Pressures increase for mold builders, with a quarter expecting no relief in 2020

While 61 percent of mold builders are fully up and running, many manufacturers of the molds used to shape raw materials into plastic products are in rough shape because of the COVID-19 outbreak.

Twenty-six percent of the businesses in the mold making industry are at 50-75 percent of their pre-pandemic production levels. Another 13 percent are operating at half their normal level or worse. One percent shut down.

A quarter of the businesses don't expect their operations to return to normal at all in 2020.

The data comes from 318 respondents of the weekly "pulse surveys" taken by the Indianapolis-based American Mold Builders Association, a trade association with more than 280 members and partner suppliers serving dozens of markets.

"One thing that has been a struggle is the startup of the auto sector," Executive Director Troy Nix said in a May 27 webcast of AMBA's annual meeting. "I know plastics processors and the rubber product manufacturers are struggling, waiting for the full-fledge startup to begin."

Only 42 percent of survey takers that primarily serve the auto market are fully operational compared to 91 percent serving mostly the medical market.

Regardless of end markets, most sales projections are being revised. While 29 percent of the businesses expect to meet at least 95 percent of their financial goal, the rest are bracing to fall far short, according to the AMBA survey conducted May 20-22.

Only 58 percent of the respondents expect to reach 75 percent of their 2020 financial forecast, 11 percent say they will meet 50 percent of projections and 2 percent don't expect to achieve half their initial target.

A lot of the feedback from businesses is troubling to Laurie Harbour, president and CEO of Harbor Results Inc. in Southfield, Mich., a financial and operational consulting firm for manufacturers. Most tool and die shops already were planning for 2020 to be a light year in terms of sales, Harbour noted.

"If they were only planning for 80 percent of 2019 volumes and now they're planning for 75 percent of that, we're looking at an industry that will take a significant impact in the 2020 calendar year," Harbour said during the online meeting.

Her firm has been conducting its own monthly surveys of some 325 businesses — mold builders, molders, stamping firms and die manufacturers — about how the COVID-19 virus, which was declared a pandemic on March 11, is affecting their operations.

Thirty-five percent of tool shops and 47 percent of production shops are concerned about the future because business is significantly down. Some of them won't survive the COVID-19 crisis.

"In October of last year, I forecast a 10-15 percent loss of mold shops and die shops over the next five years. I wasn't anticipating that soon," Harbour said. "Unfortunately, I think that number will be similar, if not more, and I think it will be moved forward quite a bit."

The COVID-19 pandemic also has underscored the need to shorten supply chains for critical products like personal protective equipment, and it has increased calls to bring back other work that was shipped overseas.

Mold builders, tooling shops and processors expect to benefit from the latest outcry for reshoring.

Forty-seven percent of tooling businesses and 59 percent of production shops told Harbour's firm that they are quoting on projects that historically would have gone to China.

"We're seeing an increased sourcing in North America and a decreased sourcing in China across both production and tool shops," Harbour said.

More than a third of survey takers also indicate they are seeing increased lead times from China and about 15 percent say pricing from China is going up, too.

Harbour said she agrees that "a good deal of reshoring" is likely but she cautioned, "we know China is not going to go away. We know China is working hard to rebuild their economy."

In the meantime, others are working hard in the U.S. to put out a welcome mat for returning businesses, according to AMBA's lobbyist, Omar Nashashibi, a partner in the bipartisan Franklin Partnership in Washington, D.C.

Nashashibi told AMBA members he is focused on tax credits and other incentives to encourage reshoring.

"A lot of the concern is that it's expensive to move, certainly internationally, and it's expensive to start a facility and train employees," Nashashibi said. "There's an effort to bring together a tax credit that would help not just those onshoring and reshoring but all manufacturers."

Other U.S. companies are eager to do business with China and a few of them have filed for tariff relief on plastic injection molds, Nashashibi said.

The Office of the U.S. Trade Representative is taking public comment through June 25 as to whether certain tariffs should be lifted temporarily to improve the response to the deadly, fast-spreading COVID-19 respiratory illness.

Proponents are arguing that tariffs on Chinese medical supplies are hampering efforts to control the disease, which has killed more than 100,000 Americans and 360,000 worldwide as of May 28.

Nashashibi pointed to a March 25 letter from Danaher Corp. asking the USTR official, Ambassador Robert E. Lighthizer, to remove duties from medical care products needed to fight the virus. The letter shows a mold used to produce a cartridge part for a molecular diagnostic kit to test for COVID-19, and it says rapid results are provided in as little as 45 minutes.

"At this critical time, tariffs on these products add cost, complexity and undue burden to businesses on the front line of the crisis," the Danaher letter says.

Nashashibi said he responded immediately on AMBA's behalf.

"We try to defend against these things. Were this tariff lifted again, you'd be at a greater disadvantage than you are today," Nashashibi told meeting attendees.

The lobbyist worked last fall on AMBA's behalf to reinstate 25 percent tariffs on plastic injection molds. The effort was a success by late December.

Nashashibi is optimistic about prevailing again.

"We're not seeing a big push against our lobbying efforts, so I feel pretty confident that between now and June 25 we can continue to hold them back," he said.