Thursday, July 29, 2010

Asset Intelligence Special Report:The Plastics Industry

Today, plastics are utilised in just about everything we use in modern day life, from packaging, bottles and basic containers, through to medical, electronics and automotive devices.

David Heaselgrave, Vice President - Marketing for GoIndustry DoveBid, provides up-to-date commentary for this Asset Intelligence Special Report:

2009 saw a massive downturn in demand for a wide variety of consumer goods. The automotive industry was hard-hit and as a direct result of this, the second hand plant & machinery market also stalled. In 2010, following the introduction of the car scrappage scheme in the previous year, the automotive industry has seen a significant increase in all aspects of global motor manufacturing and this has had a direct effect on their Tier 1 and Tier 2 suppliers. Most automotive companies operate 'just in time' delivery with their suppliers. This process requires suppliers to react to orders in the strictest of timescales.

Car manufacturers require machines which are of large tonnage but small shot weight. These machines range up to 4000 tonnes in weight. In Europe, the primary machine types are Krauss Maffei, Demag and, in the USA, Husky and Klockner.

Prices on the increase
In both the US and Europe, prices for large tonnage machines have increased by approximately 20% since mid 2009. Markets in Asia are less developed and many Asiapac companies are still sourcing from the West or purchasing new from China. This is in contrast to 10 years ago, when Chinese built machinery was not fit for a modern factory. In China today, there are over 300 primary machine manufacturers alone. Equipment is CE marked, backed by local agents in the West and now poses serious competition to the traditional US and European Brands. A typical Chinese machine, built to European standards, can cost over a third less than its European equivalent.

Extensive demand from bidders
Injection moulding machines start from 10 Tonnes in weight. The largest machine of this type, which GoIndustry DoveBid has valued, was based at an automotive plant in the US and has a 6000 Tonnes clamp force. GoIndustry DoveBid recently conducted an auction in the US for a plant pot manufacturer. We saw extensive demand for the machines and the moulds. Bidders from 28 countries competed for the lots and the sale realised over $6,000,000.

However, it is not just the primary moulders but the ancillaries which are also attracting a significant interest: granulators, chillers, water heaters, blenders, silos, hot runner systems are all receiving strong demand. In addition to the major auctions, we also run a monthly plastics exchange sale where any vendor with surplus plant can enter machines and ancillaries equipment. The sale is online and we are currently seeing in excess of 80% sell through rate. The exchange is held monthly, so both buyers and sellers can plan their requirements. Our June sale had primarily UK based equipment for sale and, interestingly, UK companies - reversing a trend seen over the past few years of everything going East, purchased two-thirds of the lots.

Market value of large machines can be affected by a number of issues, for example the restriction of movement. The 2000T clamp force machine is likely to be split into two parts for moving - the clamp and the injection unit. It is not uncommon for the clamp to be 'oversize' for haulage and, in many countries, you would be required to obtain a special movement permit. These restrictions vary across Europe and the time taken to obtain the appropriate permissions for transporting these large items can seriously impinge on exit deadlines. Refurbishment, following the use of corrosive materials i.e. Nylon, is another issue which can affect the machine's market value. Work has to be completed prior to other materials being moulded and the new owner then incurs expensive down time. Sale times to allow for proper marketing depend upon the specification of the machines being sold. Small to medium (up to 1000T clamp force) standard trade moulder machines from a recognised manufacturer can be disposed of in a 4 to 6 week period. In the case of larger machines, you would expect a 6 to 12 week period, plus a possible extended clearance period as set out above.

Confidence in the market is improving with interest globally returning to pre-recession levels. It is becoming clear that there is a shortage of quality plastics machinery coming onto the second hand market. However, dealers/brokers are still actively seeking and sourcing stock to help keep the market buoyant. This is in contrast to the machine tools market.

British Plastics Federation survey signals confidence
These comments are endorsed by the findings of the British Plastics Federation's (BPF) Business Conditions Survey 2010, which has signalled industry confidence in post-recession recovery, with 73% of all respondents forecasting an increase in UK Sales Turnover in the next twelve months. The survey results also show a healthy level of planned capital investment with 61% of respondents planning capital investments over the next twelve months. There is a particularly strong emphasis on this from Moulders, Recyclers, Additives and Masterbatch. While 34% of respondents have stated that 'upgrade' and 'expansion' are the reasons for capital investment, 22% of respondents highlighted energy efficiency as a key driver.

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