Moldmakers and molders in South China face consolidation, Part I

Steve Toloken
PLASTICS NEWS CHINA

GUANGZHOU (Sept. 27, 2011) -- South China’s mold making and injection molding companies are headed for a sharp consolidation this year as slumping worldwide demand and rising costs hit hard, with leading firms gaining business while others struggle, according to interviews at the recent Asiamold trade fair in Guangzhou.

The South China plastic tooling and molding industry could see 20 to 25 percent of its companies close by early next year, according to Jack Yeung, chairman of the Hong Kong Mould and Die Council, although he noted that many of those shutting down are likely to be smaller firms, meaning that overall capacity will not drop by that much.

Still, he and some other executives at the Asiamold show, held Sept. 21-23 in Guangzhou, said the industry is changing dramatically, with stronger, better capitalized or more innovative firms gaining market share as rising labor costs, a stronger Chinese currency and a slowing global economy make the business environment much tougher.

“It’s going to be a tough time -- I’ve seen many shutdowns right now,” Yeung said. “In the first seven months there has been a lot of shutdowns of shops, and the council itself is trying to find ways to help these companies find the right customers and to drive technology so they can improve.”

“There is extreme overcapacity right now,” he said. “A lot of the companies are running at 50 percent capacity.”

Yeung said it’s difficult to get solid statistics regionally, and he said he was referring to the broader base of both Hong Kong and mainland Chinese-owned tooling and molding companies in South China, not just Hong Kong firms.

The region between Hong Kong and Guangzhou is one of China’s largest mold manufacturing and injection molding areas.

Yeung and other analysts suggested gains are going to the strongest companies.

“You have to have some kind of knowledge that cannot be replaced -- they [customers] have to come to you,” he said. “For those who have the catch, they are doing actually very well. For those who don’t, it’s extremely tough.”

“We statistically say [about] 25 percent of the shops will shut down by the Chinese New Year next year,” according to Yeung, who said his own firm, Ace Corp. Holdings Ltd., is making investments.

Ace plans to open a facility in Anhui Province later this year, it invested in a joint venture in Mexico last year, and it recently bought out its American partner, Classic Industries, in their JV medical products manufacturing plant in Shanghai.

The two firms will continue to have a joint venture on market development, but it made sense for Ace to buy the manufacturing assets, Yeung said.

Yeung’s points about economic conditions were echoed by another longtime member of the Hong Kong Mould and Die Council’s executive board, Alfred Au, who said that business has slowed in the last few months, as mold buyers have become much more cautious.

Based on his conversations with other companies, Au said the softness reflects uncertainty about the world economy and a pulling back of spending on research and development.

“They all said it goes down, it’s not up, it’s not steady -- It comes down,” said Au, who is managing director of Hong Kong-based Inmold Technology Ltd. and a former vice chairman of the Mould and Die Council. “The [economic] crisis didn’t end. It’s still coming.”

Many foreign customers have cut back on travel budgets as well, he said.