By Lynne Sherwin
As COVID’s impact on the plastics industry has waned, the issues it left in its wake — the labor shortage, supply chain issues, inflation, the threat of a recession — are coloring processors’ outlooks for the year ahead and their decisions on machinery investments.
Respondents were feeling less optimistic in Plastics Machinery & Manufacturing’s fourth annual survey of machinery buying plans. In the survey conducted in 2020, 73 percent of respondents said they expected business to improve in the upcoming year, and in 2021 that figure was 60 percent. But only 44 percent think their business will be better in 2023, according to the latest survey, conducted in October; 43 percent expect it to remain the same.
However, processors are still planning to invest in machinery: 66 percent of the 109 respondents plan to buy primary processing equipment in 2023, up slightly from 63 percent in last year’s survey.
Companies say they need new equipment to expand capacity (71 percent), replace existing equipment (62 percent) and/or add new processing capabilities (19 percent). Investment in primary equipment will be larger this year than last year for half the respondents and approximately the same amount for 39 percent.
Two-thirds of respondents plan to buy auxiliary equipment (not including robots or automation) in 2023. Forty-four percent plan to spend more this year than last year.
Processors who took the survey and OEMs contacted for comment shared similar outlooks. Most expect their business to remain steady or slow down this year, after the pandemic fueled record investment in the last two years. The threat of a recession is a concern, and the labor shortage continues, leading many to adopt or expand automation.
North American shipments of injection molding and extrusion machinery slowed in the third quarter, according to statistics compiled by the Plastics Industry Association’s Committee on Equipment Statistics (CES).
The value of shipments was estimated at $353.8 million — down 14.4 percent from Q2, but up 6 percent from the 2021 number.
The value of shipments of injection molding machines (IMMs) fell 17.1 percent in Q3, while single-screw extruders saw shipments rise 4.9 percent, and twin-screw extruders rose 12.4 percent. Compared to Q3 of last year, single-screw extruder shipments fell 13.1 percent, and twin-screw extruders rose 19.3 percent.
PLASTICS Chief Economist Perc Pineda said in a press release accompanying the report, “It can be argued that the slowdown in plastics machinery shipment in the third quarter is in sync with the cooling of the U.S. economy. However, compared to the quarterly shipments in 2021 — a stellar year for the plastics industry, particularly for plastics equipment suppliers — this year’s third-quarter shipments remain above the first three quarters’ shipments last year.
“In sum, the third-quarter data is consistent with the projected growth in plastics machinery shipments for the second half of 2022,” Pineda said in the release. “However, the U.S. manufacturing sector continues to face headwinds — elevated energy prices, rising interest rates and inflation — which could weigh on the economy’s manufacturing output in 2023.”
Just over half of respondents to PMM's survey said their companies perform injection molding, while 21 percent are involved in making or repairing molds and tooling. Other processes included pipe, profile or tube extrusion (20 percent); film or sheet extrusion (16.5 percent); recycling (16.5 percent); compounding (15 percent); blow molding (14 percent); additive manufacturing (12 percent); and rotomolding (2 percent). Respondents could select more than one process.
Of the 109 companies, 33 reported annual sales revenue of less than $5 million; 41 companies, between $5 million and $25 million; 21 companies, between $25 and $100 million; and 14 said their annual sales topped $100 million.
COVID-19's effect on the plastics industry is receding somewhat, with only 28 percent of respondents saying it had a negative impact on their businesses. But other worries have taken the pandemic’s place. Respondents said issues that affected them negatively in 2022 included the labor shortage and supply chain issues (73 percent each), resin shortages and price hikes (63 percent), and the state of the economy (47 percent).
Regarding investment plans for 2023, the labor shortage was the top factor pushing companies to spend more (31 percent) and the state of the economy was the top factor causing companies to spend less (23 percent).
The view from the plant floor
Reflecting the survey results, processors reported varying outlooks on their business this year. Some are seeing growth and planning to buy equipment to support it; others are still struggling with staff shortages or bracing for a slowdown.
Annette Crandall, president of molder Quality Assured Plastics, said her company is replacing older IMMs with new equipment that offers “more technology, energy efficiency and automation ability … making things easier, letting machines do things that machines should do and people do things that people have to do.”
But she said potential for growth is hampered by labor shortages and economic uncertainty: “The upheaval in the supply chain, the question of, 'what's the economy going to do? Why are people not working?' It's still the same problems. It's just getting worse, like our whole system is imploding.”
She said, “Right now, I've got machines that I don't have people to run.”
Crandall expects to invest in auxiliary equipment as well, but due to the nature of her company’s business, not so much in robots.
“We do a lot of short runs, and they don't lend themselves well to robots. I would love to buy robots, but our business model doesn't support them. But it does support blenders and sprue pickers and conveyors and counters and things like that.”
Meanwhile, Mel O’Leary, president and CEO of Meredith-Springfield Associates Inc., Ludlow, Mass., said his blow molding facility invested in a major expansion in 2021 and is still finding ways to utilize that new capacity, so it does not plan to invest in machinery this year.
"We added space, we added molders, auxiliary and automation equipment in anticipation of a surge of volume as the pandemic wound down. For us, the opposite occurred, so we have some capacity underutilized,” he said. “With the uncertainty of economic conditions and a possible recession in 2023, we are not planning any major capital projects for next year.”
Meredith-Springfield is basing its 2023 plan on the assumption that business will remain at the same level as the second half of 2022, which was up 6 percent over the first half.
“That outlook will change when we begin to see our customers’ businesses gain more momentum than we’re seeing at present and when inflation begins to recede,” O’Leary said.
Other processors are gearing up for growth.
“We’re actually in a big expansion right now,” said Jeff Ignatowski, director of sales and marketing for Champion Plastics in Auburn Hills, Mich., an injection molder that provides parts for the automotive, motorcycle and other markets. “We’re probably going to see a 50 percent increase in sales [in 2023], so we’re fortunate for that.”
On top of that growth, Champion is also in the running for a new contract that would necessitate the purchase of two more presses to add to the company’s current stable of 10.
"Those particular cells will be completely automated, lights-out. We're looking to buy two presses that would have two six-axis robots, and box conveyors, and it would automatically also apply some adhesive tape to parts. Those are very high-volume jobs."
While the potential for an economic slowdown is a concern, he said, “with such large growth, if we don't get 50 [percent sales increase], and really get 40, it still justifies the automation that we need. And the programs that we're receiving are all new programs, so they're going to go out for six years. … We're not overly concerned, but you know, we're keeping a pulse on it.”
Champion might add a 67-ton machine as well, “which would be a new low end for us … and that would support some additional new business for very small precision work.”
Film Tech LLC, Stanley, Wis., which makes mono- and multilayer film products, also is considering expansion.
“We have begun discussions for a new blown film line, because demand has picked up for our products,” operations manager Jim Benson said. “New business and our current customers are growing as well. We are shifting to a 24/7 operation in January 2023.”
OEMS optimistic, but preparing for a slowdown
On the other hand, makers of plastics machinery are preparing for an economic slowdown and the end of the pandemic-era sales boom, although some are still catching up with orders and see certain markets remaining strong.
“For 2022, we are coming down from the record new order rate in 2021; however, we are sitting on a substantial record order backlog,” said Wittmann USA President David Preusse. “As is the case with many global markets, the U.S. plastics industry is recording 15 to 20-plus percent reduction of new orders in 2022. Many shipments pushed over to this year, so revenues are still OK, just impacted for supply chain delays."
He believes “time will tell what kind of recession may be ahead” as the Federal Reserve continues to raise interest rates to cool the economy.
Extrusion equipment manufacturer Davis-Standard also is affected by supply chain delays.
“We expect strong sales in 2023 if we can mitigate material shortage risks as we continue to address the backlog caused by the pandemic. We also expect new orders to decline as customers delay key investments due to the bleak economic outlook,” CMO Tony Toklo said.
“Sustainability, skilled labor shortages, and high interest rates are key factors for most industry players. Sustainability and labor trends are driving OEM-customer collaboration toward innovation, machinery automation and the implementation of digital strategies,” he said.
At a press conference at the K Show in October, Engel CEO Stefan Engleder reported “very good business” in North America despite the economic headwinds, with the packaging division showing significant growth.
“Engel is benefiting from the ongoing reshoring trend in this region,” with high demands for machinery, Engleder said at K.
“Due to the recession, Engel expects demand in North America to slacken in the short term. However, the market offers the best conditions for further strong growth in the medium to long term,” he said.
In a separate emailed statement, Engleder said the company noted a decline in orders since August and expects that trend to continue, attributing it to slowdowns in the construction and infrastructure markets. He also cited supply chain challenges and increases in energy and material prices.
Representatives from a number of OEMs voiced hope that new lines and facilities, along with the potential presented by particular economic sectors, would spell growth from them in 2023.
KraussMaffei made a splash at K 2022 by entering the additive manufacturing market with its new powerPrint and precisionPrint machines.
“Following injection molding, extrusion and reaction process machinery, this new line — additive manufacturing — will form the fourth pillar of the KraussMaffei product portfolio,” said Nolan Strall, president, North America.
Strall said last year was on pace to exceed targets by more than 20 percent, and he expects this year to be one of the company’s best.
Two new plants in Germany “will give us more capacity for machine production and streamline our manufacturing processes, which means better delivery reliability for our customers and decreased lead times,” he said, while improvements at the company’s Florence, Ky., facility will focus on demonstrating the company’s various lines, including automation solutions.
For China-based Tederic, the year opens with the promise of growth as it prepares to open a new North American headquarters in Pittsburgh with a large inventory of machines, said Tony Firth, VP of sales and marketing, Tederic North American Machinery.
“We are pushing hard to grow brand recognition,” Firth said. “Though we are recognized in China as a premium machine builder, with leading expertise in the automotive and multi-material fields, we are still relatively unknown in North America.”
He said the company is growing its all-electric machine sales with the introduction of the new Neo.E II series, “and we also feel that Tederic know-how in specialty processes, such as multi-material technologies, combined with excellent lead times, will give us an opportunity to grow sales in the automotive sector.”
Absolute Haitian introduced an IMM tailored for medical molding at the K Show, and co-owner Glenn Frohring sees these application-specific configurations as a growth market.
“We’ve enhanced our machine designs to accommodate those markets including medical packages, higher speeds and multi-component machine configurations,” he said.
Like KraussMaffei, Absolute Haitian is boosting its machine-building capacity; a new facility opened in Guadalajara, Mexico, in October, marking the first time its IMMs are being built in Mexico, Frohring said. The company will break ground this year for a manufacturing center in Serbia.
Packaging and consumer products, including housewares like storage containers and garden appliances, were strong markets last year. “While many people were remotely working from home, they had time to clean out attics, update living spaces, convert living spaces to work-at-home spaces,” Frohring said.
Absolute Haitian saw many processors upgrade to more energy-efficient IMMs that offer advanced controls.
“For molders, gaining capability in Industry 4.0 remains a factor to stay competitive,” Frohring said. “Haitian continues to advance our MES machine capabilities but with practical, useful approaches that are easy to use. We’ll be sure to feature MES connectivity in every machine cell we take to trade shows in 2023.”
Preusse agreed that smarter manufacturing is on buyers’ minds, citing customer interest in Wittmann’s digitalization products and integrated work cells.
Demand in the personal protective equipment (PPE) market has fallen as the COVID emergency passes, Preusse said, while “the rest of health-care demands that were partially stalled by COVID hospitalizations picked up with health-care products that serve our large aging population.”
Interest in automation rose in the automotive market, “since robots don’t get COVID or exposures, but unfortunately, the anticipated auto sector demand rose, but not manufacturing output,” he said. “They too were stalled from critical parts shortages, hence high demand, lower output.”
Strall said KraussMaffei’s injection molding division has seen interest from the logistics, packaging and medical markets, although the demand is lessening for PPE and COVID testing kits. He expects the automotive sector to grow this year, especially with the move to electric vehicles and continued demand for lightweighting. The company’s extrusion business has seen “activity and growth across the board, with significant increase in recycling and circular economy,” along with construction and housing.
“Packaging and building were strong for us during the pandemic,” said Tammy Straw, marketing and business development manager for twin-screw extruder maker Entek. “Packaging remains strong; however, building has slowed. We attribute this to the increase in interest rates.”
Engleder said Engel has seen growth in the electric-vehicle market as well, along with interest in use of recycled material in packaging.
“Recycling is and has been a hot trend in the plastics industry,” Straw said. “We are seeing more requests from companies who are either expanding their recycling operations or are looking for ways to recycle their own scrap.”
Dark clouds lurk on the economic horizon
Even for processors and OEMs anticipating some growth, concerns about inflation, rising interest and the threat of a slowdown dampen the mood.
“We are running our business as if we are already in a recession,” said O’Leary of Meredith-Springfield. “We are being prudent with cash and spending, and we’ll not immediately replace any staff positions that happen to open. Any capital spending will need a clear and rapid ROI potential.”
Others expect to weather any economic storm.
“Of course, these factors play into our decisions, but the organic growth should sustain us through difficult times. We are fiscally conservative and don’t take those factors lightly,” said Benson of Film Tech. “Our business has grown significantly in the past year. [The] customer base has widened and expanded and shows no hint of slowing down.”
In PMM’s survey, nearly 47 percent of respondents said the state of the economy had a negative effect on their businesses last year, and 24 percent said it would cause them to spend less on equipment this year. “Only spending as needed for replacement of worn-out equipment or to reduce costs through automation to eliminate labor or reduce material demands,” one respondent commented.
“We are seeing hesitation. Interest rate hikes and the sustained levels of those increases will impact capital equipment demand in the short term,” said Toklo of Davis-Standard. “Higher financing costs have caused some buyers to reconsider or postpone larger equipment purchases. This is especially true in terms of soaring inflation. Costs have gone up across the board, causing everyone to re-evaluate their investment plans.”
“2022 has been slower for Entek compared to 2021,” Straw said. “We saw the year start off strong and then soften mid-year; however, we expect 2023 to pick back up early in the second quarter.”
At a press conference at K 2022 in October, Gerhard Böhm, Arburg’s managing director for sales and service, said, “America has really shown staying power so far. However, with inflation and money market developments having arrived, we are seeing the first signs of braking there as well.”
Frohring said Absolute Haitian expects sales will not match the record levels of 2021. “In general, with borrowing more expensive due to rising interest rates, likely the market will slow in most segments.”
He added, “We’re bracing for the obvious — high interest rates, higher production costs, higher labor costs, higher shipping costs. We think there may be some plant closures and consolidations within the molding community.”
Kinks in the supply chain continue to affect the industry, and not just the 73 percent of PMM survey respondents who cited the issue as having a negative effect on their business last year.
“Supply chain issues continue to hinder some of our machine components, but we’ve put several plans in place to mitigate the impacts to customer commitments and machine deliveries,” KraussMaffei’s Strall said, noting that these challenges “are similar for all industrial equipment manufacturers, in all industries.”
Logistics and delivery delays have been an issue, he said, “but our response has been to increase our advanced planning activities with critical suppliers to mitigate these risks.”
“We see the market as being a little softer than in 2022. However, there is a significant amount of reshoring that is helping to counter the slowdown in other sectors,” Tederic’s Firth said. “This reshoring is not price-driven; rather, it is a function of low confidence in the stability of global supply chains.”
COVID-related investments created significant backlogs for OEMs, Toklo said, and supply chain disruptions and the uncertain economic environment have made them slower to clear.
In-person sales activity has been slow to return to normal, according to some OEMs.
“It has been difficult to see customers in person over the past few years. There has been no consistency whatsoever for in-person visits,” said Sonny Morneault, VP Sales, Wittmann. “Just as we think we have good momentum, another flare-up hits and we are asked not to come.”
While Wittmann is doing more virtually than before the pandemic, it doesn’t make up for lost visits, he said. “So what’s it all mean? We think it means customers are staying with their incumbent suppliers more than ever, making penetrating new markets and customers very difficult.”
Strall said while travel is coming back, he expects companies to continue to balance in-person and virtual meetings, because of the efficiencies and lower cost demonstrated during the pandemic.
Automation grows as labor pool shrinks
The labor shortage still weighs on the minds of processors as they consider future investments. Processors are finding remedies by investing in automation and taking advantage of OEMs' Industry 4.0 solutions.
“I'm turning away work because I don't have people to do it. Nobody seems to have the answer to why,” said Crandall, of Quality Assured Plastics Inc. “We are not the lowest pay in the area. We are a great place to work. … Most of our staff has been here more than 10 years.
“But it's that entry level, bringing people into a machine operator position, that we just don't seem to be able to find enough people,” she said.
Her company has been reaching out to the Hispanic immigrant population in the area, and working with the parole and probation systems for second chance hiring.
“We get really good results from them. I always say, ‘If you want things to change, you have to make a change.’ We have to do that,” Crandall said. “We want people employed. We have to change the way we employ them. [We can’t] just say, ‘Oh, you checked this box, you've been eliminated.’”
Benson said Film Tech formed a company to bring in immigrant workers legally authorized to work to address some of the shortage Film Tech and other businesses are experiencing.
The labor problem isn’t just a result of the post-COVID economy, Straw said: “The shortage of skilled mechanical personnel began long before the pandemic. It has been increasingly more difficult to find skilled laborers over the years, and it has become a real challenge for our industry.”
Firth believes the trend toward automation goes beyond compensating for a lack of workers.
“It is important to understand that the addition of automation, be it in robotics or through processing aids, typically adds to the skilled-labor requirement,” he said. “Rather, the primary purpose of adding technology to automate some functions is to reduce the overall labor component of a process, not necessarily to reduce its complexity.”
For many processors, automation is a solution, with 46 percent of PMM’s survey respondents planning to purchase robots or other automation equipment in 2023. Fifty-nine percent are buying for expansion, while 57 percent are automating current programs; one respondent specified the need to “compensate for lack of manpower.” Fifty-four percent of those buying automation equipment plan to spend more than last year, while only 6.5 percent plan to spend less, and 46 percent plan to spend more than $100,000.
“The investments we made in automation in 2020 and ‘21 saved us. We simply couldn’t hire to fill all of our production needs,” said O’Leary, of Meredith-Springfield. “The automation allowed us to keep machines running that would otherwise have been down if we needed to depend on people to inspect, process and handle molded parts or to do labor-intensive secondary operations.”
OEMs are watching the demand for automation rise.
“You can walk into any plant here in the US and Europe and that, typically, is the first subject that enters a conversation: labor and lack of skilled personnel,” said Jim Healy, VP sales and marketing for automation provider Sepro America.
“Automation is the key. User-friendly controls that require a minimum of training help address problems related to the high turnover of operators. Full turnkey systems, which minimize labor requirements, are also increasingly important to our customers,” he said.
Healy said his company has been focusing on controls that are powerful yet easy to use, as well as increased connectivity, remote diagnostics and AI to augment the company’s robots.
While he hears concerns about the economy among potential customers, and calls Sepro’s outlook for further growth in 2023 a “question mark,” he said “it also emphasizes how important it is for each and every molder be as competitive as they can be. Automation is an ideal way to gain a competitive edge.”
“The labor shortage has definitely impacted the mindset of customers and their approach to business,” said Toklo, of Davis-Standard. “We’re seeing an increased willingness to invest more in automation and digital solutions in order to minimize the impact of potential downtime and facilitate operator efficiency.”
Preusse said Wittmann sold a record number of robots in 2020 and 2021, and strong sales continued last year.
“Molders are realizing more than ever that they need to automate their operations for better efficiency and productivity,” he said. “We actually had one customer who told us that their robot and automation purchase and installation from us produced the work level of 10 or more employees!”
Strall cited KraussMaffei’s commitment to Internet of Things integration in its new products, along with digital solutions such as SmartAssist, socialProduction, APC+, LiveCare and remote diagnostics and troubleshooting, which decrease downtime and help less-experienced operators.
Frohring said he expects Absolute International’s automation division, Absolute Robot Inc., to thrive this year as processors compensate for the lack of skilled labor and a wave of turnover and retirements in recent years.
Absolute Haitian has invested in additional training locations and customer support, “in part, to help customers bring new people up to speed on the equipment and help them manage bumps in their production that might be caused by inexperienced labor," he said.
Absolute Haitian also offers free remote troubleshooting, which has grown in popularity.
“We can see the problem they are having and walk them through the solution,” Frohring said. “We don’t charge for this service and our customers — especially newly hired machine operators and technicians — feel quite relieved.”
At Champion, automation is constantly top of mind.
“One of the strategies that we've always employed is that we're trying to keep our labor consistent,” Ignatowski said. “Not only because it's not available, but we just feel that keeping our labor at a minimum is the best strategy. And, so, what we've done is, when we're awarded new programs, if we have time to automate them ahead of time, we will.”
With the increase in new business, there isn’t always time to automate when a program starts, so “we'll watch it using our labor, and then understand where we are, and then immediately look to automate it. And then we reallocate that labor to other new jobs. And we repeat the process.”
For capital expenditures this year, in addition to the two new lights-out lines that would support new business the company is hoping to land, Champion plans to add three-axis robots to some of its presses to help manage left-hand and right-hand parts — keeping them separated and putting them in boxes — along with box conveyors that will most likely be custom-built. Operators will need only to swap out the boxes as they fill up.
The company has about 25 employees. “We might hire one or two, but it's not like we're desperately looking for workers to work like a lot of other people are,” Ignatowski said. “Our strategy is we've got a really solid workforce, very loyal, wonderful employees."
At a recent plastics show, he spoke with representatives of other companies with larger workforces that are struggling to fill open positions.
“I think our strategy of automation versus labor seems to be working really well for us,” he said. “It's not to really replace labor. It's to replace the menial tasks that the robots can accomplish that our operators would hate anyway.”
Senior staff reporters Bruce Geiselman and Karen Hanna contributed to this report.
Lynne Sherwin, managing editor
