They say time flies when you're having fun. The past 10 years must have blown by for most plastics machinery companies.
Until 2019, that is.
This has been a strange year. Plastics machinery sales have declined by double digits. That used to be normal; capital equipment tends to be a cyclical sector. But the falloff this year has been unusual because sales have been so good for so long — a decade of growth since the Great Recession.
You can read all about it this week in our 2020 machinery outlook special report. Plastics News reporters Bill Bregar and Audrey LaForest interviewed 40 machinery company executives covering injection molding machines, blow molding presses and extruders — both compounding extruders and regular lines used to make pipe, profiles, film, sheet and other products.
After the recession, the U.S. market for injection presses — by far the biggest plastics equipment sector — snapped back quickly and continued steady, if sometimes slow, growth ... until 2019, that is.
The automotive market led that resurgence, as OEMs and Tier 1 and 2 suppliers replaced aging equipment with new technology. Industry observers say that one brand-new injection press can replace two older ones and perform better, which can be a big incentive to upgrade. And upgrade they did. Specifically, the strength of the automotive sector fueled demand for large-tonnage machines.
But now the all-important automotive market is hitting pause. Experts predict future new-model launches — a driver of investment on new machinery and tooling — will slow in the next few years, as automakers spend time and money working on the electric, fuel cell and driverless cars and trucks of the future. Look at the hoopla surrounding the unveiling of the electric Ford Mustang.
Medical and packaging remain solid markets for injection press makers, but the falloff in automotive machinery spending is impossible to ignore. At least the United States auto sector isn't as bad as Europe, where injection machinery companies said the sector has collapsed.
"The automotive market, historically, has been a very strong market and then when automotive goes down, typically in the past you would say, 'Oh, it's just bad for everybody because there's no way you can make up for that, any type of a downturn in automotive throughout the other parts of the industry — whether it be the medical, the packaging, the technical, all the different areas,'" Mark Sankovitch, president of Engel Machinery Inc., said.
The good news is the U.S. economy remains solid. Unemployment fell to 3.5 percent. The economic expansion is the longest in U.S. history. Interest rates are low, which makes it easier to borrow money to spend on equipment, add onto a factory or make an acquisition. Some economists are saying it's getting long in the tooth, but consumers are still spending. They have jobs. All eyes will be on the Christmas shopping season to see if a smiling Santa, or the Grinch, comes out on top.
But, as always, there are some wild cards heading into 2020. The biggest one, no doubt, is the presidential election, which is likely to be a matchup between an unimpeached President Donald Trump vs. … some Democrat. One thing's for sure: It's going to get ugly, nasty and mean-spirited … and that's on the good days! Nobody knows how or if that will impact business spending on capital goods. But it's sure to at least give Americans a massive headache.
Wild card No. 2 is the war on single-use plastics. So far, blow molding machinery officials say the negative publicity has not impacted the equipment business, but they're watching the situation closely. It's clear that, whatever happens, machinery manufacturers will be an important part of the movement to a circular economy.
The third wild card is free trade and the U.S.-China tariff war. Clearly the world needs as much free trade as possible. But several injection press leaders said businesses should have already adapted to the trade battles.
Plastics remains a dynamic, growing industry. The innovative people employed in plastics need to be in overdrive to do two challenging things simultaneously: Keep their businesses nimble enough for a potentially volatile 2020. And work on longer-term goals of forging a truly sustainable industry based on recycling, reuse and helping make the earth a healthier place.
