Based on the growing number of visitors from Eastern Europe who attended to the biggest fair for used industrial machines in Europe (for instance USETEC and RESALE), the question that arises is the following : what about the second-hand market in eastern europe and equipment can we identify trends in the development of trade between Eastern and Western Europe?
“Eastern Europe”: Definition and industrial context
Exapro, the marketplace for used industrial equipment, whose offices are based in the heart of Europe in the city of Prague, has a geographic position making a bridge between Western Europe and Eastern Europe. The website is mainly active on the European territory, therefore it is at the forefront to indicate the evolution of flows of used machinery in Europe.
Regarding the market of used machines in Eastern Europe, a pattern gradually emerges and states an already existing trend. Indeed, if Western Europe used to provide the West in industrial goods, the trend tends to reverse. The East has a very strong industrial base that was established under the communist regime, a past that the majority of post communist countries have in common. Today, Western companies readily outsource their sites to the East and therefore increased the local demand in terms of industrial equipment.
First we must define the term “Eastern Europe”. From a Western point of view, Eastern Europe begins in the Czech Republic and extends to Russia, while from a purely geographical point of view, it starts from the line marked between Poland and Bulgaria and does not include the Balkan countries. We will therefore refer to the notion of Eastern Bloc designating all countries that have been under the communist regime after World War II, which includes Eastern European countries from a Slavic language and the former Yugoslav Republic.
Flows of goods following foreign investments
According to Exapro’s internal statistics, countries where the demand for machinery is the strongest are Poland, the Czech Republic, Slovakia, Hungary, and in a minor role Bulgaria and Romania. According to the world total visits on the first half of 2014, Poland moved up to 4th place while the Czech Republic occupies 8th place. It is therefore not surprising that for the first half of 2014, 29.7% of visits came from Eastern Europe.
This can be explained by two facts: first, the German Council for Sustainable Development Projects points in its study of transfers of used technologies the trend of the purchases to follow the foreign investments. Thus, since countries like Hungary, Poland, Czech Republic, Slovakia and Slovenia have received a large number of foreign investment, they often purchase their used equipment in countries where these funds come from, i.e. Western Europe. The low costs of these machines allow them to produce more, and as a consequence to export the finished goods back to the West. There is therefore an exchange based on an financial investment that comes back in the form of finished products.
A traffic “en abyme”
On the other hand, we must mention that the requirements in terms of quality of the finished products to be exported to the West. Production has to meet the Western European standards which are above the ones in the East. Eastern European countries and Central European countries in particular therefore buy machines newer machines, of a better quality, while their own machines, of a lower quality, are sold further on the East. Flows of machines are therefore mainly directed to the West even if there is an internal traffic within Eastern Europe. Central European countries therefore reproduce the same pattern on a smaller scale, but for the same reasons: optimization of production costs. Therefore, it is estimated that 10-20% of the world stock of industrial machinery is localized in Eastern Europe.
The statistics Exapro join this fact: in the first half of 2014, 25.3% of machines sold through the marketplace were sent to countries in the East, against 16.6% who originated from the region.
The trend is thus confirmed: we should then see the share of imports of used machinery eastward increase in the years to come. However, unintended consequence, the share of sales to Eurasia could also increase. Should we monitor this slowly rising power of those new markets? The future will tell.