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International Molding Report: Italy and Australia: Two growth economies

December 31, 1999

5 Min Read
International Molding Report: Italy and Australia:  Two growth economies

Editor's note: This IMM International Molding Report is prepared for IMM by Agostino von Hassell of The Repton Group, who provides IMM'smonthly Molders Economic Index.

U.S. injection moldersshould watch both Australia and Italy for trends that could benefitthem here. Both countries have healthy injection molding marketswith solid growth. They represent interesting case studies onhow to position molding businesses to grow even under adverseconditions.

Italy:High Value Added
Looking at Italy's injection molders, one can see an interestingpattern. The growing companies are not molders that produce itemssuch as automotive parts or consumer products. Rather, solid growthcan be found among molders who specialize in a value-added approachto business.

Well designed consumer products-mobile phones, elegant homeappliances, fashion items, or unusual packaging-are areas wheremany molders have succeeded. One of Italy's strengths as an economyis good design for consumer products. Most of these are made byrelatively small firms that can sell products worldwide at a premiumprice. And such products call for top quality plastic parts. Injectionmolded parts for costume jewelry-something that doesn't even registerin U.S. economic data-is a major market in Italy.

Italy, the world's seventh largest economy, is a hard environmentfor molders, faced with very high taxes and comparatively highlabor costs.

Overall, Italy's economy has shown the least growth among theEuro-11 countries. And major corporations in Italy are laggingeven more. The strength in Italy comes from small business inspecialty markets. We contacted several Italian molders by e-mailand asked about their growth prospects. In all cases growth wasseen in small-volume, precision applications. Most of the outputis destined for export and the U.S. is the single most importantmarket. It is here that the weak euro benefits Italian moldersthat are export dependent.

Where is Italy's economy headed? The most recent data showthat Italy's manufacturing economy continued to expand in November1999 with output, orders, and employment all still buoyant. Datashow that Italy has been in the fifth consecutive month of expansion.And all projections are for more growth in 2000.

A review of some of the U.S. import data through September1999 shows that imports from Italy of products containing numerousinjection molded parts-toys and sporting goods, small applianceslike coffee makers, fashion items, and specialty packaging-havebeen growing at an annual rate of 11 percent.

Official Italian data also show that new factory orders rose.4 percent in September 1999 from the month before, boosted byrising demand from abroad. Orders increased 5.5 percent from ayear earlier. And compared to the previous year, foreign ordersgained 7.5 percent and domestic orders rose 4.2 percent. A breakdownby product category showed orders for electric and precision apparatusrose by 15.6 percent from a year before. Orders for machineryand mechanical apparatus rose by 9.2 percent.

Italy's molders have enjoyed healthy growth in smaller applicationsand much of this has been driven by exports. At the same time,older plastics processing companies-particularly those in commodityapplications such as caps and closures, basic packaging, and automotiveparts-have seen both domestic and export market opportunitiesdecline. Low-cost imports of such parts-mostly from Asia but alsofrom emerging economies in North Africa, the Near East, and morerecently countries in Eastern Europe-have made it almost impossiblefor Italian molders to compete.

Australia: Dealing with Asia
Of all developed economies, Australia is under the strongest assaultfrom the ever growing wave of low-cost exports from Asia's youngereconomies. In years past this has depressed Australia's marketfor plastic parts like large automotive components and items usedin housing. Australian government data show that import of plasticpipe and pipe fittings used in housing has doubled over the pastthree years. In contrast, U.S. molders serving this market havelittle or no competition from importers.

Australia's molders have seen growth in markets such as electronics,medical parts, and optical devices. Exports have been growingand many molders active in these markets have enjoyed growth ratesin the 6.7 to 8.2 percent/year range since at least 1995. TheAsian crisis depressed such growth in 1998, but at least sincethe spring of 1999 solid growth has resumed. Other expanding marketsfor Australia's molders are smaller automotive parts and specialtypackaging applications.

The outlook for the next few years is excellent, say our Australiancontacts. In late December 1999, Australia's Prime Minister JohnHoward predicted that his country "should have no problemreaching its 3.5 percent economic growth forecast for 1999/2000and may better it if the Asian economic environment continuedto improve."


 Percent growth in prior year



 Transportation parts



 Computers and electronics



 Plastics processing



 Value of injection molding output



 Projected growth, next 12 months



 GDP, Industrial production



While detailed data are difficult to obtain for just injectionmolding, we believe, based on monitoring the Australian plasticsmarket, that molders there can anticipate growth of more than4 percent in 2000. Most of this growth will be in markets suchas electronics and medical.

Australia's molders are positioned as technology leaders forAsian economies, supplying many of the smaller precision partsthat are used in the assembly of products as diverse as personalcomputers, automobiles, and toys. The export of precision components-lessprice-sensitive than commodity applications-has been little hurtby the recent rise in the value of the Australian dollar. In December1999, the exchange rate to the U.S. dollar had increased to US$1=AUS$ .63, almost a 4.5 percent rise for 1999.

Australia is likely to grow its technology leadership in theyears to come. According to one e-mail from a molder in India,"Australia is our top source for new manufacturing technologiesand ideas." Part of this is a function of Australia's veryhigh labor costs; molders have been on the forefront of productivityimprovements, using technology to minimize labor.


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