China gains with local machinery

By Steve Toloken
Staff Reporter / Asia Bureau Chief

Published: June 14, 2013 3:01 pm ET
Updated: June 14, 2013 3:24 pm ET

Image By: Rich Williams

Related to this story

Topics Machinery, China

China's plastics machinery market has been a major engine of growth for the global industry for the past five years. Some would say the biggest engine for equipment makers.

Chinese plastics equipment sales grew from 34.9 billion yuan in 2008 to 49.4 billion ($7.92 billion) yuan last year, as companies around the world targeted China to help them through the global recession.

But there are now signs that China is becoming a much tougher place for foreign imports. It's an important change in the global market, and could spell trouble if firms are too dependent there.

First, Chinese imports of injection molding machines hit a high of 6.2 billion yuan in 2010, but have dropped steadily since then, to 5.4 billion yuan last year.

Meanwhile, exports of Chinese-made injection presses have been rising, from 3.9 billion yuan in 2010 to 5.7 billion yuan last year.

Second, at the same time that those foreign injection press exports to China are down, domestically made machinery has also been capturing a much bigger share of the local market, according to data from the Beijing-based China Plastics Machinery Industry Association.

In 2008, China's overall plastics machinery market was equally split between imported and domestically made machines, with imports capturing 51 percent.

But by last year, the situation had changed dramatically: Foreign-made machinery was only 27 percent of the market, while locally made machines had a 73 percent share.

The big change happened in 2009, when industry executives said the global financial crisis forced a lot of belt tightening in capital investments among plastics processing factories in China.

"In 2009, when the crisis comes and the consumption goes suddenly down, people were recognizing there is a local supplier, why not try it," said Helmar Franz, executive director of China's largest injection press maker, Haitian International Holdings Ltd. "The interesting question would be, after the crisis is over, would they return to their original supplier. They didn't."

"This was a turning point in the Chinese plastics [machin-

ery] consumption," he said. "Most local suppliers suddenly realized, this was the chance taken by the crisis. The Chinese could present themselves as equally positioned."

Industry executives like Stephan Greif, chief executive of Demag Plastics Machinery (Ningbo) Co. Ltd. and James Zhang, deputy general manager at press maker Guangdong Yizumi Precision Machinery Co. Ltd., point to two things happening to explain the declining market share for imports.

First, foreign machinery companies increasingly set up their own factories in China, to be closer to the market and make something more in line with the cost needs in China.

That suggests that foreign companies have much more influence in the market than the relatively low 27 percent import figure suggests, since it's still really foreign technology that's at the core of the machine. It's just now put on a made-in-China (or assembled-in-China) piece of equipment.

But secondly, and here's the counterpoint to that, the Chinese equipment itself is improving its quality and becoming more competitive globally. That's a point that both foreign and Chinese-owned companies have made with me.

To offer one example, it's something I heard from a few South Korean companies at the recent Koplas show in Seoul, where Chinese press makers came in much larger numbers than before.

China's overall plastics machinery market last year was down 3.5 percent, or 1.8 billion yuan, to 49.4 billion yuan.

More than half that drop came in the imported equipment, though, and some foreign machinery groups seem to be acknowledging that China is becoming a less attractive export destination.

In releasing the 2012 financial results for the German plastics and rubber machinery industry, the Frankfurt, Germany-based VDMA engineering trade group pointed to rising interest in other markets in Asia.

"Southeast Asia, Thailand and Indonesia, in particular, are conspicuous for their high levels of growth, whereas sales to China and India are on the decline," said Ulrich Reifenhäuser, chairman of the VDMA Plastics and Rubber Machinery Association, in a statement.

There's one other illuminating look via the statistics. An analysis presented by Haitian in March, using Chinese, German and other data, said that between 2007 and 2011, China supplanted Germany as the single-largest manufacturing location of plastics and rubber machinery.

In 2007 Germany was tops, with 24.7 percent of the global market, and China second, with 15.9 percent. By 2011, they had flipped dramatically: China had 30.5 percent, Germany 22 percent.

Italy, the United States and Japan, ranking third, fourth and fifth, all saw their market share decline as well.

No one is writing a eulogy for machinery makers in those countries, though. They clearly have advantages in technology and in their skilled workforce.

For example, Austria's Engel Group, the world's largest injection press maker, said recently that China remains its largest Asian market. It added that, even as China's rapid economic growth has slowed, demand for high-technology models continues to grow as manufacturers look to offset rapidly rising wages.

But taken together, the figures do illustrate the sizable shift underway.

They suggest that — even with all the concern about the rising costs in China hurting that country's competitiveness at lower-end manufacturing — in plastics, China is moving up the manufacturing ladder from low-cost labor to making machinery it can now sell to the next low-cost countries.

As we look to the future, some executives also feel there could be a clustering effect that provides further momentum for China.

As those already-existing regional clusters develop further, around Ningbo, or the Shanghai-Suzhou or Pearl River Delta corridors, one question is whether that will that feed more development and more local innovation, creating centers that over time rival the top spots globally for this kind of capital equipment.

Only time will tell. Crystal ball gazing is at best difficult for experts, and at worst nearly impossible for journalists like me.

Japan certainly looked invincible from a manufacturing point of view 20 years ago, and that got a lot of ink at the time. And China has its own challenges, like depending too much on exports and infrastructure spending to drive growth.

But the last five years have brought some changes, and we can probably count on the next five years bringing some equally big ones.

Steve Toloken is Plastics News' Guangzhou, China-based Asia bureau chief.


Comments

China gains with local machinery

By Steve Toloken
Staff Reporter / Asia Bureau Chief

Published: June 14, 2013 3:01 pm ET
Updated: June 14, 2013 3:24 pm ET

Post Your Comments


Back to story


More stories

Image

Flexibility for complexity key for Brampton

September 16, 2014 11:26 am ET

Blown film machinery maker Brampton Engineering Inc. is well positioned to meet growing demand for complex film structures, highly customized...    More

Image

US plastics machinery market still gaining strength in second quarter

September 15, 2014 5:01 pm ET

U.S. plastics machinery shipments in the second quarter continued to outperform activity in 2013, according to data from Society of the Plastics...    More

Image

Toy supplier sues maker in reshoring fight

September 15, 2014 3:18 pm ET

An Arkansas toy supplier is suing a Taiwan-based manufacturer for breach of contract and other civil allegations in a legal dispute that not only...    More

Image

ZF finalizes deal to buy TRW, creating another global auto supply giant

September 15, 2014 1:09 pm ET

TRW Automotive Holdings, in a supply chain megadeal that has been in the works since mid-July, said Sept. 15 it has agreed to be acquired by German...    More

Image

Sabic, Chinese Academy of Sciences sign five-year development agreement

September 15, 2014 11:54 am ET

Ties between one of the world's biggest oil producers and one of its biggest consumers grew tighter Sept. 12 with the announcement of a five-year agre...    More

Market Reports

Shale Gas Market - Analysis of North American Region

This report highlights the impact of shale-based natural gas on the North American plastics market and features an in-depth analysis of production trends in the United States during 2013 and a forecast for 2014 and beyond.

Learn more

Thermoformed Packaging 2014 Market Review & Outlook North America

This in-depth report analyzes economic and market trends, legislative/regulatory activity impacting supply and demand, business opportunities and threats, materials pricing, manufacturing technology, as well as growth strategies being implemented by thermoformed packaging companies.

Learn more

Pipe, Profile & Tubing Extrusion in North America 2014

U.S. demand for extruded plastics is expected to grow by 3 percent in 2014, with PVC remaining the largest segment.

Plastic pipe will post the strongest gains through 2018, continuing to take market share from competing materials in a range of markets.

Our latest market report provides in-depth analysis of current trends and their financial impact on the pipe, profile and tubing extrusion industry in North America.

Learn more

Upcoming Plastics News Events

January 14, 2015 - January 14, 2015Plastics in Automotive

February 4, 2015 - February 6, 2015Plastics News Executive Forum 2015

More Events