Market Snapshot: Industrial

Fluid handling applications are among the industrial products served by IM plastics. A backwash filter (below) and showerhead (top) both rely on acetal (Hostaform POM from Ticona).

Demanding applications continue to incorporate IM plastics as cost concerns rise.

Remember the stories told about military procurement? Rumor had it that the military was paying 10 times more for a simple hammer than the consumer public was. Industrial products used to remind us of that—higher prices than normal—but usually there was a good reason. Exotic materials were used, for instance, with a per-pound cost that was top dollar. Or performance requirements were so high that molding became extremely tricky.

Time has changed the picture somewhat. Material suppliers have developed more muscular grades of their standard engineering thermoplastics that expand the performance window into that of exotics without the big price tag. Performance requirements, while still demanding, have become more realistic as engineers get more comfortable with converting from metal to plastic. Early plastic adoptions were often overengineered just to be on the safe side.

Further, industrial-product OEMs are more likely to replace metals with IM plastics as a way to reduce product cost and weight while boosting resistance to corrosion and chemicals.

What’s up with the majors

As in many of the markets for IM plastics, we often take pulse readings by checking on the health of the major players in that category. Industrial OEMs tend to be larger, often conglomerate-style concerns, such as General Electric, Tyco International, and Honeywell. Relatively smaller firms, such as Lincoln Electric and Toro, help to balance the mix.

Judging by the results of BusinessWeek’s Corporate Scoreboard, most of the industrial majors performed even better in 2005 than in 2004, which was considered a banner year. Profits for the first half of 2005 were up by 73% at Goodrich, 39% at Textron, and 36% at Caterpillar. Honeywell and Tyco alone posted profit declines of 3% and 17% respectively for the half.

Caterpillar chairman and CEO Jim Owens, who last year reported a record-setting profit of $2.03 billion, is enthusiastic about this year’s prospects as well. The company expects sales and revenues to be up about 10% from 2005, and the profit prediction for 2006 is an increase of 15-25%. Says Owens, “Caterpillar is well-positioned for continued profitable growth. Further, we will intensify our focus on order fulfillment and cost management.”

Resin prices in focus

As Owens and others in this market contend, keeping costs down is a major goal, and one that may or may not be served by converting from metal to plastic. Industrial applications tend to use more plastic per product, because the gears, valve covers, housings, and other components often are thicker to meet strength and stiffness requirements. If resin costs continue to climb, it may not make as much cost sense to switch.

With reasonable resin prices, the systems cost for plastic parts is lower because there are no secondary operations needed to shape parts, and no painting or coating needed for corrosion resistance. But if prices are too high, industrial OEMs may be tempted to stick with the status quo.

An early prediction from BusinessWeek’s Inside Scoop for 2006 calls for oil prices to drop to $55/bbl by year’s end ($66.25 as of this writing). Mike Fitzpatrick of Fimat USA believes the price will be closer to $50, based on a predicted slowdown in the second half of the year. But Wall Street oil analysts have given up calling for lower prices and instead are looking at Q1 oil futures, which currently average $60/bbl.