The Asia Miner

OCT-DEC 2017

The ASIA Miner - Reporting Important Issues to Mining Companies in the Asia Pacific Region

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Page 7 of 55

6 | ASIA Miner | Volume 14 • Issue 4 | 2017 THE South East Asian economic area has experienced remarkable economic development in the past 50 years since foundation of the ASEAN state union. International machinery exports in this region currently total EUR 85 billion per year, nearly 200% higher than just 10 years ago. Countries such as Vietnam, Indonesia and Malaysia are now among the world's most dynamic economies and are becoming more attractive as sales markets and investment locations. Thanks to growing exports, mechanical engineering companies from Germany have benefited from the upswing in the ASEAN re- gion - Brunei, Indonesia, Cambodia, Laos, Malaysia, Myanmar, Phil- ippines, Singapore, Thailand and Vietnam - in the past 10 years, ac- cording to the German manufacturing representative body, VDMA. From 2007 to 2016, the value of German machinery exports in- creased from EUR 3.4 to EUR 5.0 billion. A positive rise in exports of nearly 12% to EUR 1.2 billion compared to previous year's levels was achieved in the first quarter of 2017. "The companies have by no means exhausted their sales poten- tial," explains VDMA chief economist Dr Ralph Wiechers. He explains that the demand for machinery in South East Asia has grown faster than the machinery exports from Germany. In 2006, the ASEAN states purchased 9.2% of their machinery imports from Germany. In 2016, it was only 5.7%. Japan and the USA, former market leaders in this region, suffered even stronger losses: Japan decreased from 28.7% to currently 16.8%, and the USA from 13.4% to 7.1%. The German, US and Japanese sales have been replaced by im- ports from China, which is now the largest supplier of machinery in this region by far at 25.4%. South Korea with 7.1% and Singapore with 10.1% have also increased their deliveries in recent years. "The ASEAN states pose a challenge to German companies be- cause each country has to be treated and approached as a single market," says Ralph Wiechers. "Due to the increasing prosperity and growing population in these countries, the German mechanical engineering companies are well advised to place more focus on this region," he concludes. The ASEAN state union was founded in August 1967, encom- passing five countries - Indonesia, Malaysia, Philippines, Singapore and Thailand. At the time, mechanical engineering companies from Germany exported goods worth 249 million deutsche mark to this region. At that time, the total share of exports of the German me- chanical engineering totalled 1.3% and in 2016 it was 3.2%. MINING machinery manufacturers from Germany are back on track, with incoming orders increasing by 45% in the first half of the year. Closer cooperation with Australia along with forecast growth in Asia is set to bring further orders. Following a sharp decline in turnover in recent years, incoming orders from abroad went up 50% in the first six months of this year compared to the same period the pre- vious year. While domestic orders slumped 11%, the total number of orders in the first half of the year increased 45%, said VDMA Mining dep- uty managing director Klaus Stöckmann. In light of the increase in raw material pric- es in many areas, the association expects this positive trend to take hold. For the cur- rent year, VDMA forecasts project only a mi- nor increase in turnover. According to Klaus Stöckmann, this is due to the relatively long periods of up to one and a half years that can pass be- tween receipt of an order and the delivery of equipment and systems for raw material ex- traction – and thus the receipt of payments. "In 2018, turnover will be increasing again as well," he projected. While strong gains were recorded in ex- ports to the EU and in particular to the USA, exports to formerly important markets such as China and Russia declined. With the export quota climbing from 84 to 92% (2016) since 2006, the domestic mar- ket in Germany is becoming less and less important for manufacturers. Klaus Stöck- mann cited the phase-out of hard coal pro- duction planned for the end of next year as the main reason for this development. The situation with brown coal, on the other hand, is quite different. With an annual ca- pacity of about 180 million tonnes, Germa- ny continues to be the largest brown coal producer in the world. Furthermore, Germany ranks among the five largest global producers of potash and salt, with around 6 million tonnes of potash and approximately 32 million tonnes of salt. German manufacturers anticipate addi- tional growth stimuli to come from Australia in particular. In March, both countries signed a Memorandum of Understanding and agreed on strengthening cooperation in the energy and raw materials sectors. The first bilateral talks are scheduled to take place during the Asia-Pacific Regional Conference held in Perth, Australia from November 3-5. The schedule includes two working groups, comprised of representatives from industry, politics, administration and associ- ations. The meetings are to take place every year. "This dialog will help our industry to contin- ue its success story in Australia," summaris- es Klaus Stöckmann. Opportunities in ASEAN states VDMA Mining deputy managing director Klaus Stöckmann. German manufacturers back on track

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