Steep drop reported in plastics machinery shipments in first quarter

Shipments of injection molding and extrusion equipment in North America declined 27.6% in Q1 2019 compared with the last quarter of 2018 among reporting companies, according to the Committee on Equipment Statistics (CES) of the Plastics Industry Association (PLASTICS; Washington, DC).

Given that 2018 finished on a strong note, there was some doubt in the industry that 2019 could carry that forward. As it turns out—at least so far—the doubters might have been right. The preliminary value estimates of the shipments from reporting companies totaled $273.0 million, 27.6% lower than the fourth quarter of 2018. Injection molding shipments fell 26.3% and single- and twin-screw extrusion equipment shipments decreased 24.8% and 46.2%, respectively. Year-over-year, the value of shipments for single- and twin-screw extrusion equipment rose 19.8% and 8.3% respectively.

"First quarter data usually come in soft, but the declines reflect the expectation of weaker U.S. and global economic growth," said Perc Pineda, PhD, Chief Economist of PLASTICS. "Price effects were also at play in the first quarter. The producer price index on industrial machinery manufacturing has been on a decline from its peak in the third quarter last year."

Market conditions and expectations for the future had a strong showing among surveyed respondents, with 70% expecting conditions to either improve or hold steady in the coming quarter. As for the next 12 months, 60% expect the market to be steady to better. While growth expectations for the industrial and packaging markets remained strong, a weaker global economic forecast, the unresolved U.S.-China trade issue, and anxious anticipation surrounding the passage of the U.S.-Mexico-Canada Agreement (USMCA) by the three countries involved were reflected in the survey results, said PLASTICS’ report.

As for machinery companies, there have been some changes in their businesses over the past 12 months. One example is Milacron. Q1 business for Milacron, while meeting "expectations", revealed a considerable slump across the board, with new orders and sales down by double digits. The company’s exit from its blowmolding business perhaps mirrors the concerns mentioned by PLASTICS.

U-MHI Platech was created last year out of the merger of Ube Machinery Corp.’s injection molding machinery business with Mitsubishi’s molding machine business, and the completion of an expansion to Ube’s U.S. assembly plant.

These might be examples of companies trying to "right size" their businesses to meet projected market demand.

Among processors, M&A activity over the past 12 months has been strong, indicating that injection molders are expanding capacity, capabilities and market reach through acquisition rather than organic growth, which might require buying more presses. Last August, PlasticsToday ran a feature on the solid M&A activity being experienced by processors that included Graham Partners acquiring Nuconic Packaging LLC; Sonoco Products Inc. acquiring Highland Packaging Solutions; and Amcor announcing the acquisition of Bemis Co. Inc. Amcor announced today (June 11) that it has successfully completed the acquisition of Bemis Co., bringing "additional scale, capabilities and footprint" to Amcor.

On April 16, Pretium Packaging, a portfolio company of Genstar Capital, acquired Olcott Plastics in a deal that "meaningfully bolsters Pretium’s injection molding and personal care/beauty offerings while Pretium allows Olcott to offer blowmolded containers and a national footprint to its customers," according to a release from PMCF, a middle market investment brand.

On the international front, plastics machinery exports totaled $363.1 million, with Mexico and Canada remaining the largest U.S. export markets. Exports to Canada and Mexico in the first quarter were $77.7 million and $72.9 million, respectively. As previously projected by PLASTICS, machinery exports fell short of $400 million, following the $416.5 million in exports in the fourth quarter last year.

"Demand in the plastics industry is expected to remain positive against the backdrop of slower U.S. economic growth this year," Pineda added. "However, plastics machinery makers should also consider that weaker global economic conditions will have knock-on effects on the industry."