New figures show that Japan's domestic injection molding machine industry strongly rebounded in 2010 and will probably more than double its production to about 12,000 machines, on the strength of demand in China and other Asian countries.
That would put Japanese domestic production at roughly the same level as the 12,600 machines sold in 2008, but that was tempered by executives saying that even as demand has climbed, revenues and profitability have not returned to levels before the financial crisis in late 2008.
Japanese machinery firms said they were not sure if they had fully recovered, but the strength of the rebound seen in the new figures from the Association of Japan Plastics Machinery appeared to catch some by surprise, considering that earlier this year projections were calling for Japanese production of about 8,500 machines.
Japanese press makers made about 5,000 machines in Japan in 2009, by comparison.
Most of the new demand is coming from exports to China's factories, particularly in the automotive and electronics industries, companies said.
The main growth driver is China, said Nissei Plastic Industrial Co. Ltd., in an e-mailed response to Plastics News questions. As well, Nissei said, countries in Southeast Asia such as Thailand, Vietnam and Indonesia have been rising in terms of continuous market growth.
The 2010 figures from AJPM show that from January to November, Japanese firms produced 11,073 injection molding machines, with total orders for 11,949 units.
Those figures, however, only include machines made in Japan, and do not reflect the increasing Japanese production of molding machines elsewhere, including China, to take advantage of rising local demand and lower costs.
As a result, it can be a little tricky making a direct comparison to past years. There are no official figures on Japanese machinery production overseas, but Nissei estimated the Japanese industry makes about 2,500 presses a year outside Japan. Most are made in China.
Press maker Toyo Machinery and Metal Co. Ltd. agreed that demand in China and East Asia was responsible for most of the recovery in 2010, including demand from Japanese, South Korean and other transplant companies that have invested heavily in China.
Toyo said Japanese press suppliers appear to be over the worst of the financial crisis, but the company also estimated that production in 2011 could drop below 2010 figures.
Nissei said orders for the industry overall dropped beginning in October for a variety of reasons, including holidays in China, the end of tax breaks in Japan and waiting for the results of the U.S. midterm elections. As well, Japanese firms said they remain challenged by the high Japanese yen.
But demand has basically remained steady, Nissei said, with AJPM statistics showing orders of 857 units in October and 962 in November. More than 70 percent of the Japanese production is exported, Nissei said.
While the number of machines produced has recovered rapidly (and may approach pre-crisis levels if Chinese production is included), profitability and sales continue to lag, Nissei said.
We cannot be certain about this but there is a possibility that we have recovered to the pre-Lehman shock level if we include the machines made in China, Nissei said, referring to the bankruptcy of investment bank Lehman Bros. that triggered a run on the world financial system in September 2008.
However, sales revenue and profit seem to be significantly lower than pre-Lehman shock level, the company said.
Nissei said that if the Japanese firms reorganize their supply chains, it's possible they could produce up to 5,000 machines a year in China.
The 12,000 machines the Japanese firms are projected to make domestically this year would still be below the 15,900 made in 2007 or the 18,000 made in 2004.
Nissei also said it believes that rising costs in China could actually bode well for Japanese machine makers, as it will lead factories there to buy more automation and complete systems.
Even if sales revenues from machines are unchanged, revenues from selling complete systems will increase, Nissei said.