European machinery orders fell 22% in 2023

Machinery makers in Europe will need production facilities in large target markets and must offer market-specific plastics and rubber machinery to compete during an ongoing sales slump, according to officials at Germany's VDMA,.

Incoming orders plummeted 22 percent in 2023 after adjusting for price changes. Geopolitical changes also require new strategies, Ulrich Ackermann, head of VDMA foreign trade, told attendees at the group's annual conference held June 5 in Dresden, Germany.

VDMA is the trade group representing manufacturers of plastics and rubber machinery, waste and recycling technology and hybrid lightweight technologies.

"The globalization of the world economy is coming under increasing pressure. China is placing its focus on autonomy, resulting in knock-on effects for the European mechanical engineering industry, and in the U.S., the Biden administration has continued the 'national approach' of the Trump government's trade policy in recent years. As a result, the world is heading towards a new bipolar world order," Ackerman said.

Some machine builders have already adapted or are in the process, he added.

Lossburg, Germany-based Arburg GmbH + Co. KG is the latest. Arburg officials have said 2024 is about internationalizing the value chain. In March, it announced plans for assembly plants in North America and China. Then, at NPE2024, they launched a new machine outside of Germany for the first time in 101 years.

Arburg also has been doing some machine assembly and configuration at its Arburg Inc. subsidiary in Rocky Hill, Conn.

"We get machines from Lossburg and we put options on it and configure. That's the first step to doing this on a larger scale," Arburg Inc. President Martin Baumann said ahead of NPE.

Austria's Wittmann Group also is rethinking its site strategy and is looking to transfer production elsewhere, in large part because wages have risen steeply along with the cost of living.

Also, at NPE2024, South Korea's LS Mtron announced it had invested more than $20 million in a new facility in Palestine, Texas, to build LS tractors and demonstrate and stock its injection molding machines with the potential for press production in the U.S.

Sales of the company's presses are up despite economic challenges. LS Mtron's market share has grown from 1.5 percent in 2018 to 7.1 percent I 2023, a company spokesperson said.

Despite the adverse conditions, the German plastics and rubber machinery industry also closed 2023 with a price-adjusted increase in sales of 13 percent, according to VDMA Chairman Ulrich Reifenhäuser.

"This growth is pleasing and demonstrates that companies have been able to bring in many orders in recent years, which have now been successively filled," Reifenhäuser said. "However, in the meantime, the signs have changed significantly worldwide. Most companies have worked through their order backlog and are currently facing up to the issue of underutilization."

Even though some economic conditions, such as energy costs and inflation, have eased, the downward trend in new orders hasn't halted, according to Thorsten Kühmann, VDMA managing director.

"After we already had to cope with a price-adjusted decline of 13 percent in 2022, we recorded another 22 percent fewer orders on the books last year, after adjusting for price changes," Kühmann said. "As a result, many companies were forced to take countermeasures by introducing reduced working hours."

At Arburg, during the slowdown, employees are using time off and others are doing short work. Their hours will be increased proportionally to sales.

Mechanical engineering is a cyclical business, but VDMA officials say the current economic downturn in the plastics and rubber machinery industry is more than a cyclical dip.

Machine builders remain under pressure due to a lack of new orders.

"We cannot and must not play down the economic weakness resulting from the current situation," Reifenhäuser said. "What we can do, however, is to focus on our strengths, utilize our innovative power, and use new solutions to solve current market issues in a surprising and precise manner. This is the spirit with which the newly elected executive board will dedicate itself to its tasks."

VDMA officials expect the uncertainty on the markets to slowly subside, interest rates to stabilize, and investment in new machines to once again pick up.

The sales trend for this year will either see a sideways movement or slight drop, depending on how quickly new orders are received, the VDMA release says.

In North America, the double-digit decline in plastics machinery shipment values continued into 2024 for injection molding and extrusion equipment. The initial estimates indicate a shipment value of $261.9 million, which is a 24.8 percent drop from the previous quarter and a 24.2 percent decrease from the prior year, according to the Washington-based Plastics Industry Association.

However, Perc Pineda, the trade group's chief economist, simply said lower shipment values are common in the first quarter. He then said seasonality and said shipments decreased by 8.5 percent quarter-over-quarter.

VDMA company representatives also elected the new board of the plastics and rubber machinery association for 2024 to 2027. Reifenhäuser remains chairman.

The other members are: Gerhard Böhm, Arburg; Jörg Bremer, KraussMaffei Group GmbH; Stefan Engleder, Engel Austria GmbH; Sandra Füllsack, Motan Holding GmbH; Manfred Hackl, Erema Group GmbH; Thomas Holzer, Troester GmbH & Co. KG; Henning Stieglitz, Battenfeld-Cincinnati Germany GmbH; Markus Vollmer, Kampf Schneid- und Wickeltechnik GmbH & Co. KG; Axel von Wiedersperg, Brückner Group SE; Dr. Sascha Witt, Windmöller & Hölscher KG; and Rainer Zimmermann, Azo GmbH & Co. KG.