Staying the course

7 July 2008



Tim Self, director of TS Converting, gives his take on current trends in the international converting market


The geographic mix of business is constantly changing: as one county economy slows another seems to improve. A few years ago everyone was looking at Eastern European markets to transfer manufacture and reduce costs. East Germany and Poland are typical examples, but as their economies improve the cost benefit from manufacturing in these areas reduces.

TS Converting recently supplied a hotmelt coater and laminator to a Polish tape customer who supplies its products in to its own domestic markets. As Poland’s economy and currency is becoming stronger by the day, the company is finding it tougher to compete in its home territory and is looking further afield. By investing in our equipment and new facilities, that company is gearing up to export its products. It confirms that substantial quantities of employees currently working abroad are returning to work in Poland as the differential in their earnings reduces.

The Chinese market still seems to be very buoyant, especially in the BOPP sector where two European suppliers compete for the heavy duty, wide, high speed slitting machines. We also supply Elite Cameron machines to the converter markets in China, where they are starting to realise that it is not always practicable to buy multiple, cheap, domestic machines rather than a single high performance unit from Europe. Although employment is relatively cheap, quality is becoming more of an issue as they look to start exporting their products to the West.

We are seeing a slight downturn in Europe, but most seem to be keeping relatively busy, although the costs of manufacturing and raw materials rise with increasing energy costs.

It has become more difficult to pass on price increases to end customers, and many material manufacturers and converters are looking at downsizing or moving some of their commodity products for manufacture in Asia. Our customers in these markets are demanding faster deliveries, better prices and more demanding performance contracts.

In the slitting and rewinding industry most countries tend to buy domestically whenever possible, but this does seem to be changing as prices are becoming a more important factor when choosing a supplier. The strong euro/sterling rate should help most UK manufacturing companies to export. On the flipside, however, the US dollar continues to weaken, making European suppliers ever more expensive.

Despite these difficulties, the North American market is still one of the largest in the world and provides our company with a substantial percentage of income.

As with geographical territories, certain industry sector climates seem to fluctuate dramatically. The base paper markets are flat, as the costs increase, but the speciality papers seem to be reasonably steady.

The flexible packaging industry remains steady, with continued growth in biodegradable and ‘green’ products. Food and medical packaging remains strong, and the larger corporations and niche suppliers still seem to be purchasing equipment on a regular basis.

We are comfortably busy in the niche market areas where there is less competition and an opportunity to make decent margins. A large proportion of our business comes from the adhesive tape and laminate sector, where business seems to have slowed a little but generally remains buoyant, despite the current cries of an economic slowdown. Indeed, we will probably talk ourselves into the grim reality of recession well before we are able to prevent it from happening.

We have found it more and more difficult to compete in the Asian markets, as competition is fierce; customers’ terms and conditions become more difficult to make decent margins. The larger suppliers are forced to compete to keep their expensive manufacturing facilities busy, often taking orders at very low margins. We had firsthand experience of this at “Cameron” a few years ago, then a much larger business turning over £15M.

We made very small profits and often losses, and I wonder in the current climate how many companies are becoming ‘busy fools’. As a much smaller organisation now we are able to keep focused on the more profitable work, resisting the temptation to grow while maintaining our margins, constantly looking to cut our manufacturing costs.

Our industry is changing, with most of our competitors focusing on the volume markets, forced to offer ever more competitive prices. Others are pushing the virtues of their ‘green’ machines, focusing more and more on the environment.

We re-engineered our centre winders and launched a range of “low cost” slitters two years ago. These have been extremely popular, proving we were able to compete with machines from Asia, still using high quality European components and our comprehensive support services. These machines provide us with regular contribution to our income which we top up with the larger, often more lucrative contracts that demand our dedicated design expertise.

Despite tough times ahead, there will always be a market, but we will all have to work harder to maintain the same level of business. There is only so much cost cutting possible and eventually machine prices will start to rise.


Tim Self tim

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