2014 Plastic Processing Equipment Expected To Be $1.25 Billion

My estimate for 2014 plastic primary processing equipment sales is $1.250 billion. This would be down 7.6% compared to my current estimate of $1.346 in processing equipment sales for 2014. However, the leading indicators for plastic equipment sales are still strong and my estimate could be too low.

The number leading indicator for equipment sales is capacity utilization. According to the Federal Reserve capacity utilization at plastic product manufacturers is 74.7%. This is essentially the highest capacity utilization since December 2008. Also, in each of the last two months capacity utilization has grown at an accelerating rate. The annual rate of change in capacity utilization has had a fairly flat rate of growth for most of 2013. This indicates that plastic equipment sales should continue to grow at a moderate rate.

One chart I always like to look is our plastic equipment demand curve. For a given capacity utilization it forecasts plastic equipment sales. The red line on the chart is optimal demand. Typically, processors over buy (points above the line) or under buy (points below the line) processing equipment in cycles of four to seven years. Since 2009, processors have been over buying the optimal demand of processing equipment. So, the current over buying cycle is five years long. With capacity utilization still high, but perhaps slowing, it makes sense that 2014 would be another year of overbuying. Therefore, we should see sales above the red line in 2014.

However, you can see according to our capital spending survey, which is based on responses from actual processors that subscribe to our magazines, that plastic processing equipment sales are projected to be just $0.954 billion. Most equipment types are down according to our survey. But, two areas that should be strong according to our survey are hybrid injection molding machines (whether horizontal or vertical) and compounding machines. 

In the near future we will have an executive summary of the 2014 Plastics Capital Spending survey posted on this site as well as a tool that will allow you to search spending projections by industry or equipment type.