Flemington, N.J.-based Kautex Machines Inc. had a fantastic start in 2022 with a good outlook and plans to grow the business by double-digit figures again. The subsidiary of Bonn, Germany-based Kautex Maschinenbau GmbH had just moved from North Branch to Flemington and was active in strong markets.
But shortly into 2022, in late February, the pandemic-driven world grew more uncertain. Russian President Vladimir Putin invaded Ukraine, then weaponized grain and gas against other countries. Injection Molding Press
"The war in Europe drastically increased material costs, and increased capital cost resulted in postponement of projects," said Manuel Heusinger, Kautex's vice president of sales and service Americas. "Now we expect to close the fiscal year at budgeted level; in other words, stable business."
Until early to mid-2022, the pandemic declared in March 2020 had a huge impact on the blow molding community.
"Across the board, machine builders experienced record-setting business levels in 2020 and 2021. It was like never before," said Gary Carr, vice president of sales for Bekum America Corp. "With that backdrop, how do you follow up in 2022?"
The Williamston, Mich.-based subsidiary of Germany Bekum Maschinenfabriken GmbH started the year with a really strong backlog because machinery deliveries had been extended due to high demand and supply chain issues.
"In many respects, 2022 was almost assured to be a decent year just because of carryover. That's how I'd characterize the first half of the year," Carr said.
In the second half of the year, there was a change; quote activity decreased and not just because of the war.
"I think a lot of that is the market adjusting back to pre-pandemic levels on the packaging side," Carr said, excluding large drums, cannisters and technical parts associated with blow molding.
"Our customers' capacity levels are to the point where they would seek new business and opportunities. All that equipment that was installed is now being absorbed in 2022," Carr said.
Fred Piercy, president and general manager of R&B Plastics Machinery LLC in Saline, Mich., shared similar observations. He said a lot of excess capacity post-COVID created a glut in extrusion blow molding demand in 2022. Now more machine builders are likely to be going after that falling demand, he added.
"I see new faces or entrants in the North American machinery space," Piercy said. "Companies that had a toe in the water are trying to increase their North American business. We're seeing increased competition from European machinery manufacturers with less access to the Eastern European market."
In the meantime, U.S. plastics processors are rightsizing their businesses.
"Customers seemed to be getting their capacities realigned," Piercy said. "There was a lot of quoting activity and a lot of projects we were working on, but the capital didn't cut through until H2, or even this quarter."
Right now, R&B customers are focused more on industrial and home care applications than consumer packaging related to the pandemic.
"Customers either ended up with the cannister business or they've come back and asked us to look at retooling or repurposing their machines for other applications or markets. There's been an adjustment," Piercy said.
While there is overcapacity in consumer packaging, Kautex serves markets that have been strong for decades, such as industrial packaging and specialties, which Heusinger also said are still growing.
"Market growth in these areas is mainly driven by material and technology conversion to EBM [extrusion blow molding]," he added.
Also, demand for outdoor furniture and sporting products — two markets that increased tremendously during pandemic — continues to stay strong along with medical packaging, Heusinger said.
At R&B, Piercy said, "The projects we're seeing are more industrial and specialized containers."
He pointed to large custom containers up to 6 gallons in size and containers for home care, agricultural, recreation and automotive uses.
Bekum's Carr reflected on the machines that shipped most recently.
"One is a medical application; the other is ag chemical," he said. "Our customer base is diverse and nicely balanced. We're also building machines for the personal care segment, food applications and chemical containers."
At Miami-based Globeius Inc., which sells machines built by Plastiblow srl in Corsico, Italy, President Ernie Sosa said, "Packaging [for] cleaning products has been a major growth area for Plastiblow and continues to be an important sector."
When Plastiblow allied with Globeius in 2020, the principals of the two companies agreed to a form a joint venture, Plastiblow NA, for all aftermarket sales and service of machines sold in the U.S. and Mexico. In 2022, Plastiblow NA was officially incorporated to service the North American market out of Globeius headquarters in Florida.
Kautex introduced a new machine series — Skyreef, KSH line — new accumulator head technologies and upgraded its IT infrastructure on a global basis. Also, offices in New Jersey and Mexico City were relocated, and a service hub office opened in Georgia.
In addition, Heusinger said, "We increased our simulation and prototyping capabilities in our technical centers following our company's philosophy with strong focus on the final product and being as early involved as possible in the product definition."
At Bekum, on the product side, the company introduced a new lineup with 20 machine models that will be launched in phases.
"As they come into the marketplace, Bekum will emphasize the more modular designs to improve manufacturing efficiency, which reduces costs and shortens deliveries," Carr said. "Ultimately, we believe that will be key to the blow molding community in the coming year and years."
This is by far the biggest product introduction in Carr's 37-year career with Bekum, he added.
The company also followed up on its sizable U.S. expansion, which in 2021 added a 45,000-square-foot assembly hall for machine builds in Michigan to handle unusually high demand and to set the stage for supplying full systems.
"This is a continuing program after the bricks-and-mortar expansion of the building," Carr said. "We're providing broader support with the ability to run and qualify complete systems."
Blow molding machine customers often need other equipment, such as conveyors, finishing lines and quality check systems.
"Bekum is now able to provide a system approach. We've got the room to do it," Carr said.
In 2023, Kautex will further invest in proprietary simulation tools, the next-generation sales and service tools presented at K 2022, and will bring all entities into the same enterprise resource planning system. "That's probably the biggest upcoming project," Heusinger said.
At Globeius, the technology center will receive a Plastiblow machine for demonstrations and training. This machine is expected to be in operation by the third quarter of 2023.
While there is no major expansion project at R&B Plastics Machinery, which operates out of a facility with room to grow, Piercy said, "We're planning to increase staffing and engineering capabilities to meet demand. We have some bandwidth in terms of facility size and capabilities. We could grow 50 percent here."
The supply chain continues to hamper production, however.
Kautex officials expect to see more challenges related to the lead time of certain components and the unpredictability of their availability.
"Standardization of our machine platform and most accurate forecasting have never been more important," Heusinger said.
Sosa said the main procurement issues are still related to electronic components, such as boards, drives and servo motors.
"Our customers have been advised that delivery times have been extended by two to three months due to this issue," he said.
Carr also pointed to electronic components but said other machine parts can be a challenge.
"It's the gamut. We've had things you wouldn't anticipate, as simple as fittings and connectors," Carr said.
Piercy agreed, saying, "You'd think it's the higher-end electronics, but there's ordinary things that can be difficult like disconnect switches and fuses. There are challenges across the board. It's not specific that it has a chip in it."
Bekum has gotten creative with its sub suppliers, Carr added.
"We've done more forecasting than ever. We try to order ahead to buffer some of the long lead times," he said. "We're using forecasting as a tool and buying ahead to have those components when orders are placed and to allow the deliveries to come back to the normal levels we had pre-pandemic."
From a workforce and capacity standpoint, Carr said Bekum is in a good position, but component shortages can dictate build times.
"We're not back to normal levels quite yet," Carr added.
Piercy estimates build times have been extended an additional six to eight weeks on average to 36-38 weeks for a blow molding machine to 18-26 weeks for an extrusion line.
Kautex's Heusinger said logistics are returning to normal, except for predictability issues related to booking vessels for overseas shipments.
"Delays at ports either side of the Atlantic have increased lead times in addition to an ongoing reduction in cargo capacity that increases lead times further," Sosa said. "Freight pricing is still significantly higher than pre-COVID. However, we sense this may come down a little in 2023."
Carr said ocean freight for Bekum, which brings some equipment from Europe, has been unpredictable and rates have more than doubled for transport.
"That's staggering," he added. "There seems to be a little relief on the horizon, but it was a tough year in terms of shipments and logistics."
Heusinger is braced for more of the same with the challenging supply chain situation, mainly related to availability of electrical components and increased raw material prices.
Sosa said procurement of electronic components will impact the capability of supplying machinery in a timely fashion.
Piercy listed the same issues and added one.
"In 2023, we expect supply chain challenges will flatten out and ease while not be completely solved," he said. "The one other thing on everyone's mind is inflationary costs."
Bekum officials are monitoring megatrends like tight labor markets, rising energy costs and increased demands from end users to utilize more [post-consumer resin] to be more sustainable.
"Clearly there are a lot of business challenges out there," Carr said. "At the end of the day, we build capital equipment, which means investment. Blow molding equipment is not inexpensive. Any major capital expenditure will always be scrutinized in a turbulent economic period with geopolitical pressures and energy costs. You roll that into decision-making, and it definitely will influence the final performance of 2023."
In response, Carr said Bekum is developing products focused on technology, automation and energy savings with all-electric systems, high-efficiency extruders and extrusion technology to address post-consumer resin usage.
"That involves what we call spiral flow head technology and the creation of three-layer bottles that look and behave as a monolayer version but in the middle contain 25-40 percent PCR," Carr said.
If the supply chain opens up more, machine builders will likely get the components they need but at higher cost that will have to be absorbed somehow.
"We're trying to push back and hold those as best we can," Piercy said. "We constantly need to consider and adjust for inflationary costs."
"It is affecting our pricing as we have no further capacity to absorb the significant increases in raw material, components and labor cost," he said.
At Bekum, Carr said everyone is cost-conscious.
"Costs are going up, no doubt about it," he said. "We're a premium equipment manufacturer, so we're challenged to justify our price, and we take it very seriously when we need to implement adjustments. We're monitoring costs closer than ever. When adjustments are needed, we will scrutinize them and only do it when essential."
While plastics processors face inflation, Piercy said two questions will guide them: "Do I need the capacity? Is this business growth? Whether it's privately owned or publicly held, money is hard to get a hold of these days, so it's pretty focused on growth. Most of our customers are very disciplined. They're not just going out refreshing assets; the investments are driven around growth."
As for plastics processors bringing back work from overseas, Piercy said he sees some evidence of reshoring mainly due to logistical and pricing pressures from Asia.
"Customers just said, 'I'm going to do it in the States. I can control it. I know when I'm going to get it, and it just makes sense to bring that manufacturing back,'" Piercy said. "We saw quite a bit in the home and industrial space, which has a lot of different end markets — anything from construction to parts in recreational or outdoor type of applications, recreation RV and a little bit on the automotive side, but not a whole lot."
Overall, however, the issues that lead to reshoring haven't affected most blow molders.
"We have not seen reshoring because there was no offshoring," Heusinger said. "Shipping hollow plastic parts is only competitive in a certain radius due to logistics costs."
"When you blow mold a container, a bottle or gallon jug, it's often said in the industry that you cannot cost-effectively ship that container more than 500 miles radius from the fill site," he said. "Those productions were never very far from the final fill site. There isn't really a lot of reshoring needed in blow molding because it's here anyway."
For many decades, the domestic automotive market revved for blow molding machine builders. Kautex products, for example, were used to produce millions of six-layer, coextruded fuel tanks until OEMs hit the brakes just ahead of the onset of the pandemic.
"Sales in this area started decreasing drastically already back in 2019," Heusinger said.
No turnaround is expected as the automotive and other industries, such as lawn equipment, move toward electric vehicles.
"Anything related to gasoline-driven engines is probably on a downward trend," Carr said.
As the auto industry evolves, Heusinger said, "Today we are modernizing existing equipment rather than adding new capacity. There are other technologies, like hydrogen, on the horizon where we want and will take over a leading role on the machinery side in the future."
At R&B, Piercy said accumulator head machines for producing ducts and large blow molded parts continue to sell well, as do single-screw extruders for cooling lines and fluid-delivery applications of Tier 1 suppliers to the electric vehicle market.
The accumulator head side of R&B's business consists of hydraulic machines, while the shuttle lines are all-electric.
"People are over the fear that electric machines are more complex," Piercy said. "From an energy standpoint, not only are they more economical and greener to run, but they're repeatable and reliable. It's much easier to train the operators. We put them in locations, and employees are trained in a short time to be self-sufficient."
Sosa said Plastiblow has been a leader in all-electric technology with more than 25 years of experience.
At Kautex, Skyreef hybrid machines have been big sellers for the last two years
"This technology makes ... sense when it comes to applications where a fast clamping pressure buildup is required while still having precise and fast electric movements for shuttle, blow pins, extruder bobbing and parison profiling," Heusinger said.
He doesn't think higher electrical costs will automatically push electric machines.
"It is important to choose the right production solution for the individual application. This can be hybrid or electric," Heusinger said. "The focus to lower production cost will stay on lightweighting and rightweighting of the final product."
Bekum offers all three kinds of machines. The all-electric presses will be even more attractive if energy costs continue to go up, Carr said, adding the machine builder also can have "a la carte electrical movements" of hydraulic-hybrid systems.
Kautex officials feel positive about 2023 after many productive meetings at K 2022, Heusinger said.
"Projects that have been postponed into next year will give us the chance to generate additional sales and will support our growth plans," he added.
Sosa said, "Packaging will continue to grow, even though at a slower pace, and we look forward to continued growth in the requests for multilayer container production."
Bekum's business forecast calls for a steady and good business year, but Carr said, "There are so many economic challenges in general that we face in the U.S. and globally — energy costs and inflation, all the geopolitical challenges at the moment. I think it'll be hard to justify an overly rosy forecast because we have to be realistic."
The counter to that is the projects and the discussions continue, Carr added.
"Companies are going to be investing when they see a technology fit that addresses key challenges. That's the full circle to us forecasting a steady to good 2023," Carr said. "Hopefully we can target to very good, but this is a fair assessment. That's the forecast we've given to our ownership, and they're supportive."
Carr said he is bullish about 2023 for blow molding equipment and for Bekum.
"I think the customer will be looking for very specific benefits and performance, and our challenge will be to address those benefits they're looking for. That will differentiate in the marketplace," Carr said. "It's kind of a buyer's market, to put it bluntly."
At R&B, machine orders are up in the second half of the year.
"As far as revenue, 2022 was a down year, but the good news is 2023 has a nice head of steam," Piercy said. "I'm feeling very bullish. We have purchase orders in hand, and we're building machines. We'll be able to recognize that revenue earlier in 2023."
R&B is seeing demand in its accumulator head sizer machine business, particularly from the automotive and industrial markets. The company expects 25-30 percent growth compared with 2022, driven partly by reshored products and special projects aimed at using more post-consumer recyclables.
"For us, 2023 could line up to be one of our better years out of the last five," Piercy said.
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