By: Steve Toloken
July 3, 2013
After years of China being the overwhelming focus of plastics investment in Asia, there's new data showing that molding companies are spreading themselves around the region, as manufacturers develop their own versions of a "China-plus-one" strategy.
That term is supply-chain jargon for Asian investment shifting from being mostly about China to China plus another key manufacturing location in Asia. It's seen as a hedge against China's rapidly rising costs or just diversification and not putting all of the fortune cookies in the one basket, so to speak.
For plastics, there's data from both Japan and Europe showing this happening.
For example, Japan's large injection molding machinery industry saw exports to China and Hong Kong last year drop 15 percent in yen terms and 30 percent in U.S. dollar terms. By contrast, exports rose substantially across all of Southeast Asia.
Injection press exports to the largest market there, Thailand, nearly doubled, and that country in 2012 replaced China as the top destination worldwide for Japanese molding machines.
That's according to data from Japan's Ministry of Finance, summarized in a May article in the Plastics Times of Japan trade newspaper. In 2012, Japanese press makers sent 2,991 injection presses worth $372.8 million to Thailand.
That's a big change, although to put that in the right perspective, some large part of the 2012 Thai investment could be one-time spending as companies replaced machines lost in the huge floods in the country in 2011.
But still, coupled with rising investment there and in other parts of Asia, there's a
clear trend of manufacturers looking beyond China and bringing more balance to their Asian investments.
Those companies are expanding in part to tap growing consumer markets in places like Indonesia, or to serve Thailand's expanding car and electronics industries.
They may also be looking for alternatives to China's yearly double-digit labor cost increases, and in some cases, particularly for the Japanese, could be motivated in part to find new markets to reduce the risk from rising political tensions with China.
Similar to the Japanese data, statistics from the world's largest injection molding machinery maker, Austria's Engel Holding GmbH, make the same points about more balance in Asia.
The number of injection presses sold in China will drop from 45,000 last year to 35,000 in 2015, the company said in a presentation at the recent Chinaplas trade fair.
At the same time, Engel says India and Southeast Asia will all buy more molding machines. Between 2012 and 2015, India will grow from 3,000 units a year to 5,000; Indonesia from 1,500 presses to 2,000; and Vietnam from 2,000 injection molding machines to 2,800.
Indonesia and Thailand were identified as being "conspicuous for their high levels in growth" as export markets for German machinery in a February statement from the VDMA Plastics and Rubber Machinery Association. That same report noted that sales to China and India were on the decline.
The Engel data makes clear that no one country can come close to replacing China, which is why it's called the "China-plus-one" strategy rather than the "what country replaces China" strategy.
In 2015 China's injection molding machinery market will still be nearly twice the size of the rest of Asia put together, measured by number of machines, according to Engel's estimates.
But there will be more balance in investments. That change may be most evident among the Japanese companies, which remain Asia's most technologically sophisticated in plastics, and have invested heavily in China.
In addition to Thailand becoming Japan's top export destination last year and pushing China to No. 2, machinery exports to Indonesia rose 40 percent in yen terms, to US$85 million. That country went from No. 6 to No. 4 as a destination for Japanese presses.
The U.S. remained steady in the No. 3 spot for Japanese-made injection presses (with 1,200 presses worth $166.2 million in 2012), while South Korea kept the No. 5 spot.
But getting back to the main point, Asia, here are some more numbers. Japanese exports to Vietnam last year rose 49 percent measured in yen, to $64.9 million, making it No. 6. And equipment exports to the Philippines, not a country plastics molders talk about much globally, rose more than 30 percent to $24.2 million.
There is another key reason for the declining exports to China that needs to be mentioned, and that's been the trend for machinery makers to set up more factories in China, as the Japanese industry has done heavily in recent years.
That could partially offset the export losses, and it shows that for Japan, China will remain a key market, just one served more locally rather than from the main factories in Japan.
But even putting that aside, trend spotting with this data suggests the next few years will see investment in Asia continue to spread out, as global manufacturers adopt a "China-plus-one" strategy and their suppliers follow suit.
Toloken is Plastics News' Guangzhou, China-based Asia bureau chief.