Country Report: Mexico—Taiwanese machines gain a foothold in automotive; packaging exported to the U.S.; and more

Senior Editor Stephen Moore recently visited a number of Mexican processors and market experts, discussing automotive molding, packaging, and thermoforming at altitude, among other subjects.

Taiwanese machines make inroads in auto sector…

Cuautitlán, Mexico—Mexican Tier One part suppliers serving the likes of Ford, GM, Mercedes Benz, and Toyota in North America are coming under increasing cost pressures on account of high resin prices and the demands of their customers to cut costs to the bone. One cost-cutting option open to them is lower cost machinery and according to Guillermo Salas Valdez, director general of Industrial Plasticas Maximo (Cuautitlán, Mexico) the auto industry is starting to accept large Taiwanese machines.

“Last year, we delivered eight Jon Wai machines with clamping forces of 800 to 3000 tonnes to North American auto parts Tier One’s,” says Salas. Industrial Plasticas Maximo represents Jon Wai Machinery Works (Taipei, Taiwan) in North and Latin America. Salas says these machines typically cost 65–70% of similar Japanese machines. In 2008, Industrial Plasticas Maximo expects to deliver as many as 17 machines with clamping forces of 500–3000 tonnes to the North American auto sector.

…while Mexican processing sector faces challenges…

Cuautitlán, Mexico—Guillermo Salas Valdez, who in addition to being the director general of Industrial Plasticas Maximo (Cuautitlán, Mexico), also acts as president of Mexico’s National Assn. of Plastic Industries (Anipac), told MPW that while there are growth prospects for the plastics industry, challenges lurk as well. Salas said Mexican electricity tariffs are among the highest in the world ($0.20/kWh) while bank credit is prohibitively expensive. “The fact that we have insufficient local supply of resins is also a negative,” he adds.

“We’ve seen 1000 processors disappear over the last 10 years,” Salas says, leaving Mexico with some 3200 converters. “The trouble is that 70% of processors buy machinery on price alone and look for the cheapest machinery to mold low-end products. Only 10% are really looking for high-tech solutions, while 20% buy machinery for specific applications such as packaging and optical discs.”

Salas believes hybrid hydraulic-pump technology, whereby a servomotor is employed to drive the injection machine’s hydraulic pump, will prove popular in Latin America given the high cost of electricity. “A lot of interest was generated at the recent Plastimagen Show [in Mexico] where a Tat Ming hybrid machine [from Hong Kong] was displayed.”

Mexican packaging thermoformer sells into the U.S.…

Cuautitlán, Mexico—Common sense usually dictates that plastic packaging is not a product that ships well, but one Mexican processor is showing that’s not always the case. According to Moris Guterman, director general of injection molded and thermoformed rigid-container supplier Envases Cuautitlán (Cuautitlán, Mexico), “We are growing fast in ethnic markets such as the Latin American one in California where the volumes don’t excite the big local players. Our strengths are understanding these niche markets and having the flexibility to provide personalized solutions and service.”

Guterman says that resin prices are also competitive in Mexico and if shipping to non-coastal locations in the U.S., costs can actually be lower from Latin America. Envases Cuautitlán also operates facilities in Colombia and Venezuela, from which it can ship by sea to locations such as Chicago. It has also set up warehouses in strategic locations across the U.S. and promises a maximum shipping time of four days.

Guterman also has something to say about the use of in-mold labeling (IML) in the packaging sector. “IML entails a high investment level [of $1–2 million] and the process lacks flexibility,” he notes. “It’s fine if you have a high-volume process and a customer with a long-term commitment to a specific design, but if for some reason your customer decides to change the container size or dispense with IML, you’re in trouble.” Guterman has seen cases where IML is adopted for a food product that is first to market where the 15–20% higher cost of IML versus printing can be justified by high volumes or a price premium. “But once competitors enter the market, often the first thing that goes is IML.”

Guterman says alternative technologies such as adhesive labels, shrink sleeves, and cardboard sleeves are lower in cost, flexible to implement, and importantly, the quality perception can be just as good. “Cardboard sleeves also offer the option of incorporating printing on the inside surface for promotional purposes, for example.” Shrink sleeves, meanwhile, have no form restriction, exhibit a glossy surface, and can easily be reconfigured if the product size changes.

Guterman does note that IML is a good solution for the European market where labor costs are high. “You don’t need to warehouse the containers prior to labeling, nor incur extra costs in the labeling process.” He also says IML is fine for premium products like promotional items in movie theaters. “If you’re selling a Spiderman cup for $1, you can afford to use IML.”

Envases Cuautitlán has also been investing extensively in thermoforming capacity of late. “The big issue with injection molded containers in Mexico and Colombia is that food processors fill at high altitudes, sometimes at over 8000 feet,” says Guterman. “With the industry tendency to downgauge, injection molded containers flex inwards when they’re at sea level and you can end up having a yoghurt explode in your face.” The orientation inherent in thermoformed packaging results in higher mechanical strength and helps realize a container better suited to make the altitude transition.

Five years ago, 95% of the capacity at Envases Cuautitlán was injection molding. “Now it’s 70:30 split in favor of injection, but I expect thermoforming to account for 50% within a few years,” says Guterman.

One area where injection molding is expected to continue to dominate is large containers and lids, such as 1-kg yoghurt containers. “These large containers are the “people’s Tupperware,” often used to store rice once they’ve been emptied. We have to ensure a good seal for this second use,” says Guterman. High-speed filling lines also prefer injection molded containers.—[email protected]