Mexico makes its case

Before NAFTA tore down import/export barriers between the U.S., Mexico, and Canada in 1994, then-presidential candidate Ross Perot famously predicted in 1992 a “giant sucking sound” would soon emanate from America’s neighbor to the south as jobs and companies headed to Mexico en masse.

Ultimately, many companies did shift operations there, especially in plastics-heavy markets like white goods, automotive, and electronics, but an even louder sound could be heard as China’s rise drew business out of Mexico and across the Pacific. Market watchers and participants now feel that the shift may have slowed, and in some cases reversed.

Steve Braig, president and CEO Engel North America, said predictions of the Mexican market’s demise due to pressure from China may have been premature. “[Engel] sees Mexico as a growing market,” Braig said. “I do truly think business that has gone to China—I see that business coming back,” with Braig specifically citing two customers that are bringing back projects, as well as new projects that in the past would have gone to China, but are now in Mexico.

One barometer of the country’s relative health in plastics is its largest trade show. Held from April 8-11 at the Centro Banamex in the northeast quadrant of Mexico City, Plastimagen 2008 was by most accounts the biggest iteration of the event to date. Organized by E.J. Krause de Mexico S.A. de C.V. and the Asociación Nacional de Industrias del Plástico A.C. (ANIPAC), the biennial Plastimagen’s 2008 edition saw an increase over 2006 in exhibitors (up 21% to 817) and attendees (up 19% to 27,162), with the 2006 version drawing 715 exhibitors from 22 countries.

In 2008, Plastimagen welcomed visitors from 42 countries, with 12 national groupings, including first-time country pavilions from France, Korea, and China. The most marked increase in show participation, and one instance of reverse flow of trade between Asia and Latin America, came from China and Taiwan, with around 60 Chinese companies and 50 Taiwanese firms exhibiting at the show, up from eight Chinese and 24 Taiwanese companies in 2006.

The show-wide expansion is in line with the overall growth of plastics in Mexico, according ANIPAC, which reports the plastics industry there is growing more than 5% annually.

Injection suppliers target Mexico

During the show, Arburg (Lossburg, Germany) talked up the local market and its new direct presence, as it took over the space and employees of its long-time partner in the country. According to Helmut Heinson, executive director of sales for Arburg, and Guillermo Fasterling, who will head up the new-old office in Mexico City, Arburg’s presence in the country goes back some 20 years, with 800 to 900 machines installed. The new subsidiary, Arburg SA de CV, occupies the same office and carries over staff from its Mexican partner dating to the mid ’90s, IPLYH. The transition includes 10 staff, and among them is Juan Carlos Lachica, former IPLYH head, who will continue in sales.

Fasterling, who has worked in Mexico for nearly 20 years, including stints with Arburg competitors Demag and Husky, says the Mexican market has seen some dramatic shifts in that time. When he first arrived in the country, Fasterling said large-tonnage machines were rare if not non-existent, recalling he saw only two presses above 1000 tonnes clamp force; dryers and robots were even more rare. Over the last eight years, however, Fasterling says he has seen more and more automation and larger machines. In terms of top markets, automotive makes up around 50% of Arburg’s business in Mexico, followed by packaging with 30%, and rounded out by technical molding and medical, with the latter growing quickly.

Austrian injection molding machine and automation supplier Engel (Schwertberg) announced at the show that it has purchased land in Querétaro, with plans to move its office in Mexico City to a new greenfield facility. Braig said Engel’s direct presence in Mexico goes back to the mid ’90s and estimated that the company has around 1200 installed machines. Engel has a tentative goal of starting operations at the new Querétaro site in 2008. Currently, it has 16 employees in Mexico, including two recently added service technicians, with plans for 20 total in-country once the tech center is fully staffed. Braig says the new facility will offer sales, service, training, spare parts, and mold trials, with plans for two to three machines on site, rotating through different sizes and technologies.

According to Braig, recent business in the country is typical of jobs that had crossed the Pacific for China in years past, including several multicomponent Duo machines delivered at the end of 2007 for a Samsung supplier in Tijuana molding flat-panel TV screens. Braig believes packaging is a growing market, with automotive strong in spite of issues in the North American market. The bulk of Engel’s clients represent multinational firms.

Engel’s German competitor KraussMaffei (KM; Munich) has wholly owned Latin American subsidiaries in Mexico City, Columbia, and Brazil, with staff in Querétaro, Monterrey, Guadalajara, and Puebla, according to regional sales manager Ralf Knobloch, who says the goal in Mexico for KM is to never be more than 4 hours from a customer. On the injection side, Knobloch says KM has 35 staff in Mexico, including direct sales and service, with roughly 650 to 700 installed machines. The company imports about 65 to 70 presses to the country annually, with around €18 million in turnover. In terms of markets, 50% of its business comes from automotive, but there is growing interest in other applications, including food-transport packaging, driven in particular by a wholesale shift away from wooden crates to plastic versions for shipping fruits and vegetables. Brazil is also strong for KM, generating around €12 million in turnover, with a small if exploding market in Argentina, which, after five to six years of no investment, is once again buying machinery, specifically for the automotive market. Knobloch says the company sold a 4000-tonne press into Argentina last November that was destined for automotive applications.

Demag Plastics Group (DPG; Schwaig, Germany), including its German and U.S. forerunners, has nearly 3000 machines installed in Mexico, including a little over 1000 German-built presses and 1600-1800 Ohio-made Van Dorns, according to Peter Kramer, head of Avance Industrial S.A. That company has been DPG’s partner in Mexico for 45 years, with Kramer seeing many changes over the decades. “[Mexico] is a market with a lot of competition—everyone is here—but the market is growing,” Kramer said, describing 2006 as “fantastic,” 2007 as a little weaker, and the start of 2008, at least, as quite strong.

Christian Renners, VP global sales for DPG, said his company has also seen a great deal of interest in food-transportation products. “There has been an amazing amount of machines requested to produce one-way and multiway crates for all the produce out of Mexico,” Renners said, adding that medical isn’t very strong for DPG in Mexico yet, but there is strong interest in packaging beyond the top sector of automotive.

In terms of the market’s size, definitive numbers are hard to find, especially in the Maquiladora region bordering the U.S., and Renners admitted that “Mexico has the mentality to typically buy used machines.” Kramer estimated the annual market for new injection molding machines in Mexico at around 520 to 580, with another 250-300 machines transferred to the country by multinational firms shifting equipment from other locales.

Will Mexico plug in?

All the above companies offer all-electric or hybrid molding machines, and while interest in servodriven presses is increasing in Mexico, an uneven power supply has left some early adopters unhappy. Avance’s Kramer explained that in many areas there are high fluctuations in voltage, which affect all-electric machines. In addition, many smaller companies only have access to 200V power, with 220V harder to find. Arburg’s Fasterling said the desire for newer technology has piqued customer curiosity, however. “There is much interest in electric machines in Mexico,” Fasterling said, adding that Arburg sees them as a “great possibility.” For Heinson, the market’s direction will dictate the need for the machines. “Knowledge is growing in all-electric,” Heinson said, “and as more of the Mexican market goes to technical molding, more will go with all-electric.”

Plastics Carnaval

In spite of tariffs to protect local manufacturers, Brazil remains an important part of any plastics supplier’s Latin American strategy, with increased infrastructure and consumer spending on everything from cars to electronics, boding well for the market going forward.

In injection molding, Michael Ferlic, international sales director for Milacron, says his company’s brick-and-mortar presence in Brazil goes back to 1998, when it founded a subsidiary in São Paolo supporting sales, service, training, and local spare-parts stock. All-electric machines dominate for Milacron in the country, making up 350 of the approximately 500 presses installed. Ferlic adds that sales are strong to the South American giant in spite of 35-40% import taxes for injection molding machines. In terms of end markets, Ferlic says packaging, medical, automotive, and consumer electronics, primarily mobile phones, draw the most inquiries for Milacron machinery, with strong local interest. “Milacron has some multinational [business],” Ferlic says, “but most of [our customers] are Brazilian companies seeking out top technology.”

For its part, Austrian injection molding machinery and automation supplier Engel (Schwertberg) opened its own subsidiary in Brazil on Oct. 17, 2007 in São Paolo, integrating local representative HDB Representações Ltda. into a new company. The site has 15 employees, a machine showroom, and spare parts to support the 1000 machines and 100 robots it has installed in Brazil. Arburg opened a wholly owned Brazilian subsidiary in São Paulo in Brazil in 2000, with the site acting as a regional technology center.

Tom Brown, marketing manager for Milacron’s extrusion systems in Mexico and Latin America, says in Brazil Milacron’s systems for polyvinyl chloride (PVC) pipe and wood-plastic composites (WPC) have generated the most interest. Brown says Brazil has a number of Conical CM 55 and 80 units installed, predating the company’s exit from international sales of extrusion machinery in 1999. Since restarting international sales in 2005, Brown says Milacron’s recent emphasis on Brazil as an extrusion market should start to pay dividends, with the first new lines installed by the end of 2008. On the extrusion side, the company has a wholly owned subsidiary in the country, offering sales and service. In the key markets, Brown says larger players like Tigre, Amanco, and Mexichem dominate in PVC pipes, with WPCs still developing. In these markets, Milacron has seen interest in its counter-rotating twins screws.