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No slowing Chinaplas' growth

This year''s show is set to rewrite the record books as market players battle for a piece of the Mainland''s massive processing sector.

Attendees at Chinaplas 2005 in Guangzhou played their part in setting a number of records for the show-more than 1100 exhibitors came from 30 countries and regions, more than 52,000 visitors made the trip from 79-plus countries and regions, and more than 900 machinery items were on display.

The latest news from show organizer Adsale indicates these records will be broken when the show returns to Shanghai this year. Chinaplas 2006, scheduled for April 26-29, 2006, should spread over 92,000m2 (50% larger than the last Shanghai event) at the Shanghai New International Expo Centre in Pudong, host 1300 exhibitors and around 1000 machines, and attract 57,000 visitors. This year''s theme is Shaping The Future For You.

Unlike many Asian shows, Chinaplas has traditionally been viewed as a suitable exhibition platform by a host of materials suppliers, and 2006 is no different. The show''s Chemical and Raw Materials Zone will spread over 23,000m2 of floor space-27.7% larger than 2005. Leading suppliers such as BASF, Bayer, GE Advanced Materials, STC/Total Petrochemicals, SK, Honeywell, Mitsui, Dow Chemical, DSM, Dupont, ExxonMobil, PolyOne, Reliance, and SABIC will participate.

The Yangtze River Delta, centered on Shanghai, has become the "dragon-head" in China in terms of economic development, with the Delta and surrounding provinces in Eastern China emerging as a strong cluster for plastics processing. In fact four of the top five Chinese processing provinces hail from the region. Zhejiang accounted for an estimated 20% of the output of plastic products in China in 2004, Jiangsu 11%, Shandong 7%, and Fujian 4%. They were only bested by Guangdong (25%).

As with the rest of the world, plastics processors in China faced tough times in 2005 due to high plastics prices, with consumption up a "paltry" 5% to 40 million tonnes compared to the average demand growth of 13.5% per annum for the previous four years. Nevertheless, the industry is quietly confident of a rebound in 2006.

Says Liao Zhengpin, chairman of the China Plastics Processing Industry Assn. (Beijing), "The plastics industry in China is expected to develop rapidly with the consistent growth of national macroeconomics. Enterprises will be more confident of achieving better results in 2006 if they are able to overcome the problem of increasing costs of raw materials."

But perhaps things weren''t as bad as 2005 data would suggest. China''s processors have a propensity to buy material when it is cheap and delay purchasing when prices increase. Hence, the market likes to talk about apparent consumption. Looking at government data for output of plastic products from large enterprises for January to November 2005, a rosier picture is painted. Plastic foam production, for example, was up 14.9%, agricultural film 18.5%, and plastic pipes and profiles 19%.

In broader terms, the Chinese economy should grow by 8.5% this year, according to Intercedent Ltd. (Beijing). Furthermore, exports are forecast to grow by 12.6%, while imports are slated for 16.2% growth. The appreciation of the yuan and increased imports should help rein in China''s trade surplus, estimated at more than $100 billion in 2005.

In addition to plastics, Chinese processors'' appetite for processing machinery is also slated for continued growth. The Freedonia Group (Cleveland, OH) forecasts the overall annual demand for this machinery to grow from $2.76 billion in 2004 to $3.77 billion in 2009, and $4.92 billion in 2014. Growth through to 2009 will average 6.4% according to Freedonia-faster than any other region in the world, albeit a slowdown from the average demand growth rate of 13.6% between 1999 and 2004. In comparison, the U.S. market for processing machinery is forecast by Freedonia to grow from $2.26 billion in 2004 to $2.55 billion in 2009 (2.4% growth) and $2.87 billion by 2014. China became the world''s largest market for plastics processing machinery in 2004.

High-tech shift

China''s role as the world''s workshop has boosted demand for high-end machinery and materials, particularly given the increasingly high-tech nature of manufacturing on the Mainland. In 2004, China overtook the United States to become the world''s leading exporter of information and communications technology (ICT) goods such as mobile phones, laptop computers, and digital cameras, according to OECD data. China exported $180 billion worth of ICT goods in 2004, compared with U.S. exports in the same category valued at $149 billion. In 2003, the U.S. led with exports of ICT goods worth $137 billion, followed by China with $123 billion.

The data show a shift toward more trade between China and other Asian countries, with a corresponding decline in ICT imports to Asia from the EU and the U.S. To manufacture laptops and advanced mobile phones, China previously relied on electronic components, such as computer chips, imported from the EU and U.S. These are now also being increasingly sourced from other Asian countries, including Japan (18% of China''s ICT imports), Chinese Taipei (16%), Korea (13%), and Malaysia (8%).

China is also the single-largest exporter of ICT goods to the U.S., supplying 27% of all U.S. imports of these goods in 2004, up from only 10% in 2000. Its ICT trade surplus with the U.S. stood at $34 billion in 2004 and $27 billion with the European Union.

The Chinese automotive industry is also a major outlet for processing machinery and plastics, although most observers feel there is sufficient assembly and part-manufacturing capacity in place for the foreseeable future. Light-vehicle production is forecast to grow from around 4 million vehicles in 2005 to 7 million in 2012.

Stephen Moore [email protected]

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