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From 1990 to 2011, the global market for injection machines nearly tripled, exploding from 33,700 
to 94,320 machines annually, with China leading the way, growing from
a 4000-machine/yr country in 1990 to more than 50,000 machines/yr.Those numbers are courtesy of injection molding machine and automation supplier Engel (Schwertberg, Austria), which rode China's rise, weathered North America's fall, and now positions itself for another market undulation, albeit much smaller.

PlasticsToday Staff

December 19, 2013

9 Min Read
Global Plastics Issue: Global injection molding machine market to grow by shrinking

From 1990 to 2011, the global market for injection machines nearly tripled, exploding from 33,700 
to 94,320 machines annually, with China leading the way, growing from
a 4000-machine/yr country in 1990 to more than 50,000 machines/yr.

Those numbers are courtesy of injection molding machine and automation supplier Engel (Schwertberg, Austria), which rode China's rise, weathered North America's fall, and now positions itself for another market undulation, albeit much smaller.

"China's total market is decreasing," Engel CEO Peter Neumann said at his company's headquarters during a pre-K press event earlier this year, "but this is
 in part because the performance quality and output of machines is going up, so they don't need such a high number of machines. It's a trend towards higher quality machines, higher technology machines."

One year earlier, Neumann was in Shanghai to cut the ribbon on an expansion of his company's plant in China, 
an addition which more than doubled its space there only four years after it opened the subsidiary.

"We believe in the market; China
 is the future," Neumann said at the time. Neumann and other Engel executives navigated the dichotomy of how 
a company could grow its business in 
a region that was shrinking by noting that the demand for "higher technology" machines, which Engel delivers, continued to expand, even while broader demand shrinks. "We have seen the Chinese market emerge as one of the fastest growing plastics markets in the world," Neumann said.

That growth has begun a reversal however that will continue for several years before settling at a new normal, for China and the broader injection molding world.

Market recalibrates

Total sales of injection molding machines globally have dropped every year since 2010, when they hit approximately 95,000, falling to 93,500 in 2011 and 90,000 in 2012, according to Engel. Over the next three years, they will contract further, before settling at 80,000 in 2015.

images.jpegPeaking at 50,000 units in 2011, Engel forecast that China's machine demand would fall to 45,000 in 2012 before settling at 35,000/yr by 2020. Over that same stretch, the company is forecasting that Europe, led by Germany, will expand from 9500 to 14,000 machines, while the Americas go from 8030 to 7000 machines, just below their 1990 level of 7500 machines.

"There is a trend to relocate production to the U.S.," Neumann said during his company's pre-K event. "I think this will continue due to energy costs and other factors. I think it will continue for the next few years."

In China, the contraction is strongest in what Engel calls the "low tech" segment, which fell by 64% from 27,000 machines to only 9600 from 2004 to 2012. Over that same time period, the high tech and commodities segments increased, by 8% and 9% respectively, to annual demand of 28,000 and 51,000.

A new global machine player

China's rise as a consumer of injection molding machines coincided with its emergence as a manufacturer of injection molding machines, and with that, the ascension of Haitian. Founded in 1965 with the delivery of its first molding machine in 1972, Haitian has grown from humble beginnings into the top seller of machines in the world, initially claiming the volume title in 1994 and holding it every year since.

Helmar Franz, chief strategic officer of Haitian International Holdings Limited, laid out the company's growth in a presentation this year at Absolute Haitian, its exclusive North American distributor.

Speaking at the company's new Parma, OH facility, purchased to accommodate its growth in the market, Franz noted that from 2005 to 2010, Haitian's total revenue grew from 2.5 billion RMB to 7.1 billion RMB ($1.16 billion). For perspective, Engel reported record revenue of Euro 950 million ($1.27 billion) for fiscal year 2012/2013, up from Euro 622 million in the 2007-2008 fiscal year.

Over that same five-year stretch, Franz said the number of machines sold by Haitian rocketed from 12,000 in 2005 to 70,000 in 2010. In 2012, however, revenue finished at 6.3 billion RMB with 22,000 machines sold, according to an AprilNF_130531_Haitian_lo_res.jpg 2013 press release that described "significant losses in the Asian machinery industry."

At the Absolute Haitian event Franz described 2012 as a "sustainable sales performance," but acknowledged that "the last year in China was quite difficult." Franz, however, said that market watchers who were down on China overhyped the market's difficulties and ignored some outside influences, including the appointment of a new government.

The end of the China story?

"I was a little surprised by what I read in the press," Franz said, "saying things like, 'Maybe there's a money shortage, maybe the economy will collapse,' and the increase in GDP was reduced to 7%, which tells you something- reduced to 7%. I don't know who else has 7%, but of course it comes down from 12% to 7% so maybe everyone says, 'OK, maybe this is the end of the China story.' Not at all.'"

For Franz, who has lived in China for the last eight years, 2012 was more about the naming of a new government, with the top candidates holding contrary economic views, which left the market unsure about which fiscal path China would pursue.

"Everyone wanted to wait to do anything to see how [the election process] would shake out," Franz said. "People need to be certain. It needs to be clear, who is guiding the country, and which direction they are guiding the country in the coming years."

Franz said that now the economy has stabilized and his company and others have a better feel for what will happen 
in the world's top injection molding machine market going forward. "So this [political uncertainty] is why last year we had a tough environment," Franz said. "No lack of money or other things I read in the newspapers, but a real change in philosophy, change in approach, and understanding that I have to work within my resources and this is why we lost some top line in 2012."

In response, Franz said the company cut its sales force by 10%, but despite that gained market share. He noted that Haitian's 1.2 billion RMB in 2012 operating cash was the highest value it has ever produced.

In August, the company released first-half results for 2013, with sales of 3.6206 billion RMB, representing an increase of 13.9% and 14.7% as compared to the first half and second half of 2012, and supporting Franz's outlook from earlier in the year. Profits increased to 568.2 million RMB, representing an increase of 17.0% when compared to the first half of 2012.

For its part, Haitian is betting big on China and the global injection molding machine market, currently constructing 
a new 120,000-sq-m (1.29 million-sq-ft) production plant for all-electric machines near Ningbo which will open at the beginning of 2013. Another plant is planned in Yanshan, with a production area of 150,000 sq m (1.61 million sq ft) for large injection molding machines. These will support the local market, as well as exports, with Haitian shipping around 5000 machines beyond China's borders annually to about 80 countries.

Trade flows

As companies like Haitian work to penetrate markets beyond their shores, they help shape a new flow of machines globally, with former importers becoming net exporters, and vice versa.

Asia produced 74,160 machines in 2012, and of those, 62,700 were shipped within Asia, while 3660 went to Europe; and 4700 arrived in the Americas, according to Engel's Neumann. Europe produced 12,800 injection molding machines, with 7500 staying in the European Union, while 1900 went to the Americas and 3000 arrived in Asia. The Americas, meanwhile, manufactured 1240 machines, with 900 of those staying in the U.S.; 300 crossing the Pacific to Asia; and 40 headed the other direction to Europe.

Production of machines by all those regions dropped over the five years from 2007-2012, with the steepest fall coming in Japan where machine manufacture contracted by 34% from 19,600 to 13,000. Chinese production fell by 20%, from 53,500 to 43,000, but a reduction in the number of producers helped it gain share on Japan. The second highest rate of contraction came in North America, where production fell by 27% from 2007-2012, with the market never returning to peak 2004 levels. Europe's production of injection molding machines contracted the least, slipping 12% from 12,500 to 11,000.

China starts to buy Chinese

Haitian's Franz noted that Chinese exports of plastics machinery were down slightly in 2012, with more Chinese processors buying domestically. The ratio of local supply: imported machinery jumped from 49:51 in 2011, all the way to 73:12 last year. Franz doesn't think the shift is done, either, predicting that
it could move to 80:20. In terms of the global value of plastics/rubber machines produced, China's growth rate doubled from 2007 to 2011, rising from 15.9% in 2007 to 30.5% by 2011.

Franz said that China's plastic machinery sales for all processes stabilized over the last three years, after jumping 62% from 2009 to 2010.

End markets shift

Low technology injection molding machines have seen the greatest contraction in the global market, as the machine sector right sizes for a new processing normal. From 2004 to 2012, Engel noted that while what it calls high tech molding jumped 8% to 28,000 machines, and commodity molding rose 9% to 51,000, low-tech molding fell 64% from 27,000 to 9600 machines.

Over that same time, Neumann said that Engel has watched its market share climb in all markets, rising from 25-30% in Europe, 9-18% in America, 2-10% in Asia, and 9-14% globally.

In Asia, Engel generated record turnover of Euro 145 million in the 2012- 2013 fiscal year. The largest share of that new high watermark came in China. Overall, Engel noted that it has been able to triple its turnover in Southeast Asia over the last two years, and despite a relatively weak 2012-2013 fiscal, Engel also expects sales to increase in India.

"In Europe we're coming to a certain level where [Engel] can't gain any more market share," Neumann said. "There
is much more competition from Asia in America. Despite the fact that the Japanese have a strong position, we were able to grow our market share dramatically."

Engel said its most stable segments are medical and packaging, while others like teletronics and technical molding depend more on what is happening in the broader economy, with automotive being the most "sensitive" segment.

Here too, Engel said market share has grown in all five business units, with the highest growth in medical, packaging, and teletronics. Compared to automotive, however, these segments are smaller. Medical jumped from 19.8 to 34.2% for Engel, while packaging and teletronics more than doubled, climbing from 10.8 to 23.2% and 9.7 to 20.1%, respectively.

Engel noted that it expects further growth of about 5% each year for the next three years. In the three years since the last K, Engel has invested Euro 67 million into its business, including Euro 23 million into Schwertberg, Euro 15 million into St. Valentin, and Euro 12 million into Shanghai. In addition to machinery, Engel has invested in people, with employment up 40% to 4200.

Written by Tony Deligio 

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