The Future? Anything But Predictable

As we move into 2009, although many Canadian injection molders still find themselves in a precarious position, the industry as a whole is dealing with a very different set of issues. At the end of 2007, most molders were focusing on the historic rise of the Canadian dollar and the threat of sky-high commodity prices.

At the beginning of 2009, the Canadian dollar has lost some ground to the greenback, and commodity prices leveled off late last year. But Canadian manufacturers are now having to cope with the aftershocks of the global economic crisis, and contend with recessionary downturns. This year’s injection molding benchmark survey offers a window into what molders did in 2008, and what they’re doing to survive what many think will be a dismal 2009.

A SNAPSHOT OF THE INDUSTRY

Surprisingly, only about 26% of respondents to this year’s survey said they worked at a plant with 50 or more employees, compared to 44% last year. Although this may have to do with this year’s survey sample, it may also indicate the wave of downsizing and consolidation that has taken place in the industry off late.

This year, more than 34% of respondents worked in a facility with one to nine employees, compared to 21% in 2007 and 3% in 2006. Meanwhile, 40% worked at a mid-sized facility with 10 to 49 employees on the premises. No respondents worked at a plant that had more than 250 people, compared to 12% last year and 28% in 2006.

Additionally, compared to previous surveys, respondents had fewer molding machines at their facilities. Only a handful (12%) said they had 16 or more machines at their plant, and the largest number of respondents (39.4%) said they had only one to five machines at their facility.

Although a majority of this year’s respondents were from Ontario (60.7%), we also heard from companies in Quebec (14.3%), B. C. (14.3%), Manitoba (3.6%) and Prince Edward Island (3.6%).

PUTTING THE BRAKES ON AUTOMOTIVE

For the first time, only a handful of respondents indicated that they serve the automotive market. Consumer goods (28.1%) and electronics (21.9%) accounted for the largest number of respondents, with only 9.4% saying that they serve the embattled automotive sector.

Last year, nearly 32% of the respondents said they served the automotive market in some capacity, but 2008 has been a difficult year for companies that sell into that sector.

Canadian molders also serve the packaging (9.4%) and construction (6.3%) markets, as well as industrial, agricultural and housewares markets. One molder also indicated that he worked in the oil industry.

Over the last few years, the number of exclusive captive molders has been shrinking gradually, with only 4.60% of last year’s respondents identifying themselves as captive molders. This year, although some (5.9%) are doing captive molding with some custom molding, none of the respondents are doing captive molding exclusively. A large number of the companies identified their operations as exclusively custom molding (47.1%), while 38.2% were performing custom molding with some proprietary molding and 8.8% were involved in exclusively proprietary molding at their plants.

Only about 28% of molders added production lines to their operation in 2008, compared to 50% in 2007. Of these, 88.9% added one to three lines, and 11.1% added four to 10 lines.

Nearly 60% of those surveyed indicated that they already are, or are in the process of having their plant certified to an ISO or QS9000 standard, and molders continued to offer value-added services to their customers in stressful economic times.

A steady number of molders (87%) offer assembly services, and many also offer inhouse mold manufacturing (67.7%) and welding/bonding (51.6%) services. Other value-added capabilities offered by Canadian molders include printing and decorating (45.2%), JIT production (35.5%), computer-assisted design (58.1%) and EDI or e-procurement (32.3%).

UTILIZATION RATES SPIRAL

In 2006, a large majority of the respondents (70%) had an average machine utilization rate of 60 to 90 per cent, and only a small minority had utilization rates lower than 39%. Last year, in contrast, 26% of molders said their average utilization rates were at 39 per cent or less.

And in what may be a sign of the times, 34.4% of this year’s respondents are sitting below a 39 per cent utilization rate, while an additional 28.1% say their average machinery utilization rate is between 40 and 49 per cent. For the first time in many years, a majority of the molders surveyed were utilizing less than half their machinery capacity.

Just over 30% had utilization rates in the mid ranges of 60 to 90 per cent, compared to 55% in 2007.

And faced with overcapacity, many molders also find it harder to bring new business into their facilities. Nearly 68% of the respondents said that only a handful of projects they quote on actually turn into business.

The lower rate of machine utilization also correlates with the dramatic decline in mold shop resin consumption and revenue. Canadian molders used an average of 4.57 million lbs. of resin in 2008, compared to about 8 million in 2007. The average Canadian plant had a revenue of $5.57 million, compared to $21.8 million in the previous year.

Only about 15% of responding companies purchased new injection molding machinery in 2008, as opposed to 70% in 2007. At the end of last year, about a third of respondents said they would buy new machines, but many may have had to scale back their purchasing plans due to the worsening economy.

PREDICTING THE UNPREDICTABLE

Barring any major economic changes, molders say they won’t be making any major investments next year. About 26% say they will buy new injection molding machines in the next year, and only a quarter of those will look at new machines. The remaining purchasers will be looking at preowned machines or some combination of preowned and new machines to meet their plant’s needs.

The picture is looking slightly rosier for the auxiliary equipment market. Half of the respondents said that they had bought new auxiliary equipment this year, and 63% say they have plans to buy auxiliary equipment in the next 12 months.

Looking at robots and automation, there seems to be an increased willingness amongst molders to look at automating their lines. The market for six-axis robots looks like it will be unchanged: 6.3% of molders bought six-axis robots in 2007, and the same number of molders will buy articulated robots in the new year.

The big moves, however, seem to be happening in the three-axis robot market. While only 15% of respondents have purchased linear 3-axis robots in 2008, nearly 30% of molders say they will buy linear robots for their plants in 2009.

MAKING SMALLER INVESTMENTS

Despite tough times, Canadian molders haven’t completely scaled back on their spending for research and development (R&D) and employee training. The number of respondents who spend nothing on their R&D remained unchanged in 2008. Still, processors were spending less on their R&D activities overall: only about 28% were investing four or more per cent of their budgeted expenses on R&D, compared to 43% in 2007. This year, the vast majority were putting between one and two per cent of their expense budgets into research.

Similarly, the number of molders budgeting nothing for employee training did not change in 2008. However, molders did scale back on spending in this area as well, in what may be part of companywide belt-tightening efforts. Only about 3% of respondents said they had put four or more per cent of their budgeted expenses towards employee training in 2008.

THE INTERNATIONAL PERSPECTIVE

Instead of exporting more of their product, Canadian molders continue to rely on domestic markets. This year, over 81% of respondents shipped between zero and 50 per cent of
their product outside of Canada, compared to 64% in 2007. Year over year, the percentage of processors who have exported less than half of their product has been rising steadily.

Canadian molders also have less of a presence abroad, with three-fourths of molders indicating that they have no presence outside the country. Nearly 18% have some presence in U. S., and some molders have a presence in countries such as the U. A. E. and Hungary. Surprisingly, none of the respondents to this year’s survey had any type of presence in China or India, a departure from last year’s survey.

Of the respondents who do have a presence outside Canada, 12.5% have a manufacturing facility and 4.2% have a sales office. Manufacturers are also reaching out to international markets through manufacturer’s representatives and distribution deals.

CPL

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The Injection Molders’ Benchmark Survey was emailed to 378 people at injection molding facilities in Canada. We received 35 completed surveys, giving us a response rate of 9.25 per cent. Canadian Plastics refined its research methodology by limiting its survey sample to one respondent per manufacturing facility. As a result, this year’s survey has a smaller sample that is more representative of the industry. Because not everyone answers each question, the percentage values in the charts and tables are given as a percentage of respondents to that question, with the number of respondents provided in parentheses, for example (n=35).

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Raw Numbers On Raw Materials

The Injection Molders’ Benchmark Survey asked molders what kinds of polymers they currently process at their facility, and an increasing number are using biobased and biodegradable resins at their plant.

Commodity and engineering resins still make up the bulk of what is processed at Canadian plants — 87.5% and 71.9% respectively.

However, 56.3% of respondents are using specialty resins in their process, compared to only 39.50% last year. Furthermore, although none of the respondents to last year’s survey were using bio-based or biodegradable resin types such as PLA or PHA/PHB, nearly 10% of this year’s respondents are using “green” raw materials.