About half of all injection molding machines sold this year will go to customers in China.
Of the 80,000-90,000 presses in the world market, customers in China will buy 40,000-50,000; Southeast Asia, 20,000; Europe, 15,000; and North America, 12,000, according to Stephan Greif, Demag Plastics Group vice president of China.
The tremendous China market continues to outpace the rest of world despite government intervention last year to try to cool off the economy. The Chinese market is moving toward higher-end products and presses with advanced technologies.
At the recent Chinaplas trade show, held April 26-29 in Shanghai, press makers expressed confidence in the industry. Companies that were affected in 2005 by high resin prices and macroeconomic factors said they are starting to see a rebound.
Demag reported a 20 percent sales increase in the first half of fiscal 2006. The company yields annual sales of 12 million euros to 15 million euros ($15.5 million to $19.4 million) in China. Greif also said Demag is building a new plant, expanding its product line and adding two sales offices in China.
Engel Holding GmbH of Schwertberg, Austria, has seen 20-30 percent growth in sales for the first quarter of 2006. Christian Naderer, general manager of sales and marketing for Engel Machinery HK Ltd.'s Shanghai office, predicts 20-30 percent growth for the entire year. Engel is starting its first plant in Shanghai and opening more sales offices.
Even Netstal AG, whose sales declined in Asia last year, said sales were picking up in the first quarter. Andreas Nydegger, general manager of Netstal China Ltd., expects double-digit growth this year. Currently, less than 10 percent of the company's 200 million euros in annual sales is from China, but the company plans to add sales offices.
Compared with their Western peers, Japanese press makers seem to have maintained steadier growth. Sumitomo Heavy Industries Ltd. has taken the top share of the yearly total output of injection presses made in Japan since 2003, according to Nikkei Sangyo Shimbun (Nikkei Industrial News). Sumitomo will open a sales office in Qingdao, China, this year.
JSW Plastic Machinery Inc. said growth during the past few years has been stable and steady. Sales were up 25 percent in the fiscal year ended in March over the previous year, Wei Deyi of the injection molding machine sales group said at Chinaplas.
Upgrading under way
The current structure of the Chinese injection press market looks like a pyramid. Demag's Greif said the high end consists of 1,500 units annually from Europe and the United States; the middle level consists of about 15,000 units from Japan, South Korea, Hong Kong and Taiwan; and 30,000 Chinese local presses make the bottom of the pyramid.
But the dynamic market is moving aggressively toward higher-end machines.
Special applications such as in-mold labeling are increasing rapidly. Demag introduced IML to the Chinese market in 2005 and exhibited a machine at Chinaplas for the first time. Although only two systems have been sold, Greif believes food packaging has huge potential in China.
``Just think: About every person of the 1.4 billion population buys some sort of nicely packaged food - yogurt or soup - every day,'' he said.
Sumitomo sales tech manager Chong Chin Kung said, ``Processors are switching to more value-added products of higher quality, which requires better equipment.
``Investing more on machinery is a necessity,'' Chong continued. He said the company's Chinese local customers are increasing, although the majority remain Japanese companies as well as Taiwanese and Singaporean firms.
All-electric has become the buzzword as the industry demands better equipment and higher quality. At present, Japanese press makers have secured the majority share of the Chinese market.
Sumitomo has been selling all-electric machines in China since 1997.
``Now it's become the trend,'' Chong said. All-electric presses, with clamping forces of 7-650 metric tons, make up 90 percent of the company's sales in China. All-electrics of less than 180 metric tons have direct-drive systems without belts.
JSW's sales in China consist of 70 percent all-electric, 25 percent hydraulic and 5 percent hybrid presses. With clamping forces of 35-1,800 metric tons, JSW machines are used to make light guiding plates, auto bumpers, interior trim panels and decorations and optical lenses.
Western firms, though arriving late, are trying to win market share. Engel started to market all-electric machines in China in 2004 but has not made any sales yet. Demag sold its first all-electric press in China in 2004 but complains that the steep price keeps local customers away. To meet the local needs and demand, Demag will start making all-electrics at its Ningbo plant in the first half of 2006.
Chinese press makers do not want to give away the local market for all-electrics, either. Haitian's HTD88 series with clamping forces of 56-360 metric tons debuted at Chinaplas. Other Chinese makers of all-electrics include Haitai Machinery Group Co. Ltd. of Ningbo, Ningbo Surely Meh Co. Ltd of Ningbo and Donghua Machinery Ltd. of Dongguan. But some key parts, such as servodrives and ball screws, still are made by multinational firms.
Eventually, the best way for Western firms to gain competitiveness in China may be to produce locally.
Demag took the lead by forming a joint venture in 1999 and buying it out last year.
``The time for only importing ... machines is over,'' Greif said. ``Chinese competitors are increasing their level of technology, so there comes more pressure on pricing. In the future, standard machines should all be made in China, and high-end, special-applications machines will be imported from Germany.''
Demag to date has sold about 4,000 machines in China, 1,500 of which were made in Ningbo. Of the Chinese-made machines, 80 percent were sold to local Chinese processors. The figure is down to 20 percent for German-made Demag machines.
Milacron Inc. holds a 70 percent share in a joint venture factory in Jiangyin that makes large injection presses. The 2-year-old plant remains small-scale.
Joint ventures paved the road to China. But family-owned Engel has decided to become the first Western company to produce presses in China solo.
``I see demand for quality rising in the Chinese market, and I believe we'll serve the market better with a local factory,'' Naderer said. The plant in Shanghai will begin operating this fall.
Among Japanese suppliers, Toshiba Machine Co. Ltd. has been producing all-electrics in China since 2002. Its second plant, opened in Shanghai last year, also makes all-electrics.
Sumitomo, whose largest end market in China is connectors, makes mechanical components at its Ningbo factory but ships back the components to its Chiba, Japan, plant for assembly.
``Customers still prefer imports from Japan,'' Chong said. He contends made-in-China presses affect sales of the company's machines.
>From special applications to all-electric machines, what is certain is that the Chinese market is evolving toward higher levels.
In five years, Greif predicts, the pyramid structure of the injection press market will change to an egg shape, in which the high end remains 1,500 units, the middle level expands to become the majority, and the low end shrinks to a small portion of the market.
The picture for 10 years later is even bolder. Greif said the market probably will reverse totally and become an inverted pyramid. The high-end machines could take the largest share, and China could become the world's production center for special applications, leaving lower-end manufacturing behind.