MARKET OVERVIEW
Meanwhile, the production of motor vehicles, trailers and semi-trailers was more or less stable. The production of transport equipment significantly decreased in 2010 by 5%-22%, depending on the specific category of the transport machines, same as the consumption. The decrease continued thus in May 2013, the production of machinery and equipment recording a lower value by 2% compared to May 2012, while producer prices increased by 1.2%.
In terms of machinery and equipment trade, the value of export and import continuously increased within a similar trend until 2013, when according to preliminary data provided by the Department of Foreign Trade and International Relations, the exports of vehicles, vessels and associated transport equipment increased by 20% in the first four months of 2013 compared to the same period in 2012.
In the mean time, imports of these products fell by 10%. A simple lending process for export production and issuance of bank guarantees for participation in international tenders would enable the increase of Romanians producer competitiveness on international markets. If the tendency will follow the same trajectory, it would enable Romania to finally get rid of the collocation “Import Country” and consolidate its position on cross-border markets.
Unfortunately, less favorable results can be observed in the machinery industry staffing. In the first six months of this year, 479
employees working in this industry have lost their jobs. The National Agency for Unemployment’s Top 10 layoffs areas in the first half of 2013 reveals that machinery manufacturing is placed on the seventh position in the chart.
Electroputere, a manufacturer of high power transformers, looks at laying off between 150 and 200 employees until October 2013 in order to streamline its costs. The company also reported losses of about RON 13 million in the first quarter of 2013.
According to national business daily Ziarul Financiar, another player, UCM Resi?a, an engine and metallurgical producer, which used to have 14,000 employees before 1989, now has no more than 1,600 employees. The process of personnel reduction doesn’t stop here. By October of 2013, 200 additional employees might need to look for another job.
The massive restructuring plan and the current insolvency of UCM Resita were caused by a significant decrease in orders from their main customer – Hidroelectrica. Amid Hidroelectrica’s restructuring, which has seen its orders reduced to a third in 2013, UCM’s business crashed three times in the first half of 2013 to RON 26 million. Losses reached RON 27.3 million, while cumulated debts stood at RON 859 million (EUR 200 million).
ROMANIAN WARSHIP – A NEW TOPIC OF INTEREST FOR FOREIGN INVESTORS
According to data provided by The National Statistics Institute (INS), net investments value in this industry decreased since 2008, but quickly rebounded. In 2011, nearly RON 954 million were invested in the manufacture of machinery and equipment, an impressing increase of 234% from 2010. The tendency continued further in the first quarter of 2013, when net investments in machinery including vehicles recorded an increase of 15% compared to the same period of the prior year, also reaching 7% in the total share of net investments.
This year brought possibilities of new partnerships between Peru and Romania regarding warship manufacturing. The Peruvians are considering the Damen shipyard for an upcoming warship order. The leader of Peru pointed out that Romania has greatly advanced in terms of technology and defense, becoming a new topic of interest for Peru.
Damen Shipyard Galati has an exntensive experience, already holding several contracts for the construction of 7 warships for the Dutch Navy, with the last ship being delivered in July 2013. This order represents the most complex project at Damen for the past decades, with an estimated contract value of EUR 290 million. Also, another shipyard producer, the Norwegian manufacturer Vary Holdings Limited, received an order of EUR 100 million. Construction will take place in Tulcea, Romania.
RAILWAY AND AIRCRAFT MACHINERY WAITING FOR A CHANCE FROM ABROAD
While in the 1980s Romania stood in the World’s Top 10 equipment producers and was one of the largest exporters of railway freight cars in the world, the chances of regaining its position are very slim. Potential to revive the segment might present itself in 2014 through the partnership with Peru, which is also interested in Romania’s potential for producing railway equipment. Astra Vagoane Calatori Arad was the winner of a bid organized in Brazil and will deliver a first batch of coaches worth over USD 100 million. There are also opportunities on the Turkmenistan and Iraqi markets, and Astra has already submitted manufacturing bids for coaches, tram linings and automotive manufacturing in these countries.
The need for high tech technologies and properly qualified labor force places Romania in a very modest position regarding aircraft manufacturing potential. Only a few producers of aircraft equipment operate on the local market. However, their disappointing historical financial performance demonstrates the difficulty for Romanian producers to make a leap in this industry.
Avioane Craiova registered a loss of RON 9,1 million and RON 84 million of short term debt in 2012. The business of another aircraft equipment producer, IAR Ghimbav, also plummeted in the recent years. If in 2008 the company’s turnover was GBP 203 million, in 2012 the sales decreased to GBP 41.6 million. Even Romaero, which reported a turnover increase by 15.9% in 2012, ended last year with a loss.
In terms of profitable companies, Aerostar Bacau, specialized in manufacturing aircraft parts and in aircraft maintenance, actually recorded a profit increase of 6% in the first half of 2013 compared to the first half of 2012. The positive results represent a consequence of export sales, while the sales of the company inside the country have decreased. Romanian news wires, such as Mediafax, mentioned that Aersotar became dependent on external demand. However, Aerostar had a better evolution than other local players in the aircraft manufacturing industry.
Regarding this year’s tendencies, Romania might expect foreign investors to show interest for its aircraft equipment producing capacities. This is proven by the fact that all three major phases of the aircraft components production process planned by Universal Alloy Corporation Europe Ltd (UACE) will be concentrated in Dumbravita, Romania. The loan in amount of EUR 25 million given by EBRD to the UACE is meant to boost Romania's presence in the global aerospace industry and support the development of machine components production, surface treatment and assembly. In addition, this will lead to an increase in the efficiency of UACE operations, as well as enable the development of engineering skills in the area.
Taking into consideration the small opportunities that have arisen for some of the mentioned players, it would seem that the machinery industry could register a positive evolution in the upcoming years. However, in the current market conditions, still affected by the crisis, the forecast is for a new year without salary increases, followed by synergies and by further cost reductions. Insufficient funding for companies in the sector and the entry of cross-border players will force Romanian machinery producers to face difficulties in obtaining new orders, respectively to increase their revenues.
