FRANKFURT, GERMANY (May 10, 12:15 p.m. ET) — In the machinery export/import market, lower priced machinery from China and India has been making inroads into European markets. But with emerging economies expected to maintain growth, ambitious European companies are focusing on their own exports and how to exploit opportunities in these markets through partnering, joint ventures or subsidiaries.
Machinery manufacturers in Germany - the largest plastics equipment market in the European Union - have enjoyed steadily increasing exports outside the continent. This is according to figures given to European Plastics News by Claudia Frey, who heads sector market research at the VDMA, the German Plastics and Rubber Machinery Association.
For example, German exports to South Korea in 2010 increased 141 percent to 85.9 million euros ($111 million), Frey said. They grew to 142.9 million euros ($185 million) in 2011, ranking South Korea sixth behind China, the United States, Russia, India and France on the list of the most important destinations for German plastics machinery.
An EU-South Korea bilateral agreement in July 2011 may have helped.
“Looking at monthly data, exports took a leap indeed from June/July 2011 onwards, after the agreement came into force,” said Frey. “In general, lowered custom duties have helped to increase competitiveness - this holds true for all sectors of the machinery industry.”
However, some industry observers sound a more cautious note.
Makers of molding machinery may not have quite so much to gain from the increased potential for trade inherent in bilateral agreements, suggested Mario Maggiani, director general of Assocomaplast, the Italian plastics and rubber machinery association.
While conceding that bilateral deals may be facilitating exports to some degree, he doubted if Europe was benefiting significantly.
“[European] technologies are much more expensive than local technologies...there is no doubt that in China you pay one-third for [Chinese] injection molding machines, compared to European ones,” he said.
While Europe could not compete on price in local markets outside the EU, and particularly when sophisticated machinery is not required, as in many cases, it has the advantage in technology, Maggiani stressed.
“European manufacturers are always on top when it comes to technology. Obviously if [companies] have to produce a really sophisticated film with barrier properties, and need a nine-layer extrusion blown-film line, for example, they buy Italian or German technology,” he said.
Markus Betsche, spokesman for Germany's KraussMaffei Technologies, believes that European suppliers can compete by focusing on quality, performance, and production efficiency.
“Innovation leads to higher productivity and/or new part properties - this means added value for processors to successfully compete in global markets,” he said. “[It also] legitimizes higher price levels or enables them to produce at comparable prices by higher productivity than in low-cost countries.”
Maggiani said that the real long-term benefits for EU companies will come from setting up shop in emerging countries.
“Considering we're really working in a globalized world, we cannot think to continue just producing and manufacturing in [Europe] without having partners, joint ventures or subsidiaries,” he said.
European machinery manufacturers are starting to do just that.
In its last fiscal year, Austrian-based Engel increased capacity significantly at Engel Shanghai, with its sales focus for the future based on growing BRIC markets. Another Austrian company, Wittmann Battenfeld, announced in September it plans to begin assembling injection molding machines in China in 2013.
Ongoing trade agreements between the EU and India, and EU and Malaysia, are expected to benefit the European industry going forward, VDMA's Frey predicted.
“With India ranking fourth in the list of most important destinations for the German plastics and rubber machinery industry, we can imagine that the EU-India agreement will bring an additional boost for our industry, for example,” she said.
“With rising demand in markets like China, India and other threshold countries, requirements for quality are on the rise. That's where European machinery suppliers come in and where they successfully compete against lower cost suppliers.”