Fourth-quarter performance may have been a precursor to what 2020 holds for the mold manufacturing industry. “I’m concerned about the  fourth-quarter performance,” commented Troy Nix, Executive Director of the American Mold Builders Association (AMBA; Indianapolis) during a webinar in which the results of the AMBA survey were released. “Challenges have shifted a bit for this year, with workforce development and growth being the top two, respectively.”
A total of 113 respondents, 80% of whom were mold makers (10% die cast and 10% other), answered the AMBA survey between Dec. 13, 2019, and Jan. 17, 2020, most of them in the upper Midwest and eastern states. Seven percent of respondents had sales under $1 million and 43% were in the $1 million to $4.99 million bracket, for a total of 50% of the respondents. Thirty-seven percent of respondents reported sales of $5 million to $14.9 million; 9% were in the $15 million to $49.9 million range; and 4% had $50+ million in sales.
Primary markets served by the respondents are automotive (67%), consumer products (54%), medical/dental/optical (42%) and packaging (25%). Of those markets, 26% of respondents were most optimistic about the medical/dental/optical sector as an area of potential new business growth. By contrast, only 18% were optimistic about the automotive market.
When it comes to automotive, said Nix, it all depends on “who your customer is.” With car sales down in 2019 and truck and SUV sales up, along with an industry projection for 2020 of 16.8 million units, the global demand for vehicles is “dragging.”
Among industry challenges, workforce development topped the survey for the fourth year in a row, with 93% of respondents citing it as the biggest challenge. Age demographics in the survey show that 13% of employees are 61+ years of age and 42% of shops have employees aged 46 to 60, meaning that 55% of respondents’ current workforce is on the cusp of retirement as the baby boomer generation continues its exodus from the workplace. Twenty-four percent of responding shops have employees in the 31 to 45 age group, and 21% have employees aged 18 to 30. Sixty-four percent of respondents are looking to hire this year, with 24% “not sure.” Twelve percent are not hiring.
New business development came in as the second biggest challenge (46%), but 36% of respondents anticipate business “will increase” while 53% said business will “remain the same.” Eleven percent expect a decrease in business. Foreign competition ranked third (27%) as an industry challenge. Tied for fourth place were maintaining profitability and continuous improvement, each one a challenge for 20% of respondents.
Recognizing a need to be more competitive, 26% of respondents said they will buy new equipment or update equipment in 2020, while 15% said they will invest in workforce development. Thirty-five percent intend to make capital expenditures on primary equipment; 26% will spend on equipment repair and maintenance; and 26% will make capital expenditures on technology.
Many mold manufacturers were hoping to get a bounce in business growth from the tariffs on molds coming from China. AMBA asked: “Based on the reinstatement of tariffs on Chinese molds, what is the impact on your company?”
Twenty percent responded that they have seen no impact on their business; 28% have seen none yet, but are hoping for a positive impact; 44% are quoting some new opportunities; and 6% are seeing “significant quoting.” None of the respondents, however, have landed any new business as a result of the tariffs.
Omar Nashashibi, a partner at Franklin Partnership LLP who works with AMBA, commented that it was clear that “China would not live up to WTO agreements.” It took perseverance to get the tariffs reinstated this past December, but there was obviously a lot at stake. “Government-owned companies are our competition,” Nashashibi said, adding that 50 companies requested exclusion from these tariffs.
“Exclusions were granted based on quality and availability [of molds], and OEMs would mask it by saying they couldn’t get molds here,” said Nashashibi. However, AMBA’s surveys have shown there is excess capacity in most mold shops, with the current survey showing an average of 67% capacity utilization.
Mold shops typically forecast their future workload by looking at their backlog—work in the pipeline. Four percent of shops responding to the AMBA 2020 survey are “empty and desperate” and 47% said they are “not full enough.” Only 27% said they have an “adequate” amount of work in the pipeline; 15% are “full” and 6% are “oversold.”
Anticipated capacity utilization in 2020 for mold shops under $1 million in sales is estimated to be 66%; for shops from $1 million to $4.99 million and $5 million to $14.9 million, the projection is 70% utilization. Shops in the $15 million to $49.9 million range, are estimating a 67% utilization rate, and shops with sales in excess of $50 million estimate an 83% capacity utilization rate.
“Importers filed over 30 requests to continue keeping tariffs off molds,” said Nashashibi. “We proved that [mold makers] exist and have open capacity. If you don’t have a seat at the table, you’re on the menu.”
Some opponents to reinstating the tariffs called for separating out design costs from materials costs, but the U.S. Trade Representative said no to that idea. Additionally, the Chinese say they’ll get around these tariffs by “parking” molds in Malaysia for a week. “We need to watch for tariff evasion schemes,” said Nashashibi. “Trump is building momentum and winning on trade agreements.”
Image: Peterschreiber.media/Adobe Stock