Central European markets hold promise for the plastics industry.
Much of the region remains mired in its transition from the Soviet-era planned economies to a more market-based system. But parts of the area, Poland and Hungary in particular, have healthy, growing economies, skilled labor and transparent legal systems.
As a result, they´ve attracted lots of investment from multinationals, and some North American plastics processors have followed.
Plastics News reporter Steve Toloken recently spent a week in those two countries to take a look at what happens when North American firms take the plunge into the growing market. Our interest was piqued because those two countries, along with the Czech Republic, are on a fast track to become full-fledged European Union members in a few years.
Putting aside the big picture, the countries are interesting from a plastics perspective.
It´s impressive to listen to plastic company owners talk about how they made their own molding machines 10 years ago by cannabalizing tractor and machine parts, and marvel at how much things have changed. And you have to admire the determination of people trying to run their own businesses under governments that made it illegal to hire more than a few employees.
The countries did have a tradition of limited private enterprise, even under governments that imprisoned and executed dissidents. And Hungary always had strong technical links and some trading ties to the West.
The market potential is big. Poland´s economy has grown 25 percent since the Berlin Wall fell, most of that in the past few years. Its 40 million people make it the size of Spain, and some foreign plastics industry officials in Poland expect it to advance quickly. Its auto market is now at 600,000 cars a year, about two-thirds that of Spain, for example.
Poland, Hungary and the Czech Republic face challenges, and the economic changes have hurt some people in rural areas and those without strong links to the multinational investment. That poses additional challenges for foreign investors.
Much of the investment there has come from EU countries, and surely, that won´t change. As George Loranger, owner of injection molder Loranger Manufacturing Co. and its Hungarian subsidiary said, the risks of doing business there are high for North American companies.
That said, labor costs are low and employees skilled. Toolmaker Wentworth Technologies Co. Ltd. said it got a "pretty good deal" on its Polish toolshop, even though it had to spend about $1 million updating the plant.
The basic math indicates strong potential. Per-capita plastics consumption is between one-fourth and one-third the level in the West. That gap is only going to narrow.