German export sales strong, push for energy savings continues

Germany is the engine that drives the European economy — and when it comes to the plastics industry, German machinery is a potent force, an export-driven dynamo whose technology is admired the world over.

VDMA, the German Engineering Federation — through its German Plastics and Rubber Machinery Association — represents the sector that was on full display this week at Fakuma 2014. Thorsten Kühmann, managing director of the association, answered questions posed by Plastics News senior reporter Bill Bregar about the economies of Germany and Europe, export markets and “green” issues.

Machinery demand is brisk in Germany and Europe, Kühmann said. That sets the backdrop for Fakuma 2014.

In 2006, Kühmann was named head of VDMA, as well as secretary general of Euromap, the European Committee of Machinery Manufacturers for the Plastics and Rubber Industries. Both VMDA and Euromap are based in Frankfurt, Germany.

Before moving to plastics machinery, Kühmann had been deputy managing director of the mining equipment trade group at VDMA. He was born in Brazil to German parents, and grew up in Kenya — giving him a global outlook. Before joining VDMA, Kühmann, a lawyer, worked for a small American consulting firm.

Q: In June, VDMA reduced its forecast, predicting a 3 percent sales gain for 2014. VDMA also has said it expected a 4 percent increase in 2015. Has your outlook changed since that time?

Kühmann: For 2014, we are anticipating a drop of 1 percent, and for 2015 we still predict growth of 4 percent.

Q: At that June mid-year press briefing, VDMA officials said machinery sales were strong in Germany and in eurozone, while non-eurozone European countries were down 1 percent. Is that still the case? How is German demand for machinery going right now?

Kühmann: Orders from German clients continue to grow on a high level. Their increase from January through July 2014 was 22 percent compared to 2013. Euro countries have climbed by close to 9 percent whereas orders placed by overseas customers have slowed down by 2 percent in the same period.

Q: Can you give a breakdown of export market countries — from biggest to smallest? What is the most up-to-date information?

Kühmann: China remains the top destination for German exports of plastics and rubber machines, although deliveries have dropped by close to 8 percent from January through June 2014 compared to first half year 2013.

The United States (at plus 0.1 percent) remains stable No. 2 on a high level, followed by Poland (10. 2 percent) climbing from rank four to three. Russia dropped back significantly (-36.5 percent) falling to rank four on the export list. Deliveries to the Czech Republic (52 percent), France (-6.6 percent) and Italy (18 percent) reach roughly the same volume as Russia. Ranks eight to 10 go to United Kingdom (-17.3 percent), Mexico (-11. 9 percent) and Switzerland (8.6 percent).

In a nutshell — German deliveries to all destinations have dropped by 5.3 percent in the first half year 2014 compared to the previous year. At the same time, local deliveries climbed by about 9 percent and compensate some export losses.

Q: Has the geopolitical turmoil over Russia and Ukraine hurt your export business to Russia in 2014? We read in the news, for example, how the conflict has negatively impacted the German automotive industry.

Kühmann: No doubt, deliveries to Russia have dropped dramatically. Interesting enough, this process began prior to the political conflict. Overall exports to Russia in 2013 rose by 6.4 for the whole year, but shrank by 33 percent in the last quarter. So the Russian economy already was in a rough shape before entering into the Ukraine conflict.

However, some export losses in business with Russia could be compensated lately by rising shipments to other Eastern European states like the Czech Republic (52 percent), Poland (10.2 percent), Belarus (173 percent) and Ukraine (63 percent).

At the bottom line exports to Europe (West and East together) have slightly climbed although the impact of Russia is significant. The relationship with Russian business partners remains strong for the German side and we sincerely hope the political issues can be solved in due time.

Q: Turning to currency issues — the European Central Bank cut interest rates at its September meeting, and the euro has weakened quite a bit as a result. Has this helped German machinery makers to export out of the eurozone?

Kühmann: No, not significantly. Although the euro has weakened — the European currency still remains too strong in comparison to other currencies, such as the U.S. dollar. An exchange rate of about one-to-one compared to the dollar would be regarded as appropriate.

People get used to an overvalued euro and thus believe European exports must boost as soon as the exchange rate drops under $1.30 per euro. Besides, the slight weakening of the euro has started only a couple of weeks ago and the impact on machine business cannot be measured in such a short time.

Green Issues

Q: VDMA members launched the Blue Competence effort in 2012, and promoted it at K 2013. Can you give some updates? How is it going? How many companies are involved now?

Kühmann: A total of nearly 400 firms have signed up to this initiative, 55 of which are members of the Plastics and Rubber Machinery Association. That makes our industry a trailblazer among German plant and machinery manufacturers when it comes to environmental protection, conservation of resources and management efficiency.

 Q: How much energy can still be saved by introduction of new technology? How can companies market the energy efficiency of their products?

Kühmann: A study by Euromap concludes that further efficiency gains — in some cases as much as 50 percent — by 2020 are a realistic proposition, especially by improving drives.

Most of the technology is available today already; the reduction of energy consumption can be achieved by replacement of old machines. However, converting companies are challenged by too much and inconsistent information about energy consumption. In many cases apples and oranges are compared. Therefore Euromap has installed energy measurement standards which bring more transparency and competence to the issue (www.euromap.org).

As a supplement Euromap is about to introduce an energy label for plastics and rubber machinery. The development of a common and neutral label will enable manufactures to present the efficiency classes of their machines transparently and comparably for customers. In contrast to the energy label of the EU (such as, for refrigerators), the Euromap label is voluntary.

The detailed specification of the Euromap energy efficiency label is available as a free download for public advance information.

Q: Energy costs, of course, are very important in Germany's manufacturing economy. Has VDMA taken a position on Germany's aggressive push into renewable energy?

Kühmann: The German “Energiewende” is unique worldwide. It started with the ecological movement in the early 80s. The process was fueled by the disasters of Chernobyl and Fukushima.

The impact of Fukushima on the German society and politics may be compared with Lakehurst, N.J., and the 1937 explosion and crash of the Hindenburg, and the consequence for airships in the United States. Given this, there is no alternative for the German industry as to support this process. Therefore VDMA is a partner for the success of “Energiewende.”

However, the process needs to be organized in a predictable way. The industry depends on a reliable cost structures and safe supply of energy at any time. As technology suppliers we do the utmost to design our machines as energy efficient as possible and to behave as transparently as possible in this regard.

We trust “Energiewende” is challenging but makeable for the German industry. The technological boost for enabling this process may lead to an interesting export opportunity.