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For many companies (50% of survey respondents), an increase in capacity is the biggest driver for equipment expenditures. Shenango Advanced Ceramics, New Castle, Pa., is one example. The company, which recently completed a rebuild of its largest cordierite kiln and built a new nitrogen atmosphere kiln, has seen its sales double since it came under new ownership in September 2002. According to Mike Atkins, president, much of this growth has occurred recently in its lightweight, high-strength silicon carbide business.
"The last few years have been challenging, with the lackluster economy and the exodus of U.S. manufacturing. But these factors seem to have leveled out. We're seeing increases in sales and a more optimistic environment right now," Atkins says.
Cost reductions are another key reason many companies are investing in new equipment, with 48% of respondents citing this as their primary incentive. As the cost of energy and labor continues to skyrocket, manufacturers operating with old or outdated equipment are finding that upgrades or replacements can often pay for themselves many times over. According to Ralph Ruark, a technical consultant who specializes in kilns and firing processes, more than 50% of his current clients are concentrating on energy reduction strategies. That number is likely to rise in the wake of Hurricane Katrina, which has driven energy prices even higher.
"When natural gas exceeded $7 per million cubic feet, with probable increases continuing, many manufacturers finally realized that it was time to improve efficiency and began looking hard at energy costs. Conversion of excess air systems to pulse firing is a sound investment that can often provide a payback in energy savings alone in less than two years. Many of these pulse conversions also increase capacity due to decreased firing cycle times. Another strategy is the use of waste heat in the form of hot water recuperation and preheated combustion air," Ruark says.
Such strategic thinking can make the upfront investment in new or retrofitted equipment a little less intimidating; however, Atkins notes that this factor isn't as important as it was a few years ago.
"The initial price of new equipment or upgrades is still a big factor, but I think it's even more of a factor when the optimism isn't as strong. With the current business environment so positive, my partners and I are more inclined to make riskier investments," he says.
Despite the positive trends, it's clear that the U.S. ceramic industry still has a long way to go to become competitive on a global scale. Respondents reported that a majority (60%) of their operations are still being performed manually, while just 36% are automated and only 4% use some form of robotic technology. Although many companies look for automation when making their equipment purchasing decisions (respondents rated this as 4.5 on a scale from 1-9, with 1 being the most important), Atkins notes that automating processes isn't always feasible.
"Handling unfired ceramics often demands hand finishing or manual post-processing operations because of how brittle and fragile these products are. If there was a good return on investment, I think automation would get as much attention as any project. But ceramics present significant limitations in this regard," he says.
Still, some headway is clearly being made in implementing state-of-the-art technologies, automated or otherwise. While 28% of survey respondents indicated that they planned to spend $50,000 or less on manufacturing equipment in 2005, 12% said they would spend $500,000 to $999,999, and another 20% said they would spend $1 million or more. Such investments are likely to continue into 2006-and will be crucial for long-term success.
Editor's note: The objective of CI's Capital Spending Study was to identify capital spending trends within the ceramic industry. In April 2005, CI e-mailed an invitation to a random sampling of nearly 5000 CI subscribers (primarily in the U.S.), with an incentive to complete the web-based survey. The results were tabulated on a 6% response rate.
To obtain a copy of the complete survey results ($129), contact Nichole Charles at (614) 789-1880 or e-mail firstname.lastname@example.org.