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Challenge and opportunity aplenty

News from various corners of the plastics industry makes it difficult to discern whether we are headed for good, or bad, times.


Husky President and CEO John Galt.

Maybe—likely even—we’re in for a bit of both. There is a substantial body of evidence indicating processors are investing and expanding. Among the people we’ve heard from lately, we have Bob Simpson, president of Milacron, the largest U.S. plastics processing machine manufacturer, telling us that his extruder and blowmolding machinery sales couldn’t get any better, with manufacturing capacity maxed out. The injection molding machine business isn’t quite so positive, yet.
We have Helmar Franz, chief strategy officer at Haitian, in Ningbo, China, the world’s largest manufacturer of injection molding machinery (by unit sales), sharing data from China’s plastics machinery association which illustrates that China’s demand for presses is increasing at more than 13% per annum—it is the largest market for these machines and also is growing more quickly than any other. His firm may well manufacture 20,000 molding machines this year.
We have Thorsten Kühmann, managing director of Germany’s VDMA trade grade, saying his group’s members—who account for more than 25% of global plastics machinery sales—have, based on their order books, doubled their sales growth prognosis for this year, and expect their current high capacity usage to continue through 2008.
Consider those three comments, from gentlemen tuned into the market on three different continents, and it would seem safe to assume that the industry is in solid shape.
Still, plastics prices and energy costs remain serious concerns. The EuPC trade group representing Europe’s plastics processors warns that high oil prices are threatening the recovery of the industry, and the threat is magnified by a shrinking number of OEMs able to exact extreme pricing pressure on their plastics processing suppliers.
According to the EuPC, since December 2006 the prices of plastics and additives have reached or are very close to record levels. Prices, on average, have increased from 50% (for polypropylene) up to 100% (for polystyrene) since the beginning of 2004, with a further 15-20% price hike expected in the coming six months. These pricing trends hold true across the globe.
On another front, economists remain divided as to whether the home loan crisis in the U.S., following too-large loans offset by too little collateral, is going to a) push the U.S. into a recession, or b) push the U.S. and other parts of the world into a recession, or c) the worst is already past, or d) none of the above. You won’t find the answer here, but it’s clear that the tightening of credit and a downturn in the building and construction market would usually indicate hard times for processors.
This appears nearly a repeat of where we stood in 2004, immediately after the last K Show. Then, as now, most machine makers were full of good news. Then, as now, a major end-use industry was in crisis: now it’s U.S. housing, then it was U.S. car manufacturers and their key suppliers. Then, as now, plastics prices were on the rise and energy costs were a major concern.
The truth of the current industry outlook is almost certainly a mixed bag. There are opportunities aplenty for industrious processors using innovative technology, just as there are major stumbling blocks in those same processors’ way. Now, as then, the industry needs processors able to steer their businesses through stormy weather. We hope our magazine helps you identify some of the perils and the opportunities.
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