North American plastics machinery shipment values dropped to $224.8 million for injection molding and extrusion equipment in the second quarter — a 36.2 percent year-over-year decline.
Shipment values fell 15.4 percent from the previous quarter, according to figures released Aug. 13 by the Plastics Industry Association's Committee on Equipment Statistics (CES).
The only bright spot in the primary plastics machinery sector came as single-screw extrusion edged up 3.4 percent quarter-over-quarter. However, the shipment values of this machinery, used to extrude pipes, siding and window profiles, plummeted 28.6 percent compared with the prior year.
The outlook for pipes is strong in the United States as the federal government invests in drinking water infrastructure, but high home prices and interest rates have priced many potential buyers out of the market, slowing building and construction.
Interest rates also may be slowing machinery sales. Plastics News Economics Editor Bill Wood said they have been inhibitive for a year, putting a drag on demand for all kinds of products, especially big-ticket items like machines.
The shipment values of twin-screw extruders, used for mixing, compounding and other products, dropped 23.5 percent between quarters and 25.3 percent compared with the prior year.
Injection molding shipment values fell 16.3 percent compared with the previous quarter and were down 37.7 percent year-over-year.
"The second consecutive quarter of decline in shipments is not due to a pullback in plastics demand," Perc Pineda, the plastic association's chief economist, said in a news release.
Pineda pointed to the trade group's new "plastics demand estimate," which was released in July for the first time. Based on May 2024 figures, the estimate puts U.S. plastics demand at $22.8 billion. That's up 1.4 percent from the previous month, and up 3.5 percent from May 2023, the trade association says.
The estimate is derived from monthly data of shipments of plastics and rubber products, adjusted for export and imports from the U.S. Census Bureau.
"In fact, based on the monthly plastics demand estimate, there has been growth in demand recently. There is no indication that the baseline demand for plastic products has deteriorated," Pineda said
Also, the finished goods inventories of plastics and rubber products were estimated at $15 billion in June this year, compared to $15.2 billion in June last year. That indicates slow inventory adjustments, according to the trade group.
Inventory can move slowly for several reasons, including changing seasons, tougher competition, poor marketing and deteriorating sales.
In the plastics industry, Wood said he's concerned about capacity.
"There has been a steady decline in the capacity utilization rate," Wood said. "Plastics processors don't need new machines because they're not using the ones they have."
Machinery advances that improve output factor into the equation, Wood added.
"When the processors are able to use less and less of their capacity to meet demand, you know that means the machines are getting more efficient," Wood said. "Processors don't need as many machines to make the same number of parts or product as they did."
This is a cyclical issue, Wood said. He expects demand will pick up again.
"The second quarter [gross domestic product] number was better than I expected and that was the result of consumer spending for goods many of which are made out of plastic," Wood said.