Local companies take advantage of growing markets like China, weak dollar to increase exports

There has been an increased desire on the part of local companies to export products, due in part to
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When Citizens Bank first began hosting China trade forums, such as one held in Albany late last year, the major goal was to help inform local businesses how to acquire capital in China, partner with Chinese companies to set up manufacturing operations in China, and produce goods that would often be imported back into the U.S.

Recently, however, a growing number of Citizens’ clients in New York state have been inquiring how best to export products made here to China and other foreign markets, said Jim Gaspo, executive vice president of the Providence, R.I.-based bank.

“We are putting forth enormous effort, which quite honestly we hadn’t been doing, working with our domestic manufacturers to assist them with various global trade financing alternatives. Domestic manufacturing hasn’t been competitive, so many companies have gotten out of the habit of selling overseas and are not as in tune with [foreign exchange rate] risks and how to mitigate those risks,” Gaspo said. “It has been intensified over the past 90 days, but we’ve seen a growing trend of this over the last year.”

According to the latest available data on the U.S. Dept. of Commerce Web site, the United States exported $75.9 billion worth of goods and raw materials in January, up 16.6 percent from January 2007. New York state had $3.9 billion worth of exports in January, up 11.9 percent from last year.

The rise in exports has coincided with 12-year lows in the value of the U.S. dollar against the European Union’s euro and the Japanese yen. Capital Region World Trade Center President Bill Hooton said lately he has seen an increased desire on the part of local companies to export products.

“The additional interest is the fact that everyone is well aware that the dollar has devalued and that the Chinese have more money than they used to, which makes our exports more competitive,” Hooton said.

China has allowed the yuan to rise about 16 percent against the value of the dollar since mid-2005. The U.S. and the European Union have long pressured the People’s Republic of China to ease controls they say artificially restrict the value of the yuan, because its low value gives goods produced in China a price advantage.

China’s exports to the U.S. fell 5 percent in February to $16.4 billion, while imports of American goods jumped 33 percent to $6.1 billion, according to China’s customs bureau.

New York exported $2.5 billion worth of goods and materials to China in 2007, up $326 million from 2006, according to the Department of Commerce. Federal statistics indicate New York’s export business to China has grown 222 percent since 2000, while its exports to the rest of the world has grown 59 percent.

Local exporters

GE Energy manufactures steam turbines at its Erie Boulevard campus in Schenectady and exports them to China as well as 13 other foreign countries, according to company officials. GE is probably the largest exporter in the Capital Region, but many smaller companies are benefitting from increased export business.

East Greenbush manufacturer X-Ray Optical Systems recently began selling its Sulfur in Diesel Analyzer, called the SINDIE, in China to take advantage of China’s growing air pollution problem caused by hyper economic growth over the last decade. The SINDIE helps pipeline and refinery companies detect very tiny amounts of sulfur in petroleum, which contributes to air pollution.

X-Ray Optical Systems President David Gibson said the falling dollar has helped his company’s export business to the EU but the rise of the yuan against the dollar has not yet been significant enough to help his Chinese exports.

“I think it’s pretty clear the Chinese are maintaining that exchange rate because if the dollar drops very much against the yuan it will hurt their exports to the U.S.,” Gibson said.

Precision Valve and Automation, a 75-employee manufacturer located in Halfmoon, started selling its adhesive dispensing systems to manufacturers in China two years ago. According to company officials, about 40 percent of PVA’s sales now originate in China.

But PVA’s growth in China has little to do with the decline in the dollar. PVA Asia President and CEO Jayson Moy said most of PVA’s customers in China are Chinese subcontractors of U.S. Fortune 500 companies, such as Motorola, Apple and Texas Instruments, and pay in dollars.

“Demand for our machines is really consumer-driven rather than foreign exchange rate-driven,” Moy said.

Nutrient premix manufacturer Fortitech, headquartered in Schenectady, expects to end 2008 with about $150 million in revenues, up from $130 million in 2007, but not because of exports or the weaker dollar. Fortitech spokesman Patrick Morris said most of the premix material Fortitech sells to the growing Asian market are manufactured at its foreign plants. He said Fortitech’s manufacturing operation in Schenectady formulates premixes almost exclusively for the U.S. market.

Manufacturers that don’t export may be facing difficult times, as the U.S. economy teeters on recession.

Nancy Gold, the president of Schenectady baggage manufacturer Tough Traveler Ltd., said sales to companies in Japan and individual foreign customers via Tough Traveler’s Web site have gone up in recent months.

“That part of our business seems to be at a higher point right now,” Gold said.

Tough Traveler also reported increased sales of some of its products to domestic manufacturers, which Gold said she views as an indicator of growing strength among U.S. businesses.

Schenectady-based Accumetrics Associates President John Reschovsky said there is no question that the fall of the dollar relative to the euro has helped stimulate the European sales of his company’s electronic measurement instruments for large rotating machines.

“We do a modest but growing portion of our business overseas. Products made in the U.S. are cheap, particularly with European customers,” he said. “The fact that our product is less expensive now, and it’s offered as an option for our customers’ customer, their price for that option is cheaper and I think that drives our volume to some extent.”

Emerging exporters

Officials with Schenectady-based SuperPower, manufacturer of superconducting electrical wires, said the Chinese market should play an important role in the company’s commercialization of its product because China is robustly expanding its infrastructure.

SuperPower’s superconducting wire enables much more efficient transmission of electricity than traditional copper wires and can carry far greater electrical loads. The process used to create the wires is very expensive, but the decline in the dollar has helped make the wires more affordable overseas.

“The euro to the dollar, the yen to the dollar, are both very favorable to us at this point, and we speak to those favorable exchange rates in our sales presentations. The value of the dollar around the world is weak and that’s good for us,” SuperPower General Manager Arthur Kazanjian said.

SuperPower Director of Asian sales Jorge Jimenez said another advantage SuperPower has in China is there is no Chinese supplier of the raw materials for SuperPower’s superconducting wire.

Although there are benefits to exports, putting too much faith in overseas markets can pose dangers, as CardioMag Imaging, a Schenectady-based manufacturer of diagnostic heart-imaging machines, discovered in 2007. Halfway through last year CardioMag told its investors it expected to begin sales in China but was ultimately unable to secure distribution agreements.

Doing business in China often requires repeated visits by corporate executives, a much longer process than American commerce.

Moy said the concept of “face” is vastly important to the Chinese and he once personally visited a Chinese manufacturing client to apologize for a faulty adhesive dispenser in order to maintain PVA’s business with them.

“After that everything was OK and they ordered four more machines,” Moy said.

After CardioMag admitted its hangup to investors, everything was not OK and its stock lost more than 90 percent of its value on the London Stock Exchange’s Alternative Investment Market. Ultimately the company’s shareholders voted to take the company private.

CardioMag officials have since focused on establishing its product in the United States, seen as key to its worldwide acceptance.

CardioMag President Tush Nikollaj said it remains to be seen whether the weaker dollar will help CardioMag.

Categories: Business, Schenectady County

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