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Indian Downstream Machinery Industry - An Outlook

 
The Indian Plastic Industry gained momentum in early 1990’s when the economy opened up with liberal industrial policies. Further impetus was added with investments in raw material production from mid 1990’s onwards. This further fuelled investments in plastic processing industry as well as downstream machinery sector. But growth inflection point came in early 2000’s with removal of quantitative restriction, lowering of tariff and interest rates. Since 2000-01, virgin polymer consumption in the country has increased from 3.3 mln tpa to 7.5 mln tpa in 2009-10 with annual growth of 9.4%. Plastic Industries’ contribution to India’s manufacturing GDP touched around 10% in 2009-10. Polymer demand is expected to touch 16.2 mln tpa by 2015-16 and 20 mln tpa by 2020.
Landscape of Indian downstream Machinery Industry: Just like the plastic processing industry, Indian downstream machinery manufacturing industry is also very fragmented with large number of suppliers catering to lower end of the pyramid. Major reasons for fragmentation of the industry are economic advantages for being small scale, catering to certain geographically area or specific processing sector and low capital investment and/or technology requirement to enter the field. Among few hundreds registered machinery manufacturers, top 20 manufacturers account for 80-85% of domestic sales. The other major contributor is imported machinery segment. There are more than 50 international manufacturers from China, Taiwan, Japan, Europe and America who have footprint in Indian plastic machinery market. All major international manufacturers have their presence in India directly or through representatives. Tier 1 domestic and imported machinery manufacturers have good pan India network in terms of sales and services. Tier 2 and 3 domestic machinery manufacturers dominate in certain segments like small tonnage injection moulding machines, small size blow moulding machine, monolayer, TQPP, recycling, compounding extruders etc. which constitutes large number of low output machines. In imported machinery segment, apart from global brands, there are traders who sell used machinery. Over the years, used machinery market has become organized and matured. There are more than a dozen major firms involved in the business. Although new machines offer advantages like latest technology with low maintenance cost and energy efficiency, cost of new machines is still high. Used machinery market in India is fragmented, and data available is limited. Since 2005, imported used IM machinery market has grown substantially. In Blow moulding sector, imported machines are mainly from OEM supplier from abroad or by asset transfer from parent company, some of which are also used machines. Most of Imported BM is in Injection blow moulding machines, multilayer blow molding, high output machines etc. In extrusion sector, machines imported are generally high output lines in blown film plant, compounding extruders, nonwoven plants, pipe plants & recycling machines. Specific Projects involving high capex like PVC calendaring, multilayer film plants for barrier films, multilayer Cast lines, BOPP and Nonwoven depend solely on imported machinery. Comparatively fewer machines are imported in extrusion sector than in blow moulding and Injection moulding sector.
Downstream Machinery Industry Outlook: The decade starting from 1990 registered annual sales of around 2500-3500 primary plastic machinery. However, due to India’s higher economic expansion in last five to six years, sales of plastic processing machinery also increased in tandem. The Sales increased from 4850 machines in 2005 to 6550 machines in 2009 with CARG of 7.8%. Global financial meltdown also affected the Indian plastic machinery sales in 2008-09 with negative 12% Y-o-Y growth but scenario changed dramatically in 2009-10 with industry clocking all time high sales of 6550 machines with 16% Y-o-Y growth. The average installed capacity per machine during the year 2000 was around 150 MT/machine, which for new machines installed in the year 2010 is expected to touch 350 MT/ machine.
  1995-96 2000-01 2005-06 2010-11 (E)
Total Sales 3300 3400 4850 7900
Capacity addition (KTA) 600 750 1400 2800

2010-11 would be another milestone year for the industry with sales expected to reach new height. The demand for plastics processing machinery in India is expected to be 7900 machines. Injection moulding machines dominated overall sales, accounting for around 70%, while extrusion machines accounted for 23%. The rest 7% would be blow moulding machines and miscellaneous process like rotomoulding machinery, etc
Plastic Processing Machinery Demand 2010
In 1990s to 2000, domestic machinery suppliers had market share of 90-95% of overall plastic machinery sales, while rest were imported machines. However the market dynamics started to change from year 2000 onwards, by 2005-06, imported machinery accounted for 33% of overall sales from just 7% in 2000-01. In 2010-11, imported machinery would account for around 40% of overall sales. Within the imported machinery segment, Injection moulding sector imports accounts for 86%, blow moulding 3% and rest 11% extrusion.
Indian Machinery Market 2010
The future of plastic processing machinery business would be buoyant due to:
• Healthy Growing Economy
• Youthful Demographics
• Growing Middle Class
• Rise in Disposable income
• Raw Material Availability
• Improvements in infrastructure
• Focus on weight reduction, energy savings
• Transplantation of new technologies.
Some of the growth areas are Infrastructure, Agriculture, Material Handling & Packaging, Automobiles, White & Brown goods etc. Consumption of plastics in all these sectors is also increasing, thus organic growth and penetration of plastics together form the basis for growth in plastic processing industry and there by providing future opportunities to plastic machinery manufacturers. By the year 2015, the demand for plastics processing machinery is projected to increase annually by 10.5% to 10800 machine/ year. This demand also will be due to factors such as advances in new technology, high output machines, energy efficiency, replacing old machines and investment by new entrepreneurs.
Downstream Machinery Sector Performance Projection
Injection Moulding machinery Sector
This sector is dominated by 7 to 8 domestic manufacturers. Together they have market share of around 75-80% of domestic sales. The rest 20-25% is controlled by smaller manufacturers. With demand in injection moulding segment surging in recent times, some of the leading machinery manufacturers have expanded their production capacities as well product portfolio by offering machines ranging up to 2500T. In 2010-11 Injection moulding machinery sector is expected to record sales of around 5500 machines, domestic manufacturers are expected to have 52% share while imports would account for rest 48%.
INJECTION MOULDING BUSINESS
  1995-96 2000-01 2005-06 2009-10
Total Sales 1900 2085 3265 4235
Capacity addition (KTA) 125 210 450 750

All the major global players are present in India either directly through their own sales office or through their agent. Between the year 2000 and 2005, substantial growth was observed in imported injection moulding machines mainly due to lowering of tariff, technological advancements in these machines and in some case due to lower delivery times. In last few years the majority of imports were from China. In May 2009 the Central Board of Excise and Custom, India imposed anti-dumping duty on Chinese Injection Moulding Machines up to 1000 Tons capacity. Due to this, the imports from China were down by ~80% to 150 Injection Moulding machines with 8% share in total imports during FY 2009-10. The Indian manufacturers benefited due to the ADD and realized higher market share.
Size wise Market share: Indian market demand for injection moulding machines has been predominantly for lower tonnage machines. Between the year 1995 and 2000 there has been no shift in market share with smaller tonnage machines having 70% share while 120 to 450T segment having 27%. Since year 2000 onwards the market started shifting to higher tonnage machines. This has happened due to growth in auto, appliance, furniture, houseware applications. In 2005-06, share of machines up to 110T shrunk to 59% while that of 120 to 450T increased up to 37%, while 500T and above to 4%. By 2009-10, the market share again shifted to higher tonnage machines with share of machines up to 110T shrinking to 48%, 120 to 450T increasing to 46%. During the period 500T and above share increased to 6%.
Injection Moulding Machine Size Wise (2009-10)
The boom in auto sector, renewed investment in consumer goods, houseware sector etc, will lead to higher investment in larger size machines. With easy availability of hot runner and multi-cavity, for many of the products economy of scale will force the processing industry to higher size machines. By 2015, the market share of machines up to 110T is expected to dip to 35 - 37% while that of 120 - 450T range would increase to 54 - 56% and 500T & above 7 - 11%.
Injection Moulding Business Performance – Projection (2015-16)
All Electric Injection Moulding Segment: All electric injection moulding machines are increasingly becoming popular due to their energy efficiency, greater cleanliness, quick start up, better repeatability, and quiet operations. Despite the advantages, cost of machines is higher by 50-200% than conventional hydraulic systems. All electric machines are making inroads in Indian market with share of 4-5% of total injection moulding machinery sales. With growth in auto, medical and electric & electronic sectors investment in all electric machines is expected to increase. This growth will be further fuelled by productivity improvement initiatives due to manpower shortage, wage inflation and higher power cost. In addition to presence of major global brands, domestic players like Ferromatik Milacron India Ltd and L&T Plastics Machinery Ltd have started manufacturing and marketing these machines.
Blow Moulding machinery Sector: In blow moulding machinery sector there are around 15-20 domestic manufacturers. Sales are expected to reach 500 machines this year. Domestic industry will have ~80 % market share while rest 20% will be of imported machinery. However the market is dominated by 3 manufacturers; together they account for 80-85% of domestic market share. The rest 10-15% is controlled by smaller manufacturers. Machines up to 5 lt capacity account for 80% market share. In India, imports are mainly in injection blow moulding machines, high output machines and multi layer/multi head machines, MBM apart from LBM machines. Most of the imports in the sector are from China and Taiwan with few machines from Europe & America. With demand in blow moulding segment surging in recent times, leading machinery manufacturers have expanded their production capacities as well as product portfolio to maintain their footprint in the industry.
BLOW MOLDING BUSINESS
  1995-96 2000-01 2005-06 2009-10
Total Sales 250 270 271 430
Capacity addition (KTA) 38 40 41 85

Projection (2015-16) Growth in Blow Moulding sector is expected to continue with machinery sales expected to reach 1000 machines/year in 2015-16. Sales growth would be not only due to consumption growth but also due to mortality rate and technological advancement. Major investment would be in IBM, auto components sector, MBM, LBM and water tank segment. One interesting development in Blow Moulding sector in recent times is manufacturing of 1000 lt water tank with Extrusion Blow Moulding technique. Due to economic scale of operation and rapid urbanization there is growing trend to shift rotomolded water tanks up to 2000 lts to blow molded tanks. The industry may witness increase in investment in large molded machines in coming years for this application.

Extrusion Sector
In extrusion machinery sector there are around 120 domestic manufacturers. The market is dominated by 10 manufacturers, together they account 75-80% of domestic market share. The rest 20-25% is controlled by smaller manufacturers. In 2010-11, sales in extrusion lines are expected to be around 1800, out which domestic share would be 82% while rest 18% would be imported machines.
EXTRUSION BUSINESS
  1995-96 2000-01 2005-06 2009-10
Total Sales 1113 1021 1270 1815
Capacity addition (KTA) 400 485 900 1755

Projection (2015-16) : Packaging sector has immense potential due to booming retail consumer markets. As food inflation is on rise for past few years, unit packaging cost has come down. This has given unique opportunity for packaging industry to expand the market. Multilayer film and Raffia sector is expected to grow further in next five years. Non woven industry is expected to grow by diversifying into consumer packaging bags apart from medical applications. With government emphasis on infrastructure and agriculture productivity improvement, products like drip laterals, pipes and mulch film will have higher demand. This is going to fuel demand for drip and pipe machinery. Indian auto sector is booming for last couple of years, this growth is expected to continue due to rising aspiration level of consuming class. Compounding sector and other allied sector associated with auto industry will continue to grow in tandem. Indian market for Extrusion machinery is likely to grow to 2350 machines/year by 2015-16 due to increase in plastic consumption and also due to replacement of old machines.

Miscellaneous Sectors
Miscellaneous sector includes rotomoulding, compression moulding etc. India is second largest rotomoulding market in the world. Water tank is major segment for the industry and Indian market is world largest rotomoulding water tank market. There are 10-12 rotomoulding machinery manufacturers in the country. However the market is dominated by 3-4 players with combined share of 75 to 80% market share. Annual sales of rotomoulding machines is around 70 -100 machines per year. Most of the machines are designed to manufacture water tank. With economic growth and aspiring population, recreational, sanitation, marine, and infrastructure products are likely to have higher demand. Rotomoulding products for these segments would take Indian industry to higher growth path.
Prospects
The Indian downstream machinery industry is incessantly setting up new highs year over year thanks to the increased ability of Indian machinery suppliers to accommodate better technologies available in the world in their machines. In addition to that, either direct or indirect presence of almost all internationally well renowned major players in Injection Moulding, Blow Moulding and Extrusion sectors has bolstered the industry growth.
In injection moulding sector the global players like Engel, Arburg, Netstal, Toshiba, Haitian, etc., and in Extrusion Sector world leaders like Battenfeld, Kraussmaffei, Coperion, Hosokawa Alpine, Brampton, Theysohn, etc. either have their sales office or engaged with Indian machinery manufacturers through JVs or technology transfer or traders/distributors. They offer the latest technology available in the world to plastic industry through these Indian operations. Many of the foreign suppliers like NegriBossi, Welltec, Rollepall have already started building of new machines in India. The others are expected to follow the trend.
However, Indian machinery manufacturers need to reduce the lead time to supply new machine by expanding in machinery building capacity keeping the main focus on increase in productivity and energy efficiency by establishing state of the art manufacturing facilities with latest technology. Once the good quality machines will be offered in the market at reasonable cost by domestic suppliers, the low cost imports will definitely have tough time.
India is seen with very great interest by international Investment community. Due to economic growth in this decade, the standard of living has risen substantially. With a young society and increasing purchasing power, Indian economy is poised for higher growth trajectory. In next decade the GDP is projected to grow between 8-10% annually. This would further fuel growth of plastic industry and take it to new height. With value addition and per capita consumption increase, Indian plastic industry is expected to increase its contribution to manufacturing GDP. To meet this future growth potential of plastics, the Indian plastic processing industry not only needs to scale up installed capacity but also needs to develop the production capabilities with better efficiency to remain competitive in economic volatile environment. With wage inflation and higher power cost industry would opt for automation and higher energy efficient processing machines. The phenomenal success of Indian plastic machinery industry would continue in coming years. However the industry needs to be proactive to bridge the technology gap in high end processing machine and automation of process. The expectations from new machines would be more from less. In the competitive world, machines with higher output and lower power consumption per unit of output will only be winners. We anticipate steep growth for higher capacity and higher productivity machines in all the major segments in coming years, which will further boost the plastic industry growth.
(Authors: Vinod Kumar R & Dhaval S Shah, Product Application & Research Centre, Reliance Industries Ltd., Reprinted from Article in Plastindia Magazine, Issue No. 32)
Disclaimer: The information contained in this article has been prepared solely for the purpose of providing information to interested parties and is not in any way binding. This article has been prepared in good faith by Reliance Industries Limited, but no representation is made or warranty given (either expressed or implied) as to the completeness or accuracy of the information contained herein. The information contained was obtained from various sources believed to be reliable and we do not guarantee its accuracy. Neither the company nor any of its employee accepts any liability whatsoever for any direct or consequential damages or losses arising from any use of this article or its contents.
 
 
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  Apr 29, 2011
 
 
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