Injection molding machines could end up hitting the benchmark 4,000-unit level again in 2018, executives said. But the crystal ball for 2019 is cloudy from an automotive slowdown, an economic recovery getting long in the tooth and lingering questions over the impact of global trade battles.
Overall, U.S. sales probably slipped modestly this year—by around 5 percent—from the 4,200 units of the last two years, officials said. After years of strong sales to a resurgent automotive sector, business in large-tonnage machines declined, they said.
Certainly, there was a lot to digest in 2018: Talks to redo NAFTA with the new U.S.-Mexico-Canada Agreement, the dueling U.S.-China trade war and tariffs on steel and aluminum imports. The potential of U.S. automotive tariffs still looms large and could do serious damage to the critical auto sector.
President Donald Trump takes a hardball approach to global trade and that has raised the level of uncertainty. This year, that uncertainty caused a temporary pause for several months while customers sorted it all out, many machinery officials said.
The Trump administration's tax reform in late 2017 spurred some investment in machinery through the immediate 100 percent depreciation and reducing the corporate tax rate from 35 percent to 21 percent. That helps, but molders still tend to wait until they have orders in hand before buying injection machines, equipment leaders say.
And while the U.S. economy remains solid, as 2018 ends, there was some unease as the stock market dipped, and economists are predicting slowing growth in the U.S. and globally.
For capital machinery, the big cyclical up-and-down years appear to be something for the history books, but several officials said the U.S. market was more jagged during 2018 than in the recent past with up-and-down months.
Auto industry challenges
Injection molding machinery makers "rode the wave" of record automotive sales the last few years, said Mark Sankovitch, president of Engel Machinery Inc. in York, Pa.
"This year, it's been a little bit more challenging. It's not smooth," he said, citing the NAFTA conflict.
Even more important than car sales are new model launches, which fuel investment in modern machinery. Auto makers have cut back on new models. And the Nov. 26 news that General Motors Co. is cutting nearly 15,000 jobs and may close five North American plants signals that auto makers are getting out of weak-selling sedans.
More importantly to plastics, auto makers like GM are cutting back to free cash to invest in electric and autonomous vehicles. This means plastics processors, machinery makers and material suppliers will have to plan for a new type of vehicle and vehicle interior.
Fiat Chrysler Automobiles N.V. officials said they would move production of the Ram pickup truck from Mexico to the Detroit area, then later said they may make the Ram in both countries. The change in plans impacts major investment decisions by plastics parts suppliers, Sankovitch said.
"It's still a good year for us, but it's been like a roller coaster. There's been a lot of ups and downs," he said.
Meanwhile, Austrian parent company Engel Holding GmbH is going ahead with its own U.S. production plans to resume assembling injection molding machines in York, starting in January.
Bill Wood, Plastics News economics editor, said car and light truck production will drop in 2019, but not by very much.
"We're past peak auto by a year or two, probably two years, but there's a floor underneath. It's a gradual decline," Wood said.
Several machinery executives said the "noise" from the trade battles caused a pause in business around the middle of the year. In Milacron Holdings Corp.'s third-quarter earnings report, CEO Tom Goeke said U.S. machinery customers delayed orders for a few months coming out of the second quarter and into the third quarter, "waiting to see where the dust settles on tariffs." But business returned to normal levels by September, he said.
For this machinery outlook story, Milacron officials said customers are not pulling the trigger until they have firm orders in hand, which is putting increased pressure on lead times.
NPE2018 was the largest NPE ever for exhibit space: 1.2 million square feet and 2,174 exhibiting companies. "Then the wind came out of the sails after that. NPE was great, but then the doubts started to enter the market," Sankovitch said.
A pullback in automotive was one big reason. Though auto makers still are on track to hit the 17-million-unit mark for U.S. light vehicle sales in 2018, that number is forecast to drop in 2019 and could dip to 16.2 million units, according to some analysts. But what hurts investment in machinery—and, more directly, molds—is a big decline in new models. Consultant Laurie Harbor said about a third of planned 2018 North American model launches were delayed or canceled.
John Martich, vice president and chief operating officer of Sumitomo (SHI) Plastics Machinery North America Inc., said 2018 has "been up and down" with a strong first quarter and then business slowly dropped for several months.
"Now recently, we've seen a nice uptick, but we've had a couple of months up and down," Martich said.
Like several other executives, Martich thinks the pause was from all the global economic news hitting simultaneously.
"The middle of the year was a bit odd," he said. "I think people were nervous about the renegotiated NAFTA agreement. They were nervous about the China tariff wars, which I think, for the most part, is a less significant impact for us than it is to China. And … automotive scared a lot of people because it was forecast to be flat, under 17 million units this year."
Martich said there was some apprehension, "but I think we've seen an uptick over the last month and a half or two of activity," he said in late November.
"Any time there's a major decision on international trade people get nervous. And when people get nervous, they wait," said Paul Caprio, president of Krauss-Maffei Corp. in Florence, Ky.