customer it's 16-18 weeks, I'm not getting the order," Duff said.

Duff also said automotive business has dropped.

"They're looking at equipment, but they're not placing orders. Our business for the last several years has not been tied to automotive. We do a lot of general purpose and specialty machines. Medical's still good, but where we see a decline is the automotive sector," he said.

Yizumi-HPM is positioned for more packaging molding. At an open house Oct. 30, the company showed a new PAC-K press for making thin-wall food containers.

Business increased 20 percent this year, but requests for quotes are declining, Duff said at the open house. If the U.S. and China can agree to reduce or eliminate tariffs, that would soothe the nerves of the manufacturing sector and boost capital investment, he thinks.

"This is from my experience from 35 years being in the business. The machine tool industry — injection molding, die casting, metalworking presses — they're the first to feel a downturn in the economy," Duff said. "Capex budgets — that's the first thing that a big company or a small company says, 'We're going to hold off on the purchase. We're a little jittery. Let's not spend a million bucks on the equipment this year.' So, we're the first to feel the pinch."

John Martich, executive vice president and chief operating officer of Sumitomo (SHI) Demag Plastics Machinery North America Inc., said North American shipments of injection presses probably fell about 15 percent this year from 2018.

Sumitomo Demag has gained market share thanks to strength in medical and packaging, he said, adding that the automotive downturn has hit large-tonnage machines. Meanwhile, the company is expanding U.S. operations this year, opening facilities in Anaheim, Calif.; Buffalo Grove, Ill.; and Suwanee, Ga.

Dale Bartholomew, national technical manager at Japan Steel Works America Inc. echoed other machinery officials by saying projects take longer to close.

"We'll start quoting our projects and then it just seems to get dragged out. And you know, it moves it into the next quarter. So the sales cycles have become somewhat extended," he said.

The automotive market is saturated with machines, and Bartholomew has heard vehicle makers have a lot of inventory. And the nearly six-week-long UAW strike against GM didn't help.

"Yeah, well, customers are very hesitant to buy when they've got half of their plant shut down because of the strike," he said.

Munich-based KraussMaffei Technologies GmbH shook off an unusual problem — a cyberattack that impacted first-quarter business operations — to have a decent year, said Sven Schewe, director of injection molding machinery sales for the Americas.

Schewe said demand is off for standard injection presses, but he said KraussMaffei's highly engineered machinery, sometimes custom made for special molding jobs, have held up. And he said the company's large-tonnage machines — 1,300 tons and bigger — are fairly stable.

"It's more on the small machine market that we really see the reason for not reaching the numbers of 2018 and 2017," he said.

Medical is KraussMaffei's biggest growth area for 2019, Schewe said. In the U.S., the company has had strong growth from smaller and midsized molders, he added.

David Preusse said the U.S. division of Austria's Wittmann Battenfeld GmbH had a "super year," citing a stronger U.S. dollar and not having to shell out additional money for an NPE show in 2019.

"We had an extraordinary volume of micromolding machine systems in innovative medical projects, a great year in molding machines and, while robots fell slightly, our downstream automation systems were up," said Preusse, president of Wittmann Battenfeld Inc. in Torrington, Conn. "We were profitable, our backlog is excellent and our opportunities are bountiful."

Ube Machinery Inc. of Ann Arbor, Mich., is bracing for lower 2019 sales because of fewer automotive model launches, said Masashi Kawata, general manager.

The company will try and stock the MMX two-platen servo-hydraulic presses to cut down delivery times to American customers, he said.

Kawata said several customers are expanding existing facilities or adding new locations and have budgeted the purchase of new injection presses in the next few years. But he said automotive will remain a challenge.

"We do believe the car market may be shrinking, especially midsize sedans, and that automotive suppliers are covering the decrease in sedan sales with SUVs and pickup trucks. This trend has caused new machine sales to continuously drop," Kawata said.

Boy Machines Inc., which makes smaller machines, is not heavily into automotive, but Marko Koorneef, president of the operation in Exton, Pa., said other sectors also have invested in new machinery in the last couple of years.

"This is the year that they're not investing because they're running their models," he said.

Medical remains strong for Boy, which offers machines for liquid silicone rubber.

Koorneef said U.S. manufacturing is far from a recession.

"I think manufacturing is still up, and it's going to stay up. Capacity's still being added. Wealth is still being created. Customers are busy," he said.

Even so, press makers see delays.

"They don't want to jump in with two feet first. They're holding off to be absolutely sure when they're going to invest," Koorneef said. "But in the end, they're going to invest."

"Surprise is always in the playbook," said Dave Fung, president of L.K. Systems Inc.

The company is shifting focus to other export markets outside of the United States because of the uncertainties, he said.

Fung also advised thinking ahead: "To prepare for the unexpected is always a 'positive' thinking in the fast-changing economy."

Maruka USA Inc., which sells Toyo injection presses, did see a "slight slowdown" in 2019, said Kevin Bruce, vice president of sales.

"However, it was not to the level reported by industry sources for other manufacturers," he explained. "I believe a reason for this is a large part of our Toyo customers are in the medical field, and that segment of the market did not see as much as a pullback as the others."

CH-America, which kicked off sales of presses made by Chen Hsong Holdings Ltd. at NPE2018, has added service technicians in North Carolina and Tennessee, and opened an office in Detroit — Detroit? Home of the "not buying presses" automotive industry?

CH-America has broken into automotive, said President Ken Heyse. "But we would not experience a slowdown in the classic sense because we're growing into our place in the market," he said.

Other good U.S. markets for Chen Hsong presses are custom molders, medical and packaging — and even large agricultural bins, garbage cans and pallets, Heyse said.

Korbinian Kiesl, president and CEO of French injection press maker Billion SAS, thinks the U.S. automotive market has a need for midsized machines instead of big presses.

"There's still a focus on streamlining manufacturing, getting new products in and lowering manufacturing costs with new equipment. I think this will be quite good next year for the automotive industry," he said.

Dutch press builder Stork Plastics Machinery BV is mainly a European supplier, so the U.S. offers a growth market, especially in high-end packaging, according to Benjamin Sutch, managing partner of Chudleigh Sutch UK Ltd., Stork's distributor for North and South America.

"The U.S. market is a great place to be selling large-tonnage injection molding machines for packaging applications. So, for us, it's just about the best place that we could be looking to grow and expand into," Sutch said.

BMB North America, part of the Italian press maker BMB SpA, enjoyed a "very good year," said David Brown, area sales manager for the operation in Mississauga, Ontario.

"We do some in automotive, but not a lot. It's a very, very small percentage," Brown said. "If automotive goes down or up, it doesn't really affect us significantly. The markets that we prefer to play in, like packaging and medical, consumer products and the likes of that, and that's staying pretty steady."

Brown said the company is looking forward to a "good 2020," citing growth potential in the U.S. and Canada, where BMB is still fairly new. As for this year's headwinds, he said he views 2019 as the year "the whole uncertainty thing got baked in."

"It was a shock in the beginning back in 2018, maybe even a little earlier with the tariffs and the potential trade war with China, etc. … And so I think in 2019, it got baked in," he said. "And then in 2020, I think it's just going to be the status quo. That's just the way it is."