Some Chinese profile extruders want to sell into the U.S. window and door market, and one already has passed a strict U.S. certification process to sell entire window and door systems.
The story of Chinese competition is not new to the plastics industry, but it's causing a ruckus among North American profile extruders. Some say imports will hurt their business, and they worry about quality and pricing issues.
``Right now, yes, we've lost some business,'' said Paul Warner, co-chief executive officer and co-president of extruder Mikron Industries Inc., based in Kent, Wash. ``But we can't prove that we've been devastated by this action.''
Until now, the North American construction industry has been somewhat insulated from overseas competition. Lineals, windows and doors are costly and fragile to ship across the Pacific Ocean. And the domestic building products industry's tricky, finicky barriers to entry can include lengthy certification procedures and cumbersome codes. Window and door makers aren't required to have products certified to sell in the U.S. market, but the Catch-22 is that most local building codes require products that are certified.
Now, here's the part that domestic profile extruders fear most: Extruders across the Pacific are working to meet U.S. certification standards for those products. To compound that fear, one Chinese firm has a fabrication facility to manufacture entire window and door systems. That plant now is certified under the American Architectural Manufacturers Association.
``You start seeing that forward integration, that's more cause for concern,'' said Rich Walker, executive vice president of AAMA in Schaumburg, Ill. ``I don't see them all coming in, flocking in, right now. But I do see interest. The fact that they were smart enough to get certification, that's pretty astute. Carl [Wagus, AAMA's technical director] went over the place with a fine-toothed comb, and they comply with everything.''
U.S. market: place to be, but lead-free
Rey Nea is a U.S. citizen. The president and owner of ATN Window and Door Corp., based near Shanghai, China, spent years learning the U.S. market. His firm employs 550 in extrusion and fabrication at two plants near Shanghai. By the end of this year, ATN will have a warehouse in California. Its sales office is in Rowland Heights, Calif.
``European systems have dominated the market in China,'' Nea said in a Nov. 13 telephone interview. ``We were the first one to import U.S. technology to China, servicing the high-end market. I personally like the U.S. window market and window systems. We think U.S. window systems are especially good for the single-family housing business. The European window is better for multifloors, like apartment complexes.''
The U.S. market for single-family housing is red-hot. The sector has sustained the U.S. economy since the Sept. 11, 2001, terrorist attacks, and is not expected to slow any time soon. AAMA said firms in the Pacific Rim, including South Korea, Japan and Thailand, are gearing up to serve the largest market in the world.
ATN is not alone. Zhongsan Yangli Plastics & Aluminum Extrusion Co. Ltd., based in Guangzhou, China, had a booth at the InterGlassMetal/Fenestration World 2003 show, held Nov. 4-6 in Columbus, Ohio. And in September, Dalian Shide Plastic Industry Co. Ltd. placed a historic order to Krauss-Maffei Kunststofftechnik GmbH and Cincinnati Extrusion GmbH for 240 extruders and 165 extrusion lines, respectively. The profile and pipe producer, with plants throughout China, plans to make colored window profiles, among other products. Neither Zhongsan nor Dalian Shide has applied for certification through AAMA, officials said.
``ATN is a very progressive company and my inspection of both their plants in China indicated that they produce a very good product meeting all of the requirements of the AAMA programs,'' Wagus said. ``These companies are making that commitment. It's not junk coming across the border to flood the market. Anybody that doesn't recognize that we're in a global marketplace is in for a big surprise.''
Nea said his facility is small, but focused on high-end systems. Therefore, the Chinese market only represents a small percentage of his firm's sales, although he would not disclose that figure. But he does not want to focus on the mass Chinese market for extrusions, which accepts ``garbage'' profiles, he said. He will not use lead stabilizers, which caused a problem in the U.S. market in the 1990s when federal officials investigated PVC siding and windows for lead hazards.
``We have very intensive quality-control procedures that are more strict than U.S. extruders,'' Nea insisted. ``Our quality controls are very, very strict. We use a lot of inspectors to check the extrusion quality. We do more than AAMA requires. We want to be a supplier in the U.S. market and we know how important quality is in the U.S. ''
Still, domestic extruders are not convinced. AAMA certification mandates unannounced plant inspections. Many officials wonder how AAMA officials will be able to conduct those inspections in China.
``The very next batch that can be produced can be produced in a very different way, just to take cost out,'' Warner said by telephone. ``You as a consumer have no ability to know if you have the product you paid for.''
But AAMA officials said they have structured the policy to ensure they are able to conduct unannounced plant inspections. In addition, every 6 inches of the profile must be marked ``Made In China'' to distinguish the product in the U.S. market, especially if there is a product failure.
``We also have [an] extra inspection for lead,'' Walker said. ``We have extra consequences if you get caught with lead. If you get caught with lead in the U.S., just your plants get inspected. In China, all distribution and warehousing, plus plants, get inspected.''
Dumping is concern
Officials from AAMA and from vinyl profile extruders have met with the Department of Commerce and the U.S. International Trade Commission to familiarize themselves with the petition process that protects domestic businesses from unfair foreign price competition.
``Because Chinese vinyl window profiles are being sold at between 35 percent and 50 percent below U.S. market prices, the majority of our members are extremely concerned about possible dumping,'' Walker said.
According to information from the Department of Commerce, dumping occurs when a foreign producer sells a product in the United States at a price that is below that producer's sales price in the country of origin, or at a price that is lower than the cost of production.
``I'm concerned about dumping issues as well,'' Nea said. ``For ATN, we don't do any dumping. It would be dangerous for us. We would lose money. In the toy industry, you can do dumping. But not for vinyl windows because it's a customized product. I suggest that if [Chinese extruders] really want to do U.S. business and want to be responsible, they have to do customized extrusions for the customer here. They must follow the U.S. market for formulations. I know the Chinese market; that's why we want to do business in the U.S.''
For the domestic window and door market, the meetings continue. Heads of domestic window profile extruders were scheduled to meet with AAMA officials Nov. 20 in Chicago. The AAMA Vinyl Materials Council set up the meeting to present an overview of the antidumping petition process, and to establish the foundation for the financial and manpower support to protect the industry from unfair trade practices, according to a news release issued by AAMA.
Officials also plan to consult the U.S. Customs Department to clarify and isolate the classification of imported vinyl window profiles.
To file a petition, the industry needs to gain the support of at least 25 percent of domestic vinyl window profile producers, AAMA said. Also, imports from China must rise above 3 percent of total market volume. Walker called the rate of increase in Chinese imports ``high and troubling.''
North American extruders vow to fight the new competitors.
``At the end of the day, they've got to beat us on efficiencies,'' Warner said. ``They're not there yet. They've got to ship an awful lot of air a long distance. At the end of the day, they may take some business, but that has to go away at some point. I think our U.S.-based companies will do OK. It's difficult to see because of the amount of subsidizing that's going on right now.''
And North American producers still have customization and specialized products to rely on, other officials said. Officials from Plastmo Ltd. of Brampton, Ontario, know foreign competition is the talk of the industry right now.
``Our strategy is essentially trying to sell higher-end products,'' said President John Harbom. ``We have patented extruded and injection molded products.''