Thanks to a 6.6% jump in export sales in 2002, the sector overcame the 2.9% drop in domestic demand. Figures released by the GKV show German processors are highly dependent on sales abroad, the largest sector (two-thirds of the export figure) going to neighboring EU countries. From 1995 to 2002, domestic turnover grew 5.5% while exports, during the same period, rose 80%.
Proske warns that the higher value of the euro against the dollar (at presstime, $1.12 to the euro) is weakening Germany''s competitiveness outside the euro zone. He also believes the Iraq war has had a negative effect. The hardest hit end market last year was building and construction, where sales of plastic goods dropped 6%. Film, profiles, and sheet as well as other plastic goods were up by only .7% each, and packaging registered the best growth at 2.5%.
The number of processor operations with more than 20 employees dropped by 2.5%, to a total of 2745. They employed 278,000 last year, 10,000 fewer (3.5% less) than the previous year.
A survey conducted of GKV member processors reports that 43% believe their sales will increase in 2003, 44% thought they will stagnate, and only 13% expected a decrease. Half of the processors polled anticipate their export volume will remain the same as last year, while 55% believe the price they get for their processed goods will stagnate. According to the survey, about 27% expect to offer lower prices in 2003 than in 2002.
One alarming statistic noted by the GKV in the survey results was that 64% of respondents said staff reductions and replacements (rather than new investments) would be made in 2003, compared to only 38% last year.
This, says Proske, reflects the inability of German plastics processors to earn enough to invest in the latest equipment and therefore remain at the top of the competitive chain. Taking all these factors into account, Proske says he expects the turnover growth for the country''s sector to be only 1.5 to 2% this year.
In Austria, demand of processors fell 1.1% from last year. The country''s processors produced plastics goods valued at just over €3 billion, of which €1.9 billion were exported. EU countries, headed by Germany, take the bulk of Austria''s exported plastics goods, which increased by 4.8% last year. But Asian sales were down 5.8% and shipments of plastics goods to North America fell 26.2% in 2002.
The Vienna, Austria-based trade group, Assn. of the Chemical Industry, places the blame for this poor showing on "enormously increased polymer prices last year."
According to the Swiss Plastics Assn. (KVS; Aarau, Switzerland), the country''s plastics processors saw sales drop last year to CHF 9.49 billion (about $6.92 billion) from an all-time high in 2001 of CHF 11.31 billion ($8.25 billion). The volume of polymer processed last year sank 6% compared to 2001, according to Angelo Chicchini, director of KVS'' economic data division. Turnover among the country''s mold and toolbuilders fell from more than CHF 115 million two years ago to CHF 114 million in 2002.
Partnering pays off for Austrian extruder
Optimizing processor operations and the processes themselves is the key to survival for many small- and medium-sized (SME) processors located in the Austrian province of Upper Austria, says Werner Pamminger, the manager of the province-supported KC-Plastics Cluster, based in Linz. "Even when the order books and turnover are satisfactory today, plastics processors here are experiencing an increased competitive crunch from Eastern Europe and Asia," Pamminger says. "The main competitive advantage from the East, low labor costs, can only be successfully challenged with a different production strategy [in the West] to increase productivity."
Often small- to medium-sized processor operations are unable to meet this challenge because they don''t know where to improve operations, he says. One example of a successful cooperative project, under KC-Plastics Cluster sponsorship, was a 15-month study and change of production methods conducted by three KC members: polyethylene blown film and bag processor Fischer-Plastik, automation control specialist LEA Automatisierungstechnik (both Allhaming), and Honninger Energietechnik (St. Marien).
Fischer wanted to provide transparency in production processes, improve quality and flexibilty, reduce waste, and enhance efficient use of existing extrusion lines, raw materials, energy, and personnel. "Standard [enterprise resource planning (ERP)] products offered on the open market can''t completely accommodate the needs of a small processor," says Managing Director Harald Fischer. "Partial solutions generally lead to having to institute additional efforts by the company in both organization and financing without reaping the expected benefits."
Fischer opted for a tailor-made solution with two KC partners. Goals included were to reduce waste during start-up by 10%, decrease product changeover time by 10%, and to centralize controls to quickly handle any production problems.
By improving productivity, Fischer-Plastik was able to sustain its operation and protect jobs against cheap imports. LEA Automatisierungstechnik analyzed what hardware and software changes were necessary to reach the goals, and Honninger concentrated on power use improvements. Fischer involved its 41-man staff in the optimizing process through workshops and by creating a quality control handbook.
"Each project partner worked well together," says Fischer. "Now I''m able to select the right processing line during production planning for each job." Alois Lederhilger, LEA director, says the new process control program can be applied to each of Fischer''s production lines. "For some of the older equipment there just aren''t adequate controls on the market, so we developed a tailored concept for these," he says.
Fischer was able to improve resin use efficiency by 6% by optimizing machine running mode, reduce power consumption by 10%, and, through better operator control of equipment, shrink startup time by 20%. By having all production data (quality, waste generated, power use, and production speed) centrally available for the first time, Fischer could rework its sales strategy. Also, by changing its energy management system, it found a way to compensate for reactive current (also known as wattless or idle current, which contributes no energy but increases power loss in the system), thereby reducing reactive current costs by 100%.
Through this cooperation, LEA gained important information regarding control automation and visualization, which it can apply to other sectors.
Moldmakers'' case for overseas sourcing
European moldmakers have a reputation for high quality, and those in the German-speaking countries rank among the best. Still, few in the moldmaking industry are unaffected by the shift of molding and moldmaking to lands with lower labor costs. Some German and Swiss firms, to the surprise of many, are even publicizing their efforts to source lower cost molds for clients.
The surprise stems from the pride these moldmakers and their molding customers place in their domestic moldmaking heritage, and the lack of regard often held for molds made elsewhere. "I don''t think you''ll find too many German molders who will admit to using Asian tooling," says one avid proponent of German toolmaking, Gordon Styles, managing director at Springer Rapid Industries (Coventry, England). Despite generally tough times for moldmakers, Styles says, "German toolmakers—the good ones—are very busy right now and making good money at it." His firm sources tooling for OEMs and molders in the U.K., with much of the tooling sourced from German moldmakers, though he also has a list of approved Asian moldmakers. "In the U.K. there''s no such stigma attached to Far East [manufactured] tooling" as that found in Germany, he says.
Moldmakers in high-wage countries need to focus on tougher jobs, notes Styles. "Those who do the same as Asian moldmakers are going out of business very quickly," Styles says
Injection molder Fuchs GmbH & Co. KG (Gummersbach, Germany) has sourced some molds from an unidentified Chinese moldmaker since summer 2002, explains Managing Director Timo Fuchs, who adds that the firm still builds many molds in Germany. Sourcing molds in China allows the firm to compete for some low-volume jobs as well as jobs with lower profit margins, but still keep his injection molding machinery in use and dedicate his moldmaking staff to more complex molds. The firm makes parts for a variety of industries.
Fuchs has no interest in molding parts in China. "We''ll never mold there—that''s how we make our money," he notes, and adds that in a near lights-out molding shop such as his, the cost of molding parts in Germany is essentially the same as it would be in China.
Fuchs was introduced to the Chinese moldmaker through a customer who wanted Fuchs to mold its parts but needed to reduce tooling costs. Engineers from Fuchs traveled to China and spent a week with the moldmaker, ensuring that all aspects of the mold''s construction were understood. The Germans and Chinese communicate with each other in English. Molds from that project have been in use in Gummersbach since last summer with no hitches, and Fuchs has sourced molds from the unnamed Chinese firm for a number of other projects.
Formed in March 2003, McDynamic GmbH (Zug, Switzerland) to now has targeted OEMs in Germany and Switzerland with offers to arrange moldmaking and molding in China via its vetted molding shops there, with savings of 30% to 45% the rule. That essentially made McDynamic a competitor to domestic molders, but now the firm is expanding its customer base—due to demand—to include moldmakers and molders who may want to source tooling from China, or even coordinate molding to be done there, says one of the founders, Torsten Weiss. He predicts molders will benefit, especially for projects that involve low-to-medium production volumes, a benefit echoed by Fuchs.
McDynamic has qualified a few large shops able to make injection molds, mold parts, and provide services such as printing and assembly. These firms have between 500 and 1500 employees, he notes, well above the levels most European molders can afford to employ.
Most of the Chinese moldmakers/ molders are ISO 9001 qualified and a few also ISO 9002, says Weiss, and that firms such as his save molders and OEMs time and aggravation. He cites the importance of experience in working with Chinese engineers, knowledge of procedures at Chinese moldmaking and molding facilities, and knowledge of the culture as benefits to be gleaned.
Swiss processor makes most of alliances
Though barely three years old, Elopak Plastics Systems (EPS; Glattbrugg, Switzerland), a division of the Elopak cartons business, is rapidly becoming one of Europe''s leading processors of packaging for non-carbonated beverages. The processor, part of Elopak, one of the world''s largest carton packaging suppliers, has made the most of partnerships with machinery makers to broaden its services to suppliers of non-carbonated packaging, and is milking this niche for all it is worth.
Establishing partnerships was central to the processor''s plan to quickly become a one-stop shop for its customers, explains Jorg Thiels, executive VP of the plastics division. The plastics division includes plastic bottle systems, the largest segment; Elopouch plastic pouch processing; Unifill, a manufacturer of form-fill-seal machinery; and molding of caps and closures.
This year the processor formed Elofill GmbH (Hamburg) to market clean, ultra-clean, and aseptic filling equipment, so that it not only processes packaging but also takes responsibility for filling. Sales volumes at EPS doubled between 2001 and 2002, the most recent data available from Elopak parent Ferd, a privately held Danish group.
In the last two years EPS has formed partnerships with blowmolding machine manufacturers Kosme (Sollenau, Austria) and Techne (Lazzaro di Savena, Italy) for, respectively, linear stretch blow- and extrusion blowmolding systems.
EPS establishes processing facilities at customers'' sites and provides bottles on a just-in-time basis, which it calls hole-through-the-wall operations. Among key customers is Bergland-Milch, Austria''s largest dairy, which only last year began marketing specialty dairy drinks in PET bottles. The PET bottles for milk contain no barrier material but do include a UV masterbatch. Bottles are white in color, which Thiels says provides some UV protection but is mainly to prevent consumers from seeing separation of the beverage.
For smaller orders not justifying an onsite processing capability, EPS formed a joint venture in 2000 with blowmolder Auspac Bracknell (Bracknell, Berkshire, U.K.) and last year acquired a majority stake in that processor. In June 2002, EPS formed an alliance with Italian molder IFAP (Palmanova) to ensure its supply of PET preforms.
Many EPS customers market beverages that are sensitive to oxygen ingress, such as fruit juices. The result of an alliance formed in 2000 between EPS, alfill Engineering (Hamburg, Germany), and Iplas (Troisdorf, Germany) was a plasma coating solution for PET bottles, which he says has proven itself in laboratory settings but not yet in production. "We''re also working on oxygen scavenging in preforms and have had great success with that. We''ll definitely come out with something [along those lines] this year," he says.
German deposit law cools beverage sales
A deposit law in effect since Jan. 1 has made the widely watched German environmental policy laboratory more Frankenstein-ish than friendly to plastics processors.
The law, originally conceived to help reduce packaging litter, forces bottlers to levy a deposit on some beverages sold in non-refillable packaging, but not on others. For instance, mixed alcohol drinks are deposit-free when the alcohol content is above 15%; milk-based drinks with less than 50% milk content require a deposit.
On Sept. 26 (after press-time for this edition), the Bundesrat (upper house of parliament) was to vote on changes that would make the deposit dependant on the type of packaging, rather than the beverage. Packaging the government judges to be environmentally friendly (refillable glass and PET bottles, plus cartons and the almost non-existent milk pouches) would be exempt from the deposit, and non-refillable glass and plastic beverage packaging, and metal cans, would require a deposit.
For many firms the legislation has proven a business killer. At Holsten-Brauerei AG (Hamburg), one of the country''s largest breweries and one of the first in Germany to offer beer in cans, sales of non-refillable bottled and canned beer dropped 70% from January to May. Sales of beer in refillable glass bottles climbed only 43%.