The Pearl River Delta (PRD) of China''s Guangdong Province encompasses just 14 cities and counties but they alone accounted for 80% of the province''s $194 billion GDP in 2004. If Guangdong were a country, its GDP would rank it 41st globally behind Algeria and ahead of Portugal.
Even more telling is the province''s global importance to trade: 2004 exports of $191.6 billion would rank Guangdong 13th globally, not far behind mighty South Korea and Belgium, and most of these exports are derived from the thousands upon thousands of factories of the PRD. It''s no surprise then that this is an important market for purveyors of processing machinery and materials and they were out in force at the recent Chinaplas show, held June 21-24 in the provincial capital of Guangdong.
Many of the PRD''s plants are staffed by migrant laborers-19 million at last count-but restrictions on the movement of labor within China mean the region is in need of 2 million more. The labor shortage in South China prompted one processor to switch to more automated solutions for its production. Dominic Mak, chairman and CEO of Manufacturing Modes International, based in Hong Kong, foresaw as early as 2002 that labor would one day be in short supply and last year the company started taking delivery of 18 highly automated Battenfeld machines with clamping tonnages of 40 to 800 tonnes. "We needed high-speed machines with good robotic interface capabilities," says Mak. The machines are used for molding cellphone housings, IT products such as USB thumb drives, and even high-end thin-wall houseware. Battenfeld sold 70 machines in China last year and this year it targets a one-third increase on 2004 sales of €4.5 million.
Narrowing the gap
"The technology gap between Chinese and Western processors is narrowing," echoes Christoph Schumacher, marketing manager at Arburg (Lossburg, Germany). "We are getting more and more inquiries for complete production cells and complicated applications such as three- or four-component molding," he notes.
Also eyeing demand for high-end machinery is Netstal, (Näfels, Switzerland), which started operations at a sales and service subsidiary in Shanghai in April. "We''re late [in coming to China] but not too late," says Netstal China general manager Andreas Nydegger. "Companies are coming to China to produce cheaply, but they need high-tech solutions as well. We see local processors making money with lower cost machines, then using the capital to shift to high-end solutions and ensure a positive future."
Local processors are also more willing to try out overmolding technologies to differentiate themselves, according to David Lai, sales and commercial manager at elastomer supplier Dow Corning. He also sees growth in the auto industry for elastomers as multinationals continue to localize parts.
Coperion also reported "extremely good business" for high-tech applications over the past eight months from its local operation- compounding extruder manufacturer Coperion Keya. "We are seeing orders for engineering plastics applications jump 50% this year compared with 2004," says Ulrich Bartel, general manager of engineering plastics and masterbatch compounding.
South China is emerging as a major automobile production base, with Japanese suppliers Honda, Nissan, and Toyota all active in the area. Toyota, for example, will start production of the Camry this fall and targets production of 200,000 vehicles. Honda, meanwhile, plans to expand current capacity of 200,000 by 100,000 vehicles. For its part, Nissan recently took delivery of six 3000-ton injection machines from a Japanese machine manufacturer for production of the Sunny that started in May.
Production of automobiles and components in China is not solely for domestic consumption. According to U.K.-based consultant ims Automotive Research (London), car and part exports grew from $4.7 billion in 2003 to $15 billion to $20 billion in 2005. The forecast for 2010 is as much as $100 billion.
Massive infrastructure spending in the lead-up to the Beijing Olympics in 2008 and Shanghai Expo in 2010 also augurs well for plastics consumption and materials suppliers are also targeting this area. GE Advanced Materials'' China Technology Center in Shanghai, for example, has worked with Zhongcai Profiles Co. to developed PVC window profiles coextruded with colored Geloy acrylic-styrene-acrylonitrile (ASA), while a similar cooperation has led to development of Geloy-coated PVC decorative roofing sheet at Fangxing Building Materials in Shandong. The roofing sheet has been selected by the Shanghai Municipal Government for its "Plain to Pitch" re-roofing project to replace older flat roofs with pitched roofs that resist leaking.
Krauss-Maffei is also gearing up to target the construction market in China. It will start production in Jiaxing, near Shanghai, of pipe extrusion lines that employ single-screw extruders at the beginning of 2006, and later produce profile lines incorporating twin-screw extruders. According to Alexander Besler, "Krauss-Maffei has traditionally supplied only extruders but the emphasis will be on complete lines in China." Lines manufactured at Jiaxing will be tailored to the needs of the local market, and also exported to Southeast Asia, India, and Russia. The production target from the 14,000-sq-m plant is 200 units annually with 100% local procurement.
In the injection sector, Husky is already shipping 100 to 200 FTO (finish to order) hot runner systems per month from its production facility in Shanghai. "Most are going to the so-called 3C markets of communications, computers, and consumer electronics," says Dinesh Budapanahalli, general manager for hot runners and molds. A new manufacturing facility is planned for midyear in Shenzhen to serve the South China region. Budapanahalli says growth remains strong in China both from export-oriented multinationals and conversion of cold runners to hot runners by domestic processors.
Production of injection machines in China is taking on an increasingly international hue. Milacron Inc., for example, delivered its first China-built injection molding press, a 1000-tonne Maxima two-platen machine, from joint venture Milacron Plastics Machinery (Jiangyin) Co. in April. The press is one of many ordered by joint venture partner Jiangyin Mould & Plastic Technology, a processor serving the auto industry. Milacron plans to supply 500- to 3500-ton machines from the plant, eventually on a global basis, while it also opened a tech center in Shanghai in July.
Engel plans to start production of large machines in Shanghai at the end of 2006. Machines with clamping forces of 500 to 1000 tons will be manufactured, and Engel expects to turn out 30 to 60 machines in the first year.
Demag Ergotech sold 245 German-made machines in China in 2004 versus 305 from its joint venture with Ningbo Haitian (also see First Look this issue). 2005 saw somewhat of a slowdown in the early part of the year caused by banks reigning in lending, high oil prices, and adverse exchange rates, but Stephan Greif, VP for China, says the market picked up starting in May; the firm hopes to match 2004 sales this year. The euro has fallen 15% vs. the yuan (which is linked to the US dollar) since December. "Cosmetic packaging is a major emerging application in China, with foreign cosmetics giants [such as L''Oreal] investing in the Suzhou area [near Shanghai]."
Stephen Moore [email protected]
Around the halls
China faces overcapacity in nylon film
Following on from previous trends in Chinese investment in BOPP and BOPET production lines, biaxially-oriented polyamide (BOPA) is the latest film product to experience significant overcapacity in China. Demand was estimated at 30,000 to 35,000 tonnes for 2004, while annual capacity will reach an estimated 60,000 tonnes this year. "China experienced a significant shortage in BOPA in 2003 and 2004, and processors saw a great opportunity and entered the market," says Phillip Chen, managing director of Brückner Far East in Hong Kong. At current annual growth rates of 15% to 20%, the market will take almost four years to absorb the excess capacity.
Excess capacity is also squeezing markets. BOPA film prices are only up slightly from RMB36,000/tonne ($4350) a year ago to RMB40,000 ($4800). Nylon resin prices, on the other hand have risen from RMB18,000 ($2175) to RMB28,000 ($3380).
Brückner Maschinenbau (Siegsdorf, Germany) has commissioned six BOPA lines since the second half of 2004 and four more are to be delivered. Mitsubishi Heavy Industries (Nagoya, Japan) delivered two lines in 2004, and so far this year it has delivered one, with one more on the way. Furthermore, Unitika has two lines in China that use Mitsubishi extruders and in-house downstream equipment, while Toyobo will commission a similar line next year.
Key applications in China include CPP/BOPA for boilable bags for packaging of sausages, chicken, and other meat products, standup liquid refill pouches, and barrier packaging for products such as coffee.
China has similar overcapacity for BOPET film: 550,000 tonnes/yr of capacity versus 350,000 tonnes/yr of demand. For BOPP, Chinese capacity stands at 1.8 million tonnes/yr while demand is 1.3 million tonnes. While demand for BOPP remains strong (20% to 30%/yr over the past three years), Brückner''s Chen says margins for thick film are barely break-even at RMB1500 to RMB2000/tonne ($180 to $240). SM