Hot Industries for 1998

Transportation Equipment,
Industry Machinery Sectors Tops In “98

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Less robust growth characterized new manufacturing and expansion activity in 1998, according to Conway Data’s New Plant database tallies. Virtually every industrial sector did well, but global economic malaise took its toll.

Solid economic growth in most of the world’s industrialized economies is helping drive robust expansion of several key industries globally. But industrial development figures in Conway Data’s New Plant database also indicate more modest growth than in recent years, which can be attributed in part to Asia’s economic downturn and Asian companies canceling or postponing new plants and expansions. About 6,800 new or expanding plant projects were reported to the New Plant database for 1998, down 4 percent from about 7,100 in 1997.

The top industries for 1998 in terms of number of projects largely mirrors 1997’s tally, with some minor exceptions. Joining the top five group is the rubber and plastics industry, in fifth place with 411 new projects. Heading the list is transportation equipment, with 535 projects, followed by industrial machinery and equipment with 492, chemicals with 424 and fabricated metal products with 417. Not making the top five list in 1998 was electrical and electronic machinery and equipment, which finished in seventh place; it took third place last year.

The order of the first four top industries was somewhat different in 1997, but the fact that these same industries appear in 1998’s winner’s circle is proof that demand remains strong for products needed for infrastructure improvements, industrial development and manufacturing growth worldwide.

New manufacturing facilities announcements were less concentrated in the top five industries in 1998 than in the previous year. In ’97, new projects in the top five accounted for about 50 percent of all new manufacturing projects. In ’98, the group represented just 33 percent of the total, meaning other industry categories garnered a higher percentage of new projects than was previously the case.

But where was this growth actually unfolding? With the exception of fabricated metal products, where nine out of the top 10 deals were in the United States, expansion activity in the top five industries covered the globe.

Transportation Equipment

Top transportation equipment deals included several automotive plant projects in Germany, Brazil, the USA, and elsewhere. But the category also includes other major facilities, such as Albert Weber’s US$135 million engine block manufacturing plant in N. Charleston, S.C., and a $500 million truck plant expansion for Toyota Motor Corp., in Princeton, Ind. Sport-utility vehicle demand remains high in the USA and elsewhere; General Motors is building a $355 million SUV plant in Moraine, Ohio. And auto parts plants are springing up in these and other areas to supply the larger facilities.

Industrial Machinery and Equipment

The top 10 deals in this category were evenly split between the USA and other countries, with Ireland gaining two of the top projects. Roseville, Calif., won the big prize here, with a $1.4 billion computer plant for NEC Electronics that should employ about 700 people. New facilities in Indonesia and the Philippines prove investment in Southeast Asian markets at this time remains a highly viable option.

Chemicals

New chemical facility locations were a mixed bag, as the top 10 list indicates, though Middle Eastern sites were dominant. What’s interesting to note here is the size of the deals: Royal Dutch Shell Group’s $4.5 billion — that’s billion — petrochemical plant in China is surely among the biggest deals of the year. But investment in such facilities went both ways across the Pacific Ocean. Formosa Plastics Corp. announced it would invest $650 million in a petrochemical plant in Point Comfort, Texas.

The USA logged an impressive number of chemical facilities in 1998 with a greater geographic distribution than in previous years. The Gulf Coast states of Texas and Louisiana naturally did well, with CF Industries’ $305 million fertilizer plant in Donaldson, La., among other projects, but major projects went to Greenville, N.C. (pharmaceutical plant), Great Falls, Mont. (a $165 million ethanol plant) and smaller facilities in Ecorse, Mich., Fort Devens, Mass., and Bristol, Tenn.

Fabricated Metal Products

Nine of the top 10 projects in the fabricated metal products category went to U.S. locations, but that might have been better news if the category represented heftier investments. The average capital investment of the top 10 deals is just $21.7 million. By comparison, the average for the chemicals category is $1.27 billion. Gillette Co. is investing $40 million to build a blades and razors plant in Russia, a deal that beat the value of U.S. plant announcements.

Rubber and Plastics Products

New tire plants dominated this category in 1998, with Michelin, Goodyear, Pirelli and Bridgestone-Firestone all announcing one or more projects. Again the USA made a strong showing in the top 10 group. Average investment of the top 10 deals was $152 million. Besides tires, the category was represented in the United States by several other types of facilities, according to Conway Data’s New Plant database. These include a $174 million plastics plant for Rubicon in Geismar, La., and Goodyear Chemicals’ $144 million synthetic rubber and polymer plant in Beaumont, Texas.     SS