Sponsored By

After riding out the economic storm that many of their OEM customers endured with some measure of success, moldmakers should be seeing some calmer waters.  Many had high hopes at the beginning of 2012 for a banner year, but that didn’t materialize.  Most now have a more realistic outlook that 2013 will be what they make it. Business over the last quarter of 2012 has been a bit slower, much of it due to the fact that tooling budgets are typically spent by October in preparation for the new year.

Clare Goldsberry

December 19, 2012

7 Min Read
Moldmaking: Five predictions for 2013

After riding out the economic storm that many of their OEM customers endured with some measure of success, moldmakers should be seeing some calmer waters.  Many had high hopes at the beginning of 2012 for a banner year, but that didn’t materialize.  Most now have a more realistic outlook that 2013 will be what they make it. Business over the last quarter of 2012 has been a bit slower, much of it due to the fact that tooling budgets are typically spent by October in preparation for the new year.
   
New business for the first quarter of 2013 appears to be spotty, depending on the markets being served and how much impact the various new taxes written into the Affordable Care Act (19 new taxes, to be exact) will have on their ability to hire and expand their business. Some moldmakers have commented to PlasticsToday that in light of the pull-back on new mold purchases over the past few years, many molds are on their last legs, and replacement molds are badly needed. An air of uncertainty still plagues many of these small-business owners as they take a “wait-and-see” stance with their OEM customers.
   
A Plante & Moran study of the North American Plastics Industry through 2011, and released in October, noted several interesting facts that favor moldmakers. Molders are seeing strong earnings. “Gross profits, which never varied more than a few percentage points for the past 13 years, increased almost 20% in 2010 and remained steady in 2011,” reported Plante & Moran. “We speculate that there are a number of reasons for the retention of the strong earnings in 2011.”
   
First, press utilization increased for a second year in a row, noted the Plante & Moran study. However, utilization is still “depressed” considering that average utilization is just 40% based on a 24/7 calculation. Typically, “increased utilization comes with increased complexity”—i.e. number of molds, part numbers and materials—“and thus with high labor costs.” Still, Plante & Moran’s report notes that this is only the fifth year out of the last 15 with an increase in utilization. “For those with good margins, any increase in utilization results in improved profits,” said the report.
   
Secondly, resin costs shrank an additional 1.6% in 2011, and again in 2012. Sales growth among molders “nearly doubled” in 2011, up 8.7% for the median processor. “The growth appears to have allowed processors to be more discerning with customer contracts as median complexity actually decreased from 2010 (i.e. fewer molds/resins in the mix),” said Plante & Moran. Larger molding companies enjoyed healthy growth, while smaller enterprises were still working to get back to pre-recession levels of production.
   
Third, business is strong for several industries, noted the Plante & Moran survey. For example, the automotive industry, which had a decent 2011 and an even better 2012, has managed to keep its Tier 1 and Tier 2 (which includes many moldmaking firms) busy. They even softened their stance on payments for a while. However, Plante & Moran reported that it is “the aggressive supply chain practices that had taken a sabbatical during the recession that may have more impact on the desirability of the industry than a volume recovery.”
   
A number of mold manufacturers have found the aerospace industry to be a good fit with their automotive know-how as aircraft sales hit record highs in 2012, with builds out through 2015. That could mean good business for both molders/thermoformers and mold makers that specialize in this industry.
   
Other industries that are faring well include the industrial products sector that “enjoyed an increase in sales growth in 2011 for the first time in two years.” The construction and furniture industries, while still in the doldrums during 2011 when the Plante & Moran survey was being taken, has generally started on a slow upward trend in 2012.
   
Just when everyone thought it was safe (and profitable) to get into the medical industry to avoid the pitfalls of the automotive industry, medical and pharmaceutical are running into some headwinds. The medical device tax has many big OEMs in that sector rethinking their strategy, utilizing their foreign operations to a greater extent and even planning some “near-shoring” within North America.
   
A report from McKinsey & Company on the pharmaceutical industry said that “The good old days of the pharmaceutical industry are gone forever” as it heads “toward a world where its profit margins will be substantially lower than they are today.” With the rapid growth of generics, McKinsey noted that the expectation of “Big Pharma’s current level of R&D spending to become a luxury that investors no longer tolerate. . . as some investors and analysts believe that many of Big Pharma’s R&D investments destroy value.”
   
Given these new clouds on the horizon for both medical and pharmaceutical, moldmakers might be squeezed on price unless they provide the value proposition for molds with greater productivity for products sold in emerging markets.  
   
While Plante & Moran report that molders made limited investments in production equipment in spite of the fact that much of it is getting older, machine tool purchases as of October 2012 were up significantly over 2011 in four out of the five regions of the U.S. tracked by The Association for Manufacturing Technology. The Southern region saw the biggest jump in manufacturing orders with a YTD total of $683.23 million, a 15.3% over the same period 2011.
   
The Central region saw a 2012 YTD increase in orders of 6.8% to $1,341.76 million, over 2011’s manufacturing technology orders for the same period. The Western region was up YTD 5.7% in 2012, and the Midwest region saw an increase in manufacturing technology orders YTD of 4.9% compared with the same period in 2011. The Northeast region was the only region that saw a drop in manufacturing technology orders for YTD 2012 (down 5.7%).

Five predictions for the moldmaking industry:

  1. The successful mold manufacturers will tend to be the larger shops with significant resources to support the cost of sales, customer-dictated payment schedules, and increased demand from customers for more services.

  2. Large OEMs are losing their patience with smaller companies that do not have the financial wherewithal to meet the demands of the big OEMs or even the Tier 1 suppliers which many mold makers supply. A strong financial position is almost mandatory in the light of today’s economic conditions.

  3. OEMs will tend to keep new mold builds in the U.S. given their skittishness about intellectual property theft and reluctance to pay the added costs (which they are finally realizing are part of price they pay for going half-way around the world). Confidentiality is becoming a greater concern among OEMs, and that will increase as moldmakers become innovators, incorporate new technologies in the molds, and design and build total manufacturing cells.

  4. More OEMs are taking the Toyota approach: “Buy it where you build it.” That said, it also means that “best cost” remains a major factor. Moldmakers will still have to be competitive with other regions of the world when it comes not only to price, but also mold design and total cost of ownership as well.

  5. Collaboration will be more important than ever. OEMs want the best their mold suppliers have to offer in molds that offer the latest technology, lower costs to manufacture components, and reduce downtime and maintenance.  Silos at the big OEMs will break down, there will be an increase in technology sharing among OEMs, mold manufacturers and technology suppliers in things such as hot runner systems and other key mold components.


Manufacturing will continue undergoing a shift as we travel uncharted territory of new taxes, new and more regulatory issues, and less skilled labor. If the recovery is real, mold manufacturers should see it in an increase in new mold builds in 2013.

About the Author(s)

Clare Goldsberry

Until she retired in September 2021, Clare Goldsberry reported on the plastics industry for more than 30 years. In addition to the 10,000+ articles she has written, by her own estimation, she is the author of several books, including The Business of Injection Molding: How to succeed as a custom molder and Purchasing Injection Molds: A buyers guide. Goldsberry is a member of the Plastics Pioneers Association. She reflected on her long career in "Time to Say Good-Bye."

Sign up for the PlasticsToday NewsFeed newsletter.

You May Also Like