Compounding extruder market set for major changeCompounding extruder market set for major change

Coperion Werner & Pfleiderer is poised to acquire control of China''s largest manufacturer of twin-screw extruders.

Stuttgart-based Coperion Werner & Pfleiderer plans to buy Keya Corp. (Nanjing, China) in a bid to reduce its manufacturing costs, as well as grab a large chunk of the rapidly growing Chinese market. That''s according to Wolfgang-Dietrich Hein, chairman of the board for the Coperion Group, which includes W&P, kneading extruder maker Buss, and conveying systems manufacturer Waeschle.

Keya was founded only 11 years ago, but is already the world''s top-selling manufacturer of twin-screw extruders based on units (more than 360 last year), according to W&P officials in Asia. Keya also manufactures continuous mixers and reciprocating single-screw extruders.

W&P formed a sales agreement with Keya last December, allowing it to market Keya extruders outside China. That agreement also involved the transfer of some technology from W&P to Keya to improve machine reliability and performance. The German firm also established a small manufacturing facility in Shanghai called Coperion China Mfg. (CCM) last year, and showed its first Chinese machine, a 58-mm twin-screw extruder, at Chinaplas.

Despite its leading position, Keya''s name is not yet well known outside China, although the firm does have a U.S. subsidiary, American Keya Corp. (Fontana, CA), which last June displayed a corotating twin-screw unit at NPE.

In March, Hein said the acquisition was not yet complete. In follow-up communications with W&P, the firm backed off Hein''s original statement and referred to "a cooperation with Keya." Asian Coperion officials, however, say the deal should be done by mid-2004, with CCM acquiring a majority stake.

They outlined a three-tier strategy for W&P: high-end, highly customized machines would continue to be built in Germany; mid-level machines would be assembled in China (with key components such as gearboxes, controllers, and screws sourced from Germany, and non-critical components such as machine beds manufactured locally) and sold under the W&P CCM brand; finally, low-cost machines would be built locally using European gearboxes and sold under the Keya brand.

Hein says, "We''ve 60% of the market for compound extruders at polyolefin plants," and with Keya, the firm should be able to "penetrate deep into the market for extruders at toll compounders, where we as yet have little footprint."

Hein also expects the firm to control about 80% of the extruder market in China. Like most observers, he predicts heady growth there. "We see very tough competition in the small compounding machines market from Japanese, German and, increasingly, from Chinese firms. And don''t kid yourself, the quality of the machines made in China is equal to what we have here," he says.

Like most plastics machinery manufactures, W&P was hurt by the global downturn during the last three years and saw sales drop from e400 million in 2001 to €340 million the next year. But positive signs are emerging."Right now we have demand with no end in sight," Hein says, making it more critical to integrate Keya''s manufacturing capacity.

Last year W&P reduced its U.S. staff by 50% and closed its manufacturing capability in Ramsey, NJ. "We think that market [North America] is pretty well served, and we don''t see any great demand there except for services and spare parts," Hein explains. Demand for W&P''s larger extruders is mainly in the Middle East and former Russian states, where polymer plants are being built.

"Russia is making a concerted effort to grow its petrochemical industry, especially in Kazakhstan and Uzbekistan," he notes, and predicts much of that supply could head to China.

Hein expects changes in the compounding extruder manufacturing business as a result of the Basel II banking accords (March MP/MPI). "Basel II has really changed the landscape. There are many good firms carrying high debt that will be radically affected. Soon they''ll have to pay much higher interest on that debt."

Matt Defosse [email protected]

Stephen Moore [email protected]

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