Dark clouds behind this year’s silver lining

While 2005 may have provided some relief for North American moldmakers, don’t expect that relief to continue into the New Year.

Jerry Lirette, former president of the Madison Heights, Mich.-based DME Company, a manufacturer of mold tooling and components, said the moldmaking industry bounced back a bit in 2005. But the bounce occurred only because moldmakers severely cut back on staff, and global competition left fewer domestic competitors to deal with.

“When things pick up a little bit, the ones who are left get pretty busy,” he added.

Lirette does not expect North America’s moldmaking industry to return to the production and employment levels experienced during the 1990s. In fact, Lirette expects the industry to continue to decline in the next year.

“(This year) was a flash in the pan,” he said. “People are busier, but if you look back at how many people (moldmakers) employed before and how many they are employing now . . . it is not an increase at the national level. It is a recovery of part of what was lost, but we will never recover all of what was lost.”

Bill Wood, president of the Greenfield, Mass.-based Mountaintop Economics and Research Inc., and publisher of the Mold Business Index, agreed with Lirette that 2005 was an improvement over the downward trend experienced by the industry over the last few years. This year had improved employment levels, an increased number of mold orders from plastics processors and increased prices paid for molds.

One thing that drove this upward tick was investment in new equipment and molds by plastics processors attempting to offset foreign competition, mostly from India and China. However, foreign competition is likely to have detrimental effects on moldmakers in coming years, Wood noted.

Lirette said pressure from China has been building since 1995 when the Chinese devalued the Yuan, thereby slashing the costs of Chinese goods. A couple of years later other Asian countries followed suit, devaluing their currencies and also reducing the cost of their products.

“On average, many Far East countries devalued their currencies by about 40 per cent, which made them 40 per cent more competitive overnight,” Lirette said.

A drop in mold prices followed the drop in currency values, Lirette added, in some cases as much as 30 to 40 per cent.

Along with currency devaluation, Asian and Indian moldmakers have a labour advantage as well.

The hourly wage of a worker in Asia and India is significantly less than the hourly wage of a worker in North America doing comparable work.

Jim Campbell, president of the Ancaster, Ont.-based Advantec Manufacturing Inc. said China and other Asian countries are now selling molds to Canadian processors at prices 50 to 60 per cent lower than similar molds produced in Canada.

Campbell said these kinds of price and labour pressures are making it difficult for Canadian moldmakers to compete and to sustain long-term relationships with Canadian plastics processors.

Since plastics processors are also under pressure to reduce costs to remain competitive, sourcing molds from overseas is becoming more and more part of their cost-savings strategies.