A machinery boom may be on the horizon

July 25, 2012

Everyone who’s been in the plastics industry for any length of time remembers the machinery boom of the 1990s.  Molders couldn’t get presses fast enough and were buying from any manufacturer that could deliver the quickest. Inventories of presses both new and gently used, fell to extremely low levels. Mold manufacturers got in on the action as well, buying machine tools to a point that some of the machine tool suppliers couldn’t keep up with demand.

Of course what goes up must come down, and that’s not just applicable to the law of gravity.  When the boom ended with the mini-recession of 2001 hit, and the slowdown beginning in 2006 ended in a full-blown recession in 2009, the market was flooded with used equipment from the many plants—mostly in automotive molding—closing their doors.
Hold onto your hats! It appears that another boom—or maybe a "boomlet"—is on the horizon.
The latest report from the Association for Manufacturing Technology (AMT) shows that total U.S. manufacturing technology orders for May 2012 rose by 14.5% from April and up 19% when compared with the total reported for May 2011. Year-to-date, manufacturing technology orders totaled $2,235.27 million, up 12.1% compared with the same period in 2011.
The figures from the latest U.S. Manufacturing Technology Orders (USMTO) survey indicate both “sound health and continued expansion in durable goods manufacturing,” said AMT President Douglas K. Woods. Four out of the five regions tracked by the AMT for the program showed significant gains in manufacturing technology orders. Only the Northeast Region showed a drop in May from April’s totals, but only 6%. Year-to-date, that region is up 2.4% compared with 2011’s comparative figure.
The Southern Region saw an increase in manufacturing technology orders of 60.3%, totaling $77.67 million from the $48.44 million for April, and 40% more than the total for May of 2011. In the Midwest, typically a strong manufacturing region, May’s manufacturing technology orders were up 19.8% compared with  April, and up slightly (4.9%) for the same month a year ago. Year-to-date, the Midwest Region had a total of $738.08 million, and is up 7.9% compared to the same period a year ago.
Manufacturing technology orders for May in the Central Region ticked up 2.3% more than April’s, but up 40.7% ($134.85 million) over May of 2011. And the year-to-date orders are up 22.7% more than the comparable figure for 2011. The Western Region saw orders up 17% for May over April to a total of $38.07 million, and 21.6% higher than May 2011. The YTD total or $214.70 was 9.4% above the total for the same period in 2011.
And it looks like those numbers might just keep on ticking upward. Manufacturing surveys all point to 2012 as being a good year with demand for machinery increasing. The latest Automotive Supplier Barometer released last week from the Original Equipment Manufacturers Association, shows that while the Supplier Sentiment Index fell to 55 from the May level of 60, and optimism levels have dropped, production planning volumes are trending upward for 2012 and 2013.  

With a median volume at 14 million units, up 500,000 units from the January 2012 indicated level, “managing these volume increases continues to be forefront in supplier decision making.” Given that trend, hiring is important, but of greater importance is the need to make capital investments. Eighteen percent of the respondents to the OESA survey state capital investments are budgeted to significantly increase in 2013, most of that (80%) going toward new equipment with 20% planned for used equipment.

“Factors driving the decisions to buy new versus used are centered around equipment availability, value, and reliability along with new material and processing technology requirements,” said the report.

Other priorities identified in the survey include investing in technology upgrades, software, and equipment to produce more efficiently; fast-tracking apprentice training in key skill areas; increasing productivity; hiring more engineers; and ensuring “supply chain capacity is aligned to meet demand.”

That last point is crucial to winning additional mold jobs and molding work from the automotive OEMs and Tier 1 suppliers. And, it might mean that suppliers to the automotive industry may—or may not—need to purchase capital equipment depending on their capacity availability when the OEMs begin ramping up toward the end of this year as is projected.

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