SINGAPORE — Plastics processing and equipment sales in Southeast Asia continue to experience rough times, but glimmers of hope emerged during interviews at the ASEANplas 99 trade show, held March 23-26 in Singapore.
Francis Lim sees 1999 as ``a year of consolidation'' for Singapore's plastics industry, with recovery starting in the fourth quarter.
``The government worked very fast to address the crisis,'' said Lim, managing partner of joint venture Progressive Components Asia Pte. Ltd. in Singapore. ``A lot of companies are beginning to see the effect of their work.''
The crisis has benefited strong companies and hobbled weak ones, Lim said.
``That has helped by addressing some realities to the companies here,'' he said.
The region's plastics processing production volume declined 30 percent during 1998 from the previous year and has regained several percentage points so far in 1999, said Georg Hoefner, managing director of Netstal Singapore Pte. Ltd.
``We expect it to climb up beginning next year,'' Hoefner said, adding that multinationals have made ``encouraging inquiries'' to Netstal about possible injection molding machinery needs in the Philippines.
Plastics processing output in the ASEAN region has dropped more than 25 percent since mid-1997, said Chiang Wee Jin, sourcing manager with Singapore electronics-industry brokerage CWJ Trading Pte. Ltd.
``After September, we will see real output going up,'' said Chiang, who also is a coordinator between the Singapore Institute of Material Management and the Singapore Trade Development Board.
William R. Feldman of LNP Engineering Plastics Inc. said he is ``cautiously optimistic'' about 1999 business prospects in Southeast Asia.
``We are seeing more and more business shifting here,'' mostly from the United States, with the work moving to lower-cost countries such as Malaysia and China, said Feldman, marketing manager for business machines and electronics with the Exton, Pa.-based materials supplier.
Southeast Asian ``governments have tried to work out deals to keep business here,'' Feldman said. ``The South China area is much more entrepreneurial'' than Japan. ``You don't see pumping up of business here like you see in Japan.''
``Plastics processing was very hard-hit because of total economy downturn in Asia,'' said Robert Bodingbauer, managing director of Engel Machinery Hong Kong Ltd. in Hong Kong. ``Companies who export to America can keep production, but 80 percent of the domestic molders are suffering at the moment.
``Thailand is doing reasonably well,'' he said. ``China was not affected, but it starts to be affected now. Indonesia is 100 percent dead now'' with ``no chance for recovery. Nobody knows what is going on, and what will happen.''
Bodingbauer measures activity at customer locations: ``How many machines are running? You see immediately from a realistic point of view.'' He believes Asian processing was ``down 50 percent from year to year,'' excluding missing Taiwanese figures that might involve work moving through to China. ``China in the long term will benefit.''
Asia's economic crisis has made equipment available at relatively attractive prices as other companies have failed, said Jeff MacDonald, Hong Kong-based vice president of Asia-Pacific service and sales for Husky Injection Molding Systems Ltd.
``There is a glut of equipment out there,'' he said. ``In the last six to eight months, we have seen a lot of shifting of capacity. But we have seen our traditional customers get stronger as a result of companies not doing things so well [and] failing.''
Starting about 18 months ago, some Singapore and Malaysian molders compensated for the economic downturn by selectively buying lower-priced Taiwanese and Hong Kong-made machines, said Johann Taufenegger, managing director of Battenfeld Injection Molding Technology Singapore Pte. Ltd.
``But this didn't last very long,'' he said. More recently, ``nobody is investing in machines. There is no need to talk nicely about the situation. We are in a big mess.''
Meanwhile, financially strong opportunists of various persuasions wait to acquire land, Taufenegger said, interested only in the property.
``Most of them are sitting like the spider in the web, waiting for somebody to shut down their presses and go bankrupt. What does a flour processing company have to do with a steel company or plastics? The equipment becomes scrap [and] goes to waste.''
Processors have reverted to buying second-hand, rebuilt machines or repossessed equipment, said Vincent Wu, managing director in the 13-country Asia-Pacific Rim region with the international marketing unit of Milacron Inc.'s Plastics Technologies Group in Batavia, Ohio.
Credit is tough to obtain. For example, Milacron sold a $52,000 injection molding machine in October to a Philippines company that needed six months to secure a five-year loan at 12 percent interest.
``It shows money has dried up,'' Wu said.
Stocking inventories hurt some machine makers.
``By the end of last year, people feel the crunch and try to clean house,'' Wu said. ``Prices dropped tremendously.''
Wu believes machine sales may begin to improve in 1999's third or fourth quarter. For now, however, ``customers are not willing to talk,'' he said.
Wu posed a question: ``When people are ready to buy, is the bank ready to loan? If you look at the root problem of this whole mess, probably you come to the conclusion that it has a lot to do with the bank.''
Maguire Products Inc. is positioning for the future in Southeast Asia, said B. Patrick Smith, vice president of marketing and sales for the Aston, Pa.-based maker of materials-handling equipment.
``We are taking advantage of the depressed market right now,'' Smith said. ``You can get warehouse space relatively inexpensively. There is talent on the street because many companies have retrenched and contracted their operations locally.''
Maguire has a few people in Singapore and has added an employee in Shanghai, China.
``China is the mother lode,'' Smith said. ``We are building an infrastructure [with] substantial stock in Singapore to serve the entire Pacific Rim. We are becoming much more encouraged as we see currencies stabilize, particularly in Thailand.''
He characterized Thailand as ``a huge opportunity,'' and said Maguire is just beginning to see some requests for quotations from Malaysia. The firm entered the region through a distributor in the early 1990s, set up an office in 1995 and now has a network of seven country-oriented distributors.
``We are committed to this region in a big way,'' Smith said.
Conair Group Inc.'s Dan Summerville thinks the economy in China is going to contract. He directs the firm's Asia operations from Singapore.
``Some manufacturers are looking for China to be a bonanza, and certainly some day it will,'' he said. ``But before it does, I think it will tighten up a bit.''
Summerville also believes Indonesia's economy will remain tight for the foreseeable future.
``Hopefully, they will get their act together,'' he said.
Moldflow Corp., a provider of plastics mold design and simulation software, has seen improvement in southern Asia, Australia and New Zealand, but recognizes ``the money is not there'' for a fast turnaround, said Andrew Tweedley, manager of Moldflow's Australasia region.
``We need to wait until manufacturing bounces back,'' said Tweedley, who is based in Kilsyth, Australia.
A joint venture unit of Japan's Juken Kogyo Co. Ltd., meanwhile, is waiting for Indonesia to stabilize before proceeding with a plant there.
``We still have a lot of customers requesting us to supply them on the spot,'' said David Wong, managing director of Juken Technology Singapore Pte. Ltd., which supplies its tiny, 10-ton injection molding machines to Indonesia customers from its Singapore plant.
``Plastics processing in this region is not that good,'' Wong said, although he believes it is picking up in China because of low cost.
Mold making, however, ``is very good ... because Singapore has good pricing, quality and lead time'' for the export market, Wong said.
``This market will grow like Europe or Russia,'' said Manfred Kersten, managing director of HPM Hemscheidt GmbH of Schwerin, Germany. ``Even if there is a crisis, they will come back. Demand is there. Right now, it is a problem on how to do financing.''
Eighteen Austrian firms exhibited at ASEANplas, warranting a visit from Karl Wallner, that country's trade commissioner and commercial counselor in Singapore.
``We are a small country but, let's say, overrepresented'' in the plastics machinery industry, Wallner said. ``We have a few of the leading companies in that sector.''
No Austrian firms pulled out in the face of the Asian economic crisis.
``They show confidence that things will change,'' he said. ``You have to stay on if you want to remain in the field.''