Economic conditions in China are changing rapidly. Unfortunately, there is no bulletin board noting these conditions. In fact, the information is often fragmented, scattered, secondhand and word-of-mouth — in some instances, even concealed by Beijing. U.S. mold makers, however, need this information to be able to react and survive.
Material costs have gone up on a global basis. China is no exception and some categories, such as steel, have gone up over 30 percent in the last year. China is now the No. 1 producer of steel but also the largest importer of scrap in the world. The cost increases of P-20, H-13 (FDAC) and the 45C (1045) grades are a significant factor in the total cost of Chinese tooling since the material/labor cost ratio of a mold is higher in China than the United States.
Your customer has practically no way of knowing if the core and cavity of the mold he bought is P-20 or 45C hardened to Rc32. The mold maker knows, but he's not telling. As far as certification goes, let's be realistic.
The cost of labor has also increased. While the supply of unskilled labor from the countryside is unlimited, the cost of skilled labor in the coastal areas is up due to higher expectations and higher prices for consumer goods.
Factory owners drive BMWs and Mercedes. Their wives wear Gucci. The days of a dollar-an-hour mold makers are gone but balancing this out is the appearance of state-of-the-art VMCs and CNC lathes in the mold shops. As long as capital is cheaper in China, U.S. mold shops are in trouble. Cheap capital allows you to automate and balance the labor differential.
Another change is the changing rate (about 5 percent) of the quiet tax credit Beijing issues for exports. Local counties and municipalities may still be granting credits and tax abatements for corporations qualifying for an export license. All of these practices are something that (other) countries understand and practice but are too complicated for Washington.
The U.S. mold-making industry lacks a philosophy and needs a coherent plan of action to survive in a global economy. They better get one before they vanish like the shoe industry.
Beijing targeted the mold-making industry a decade ago and has supported the growth of the Chinese mold makers, not because they want to export molds but because lower-cost tooling plus lower-cost assembly labor supports the growth of consumer goods production in China. China must find employment for the rural masses. Mold shops open the door to mass-manufacturing activities.
Cost increases for material, labor, energy and shipping will show up in an average of a 30-plus percent increase in the price of Chinese tooling.
This will not level the field for U.S. mold makers but it's a start. Lowering the cost of components by demanding global pricing, fighting Washington and local governments for 2 percent loans for domestically made machinery will also help, but an overall strategy is needed.