The global plastics industry's march into China continues, with DSM Engineering Plastics, Basell NV and Noveon Inc. each announcing expansion projects there in recent weeks.
DSM Engineering Plastics of Evansville, Ind. - a unit of DSM NV of Heerlen, the Netherlands - is opening a research and technology center and increasing compounding capacity as part of a plan to grow its Chinese business an average of more than 25 percent for the next five years.
Both the new tech center and compounding addition will be located in Jiangyin, China. The center will provide materials testing and applications development, as well as local language support for existing and potential customers in China, DSM officials said in a Dec. 18 news release.
The compounding capacity will enable DSM to increase production of compounds based on nylon 6, nylon 6/6, nylon 4/6 and polyester. DSM sells those compounds into film, automotive, electrical, consumer and industrial markets.
DSM opened the Jiangyin facility in 1997 and now employs more than 100 there. The company also operates Asian compounding sites in India, Japan and Singapore. Currently, about 15 percent of DSM's global engineering plastics business comes from Asia.
``DSM aims to exceed this [25 percent] growth rate through ... customer support infrastructure, technical performance and commitment to markets in Asia and, in particular, China,'' DSM Engineering Plastics sales and marketing director Jan Waninge said in the release.
DSM Engineering Plastics is part of DSM NV's Performance Materials unit. Performance Materials sales were flat at about 1.3 billion euros ($1.6 billion) in the first nine months of 2003, but the unit's operating profit dropped almost 18 percent to 74 million euros ($92 million).
Through September, Performance Materials was the second largest of DSM's three operating units, bringing in about one-third of total sales. In addition to engineering resins and compounds, the unit makes a line of thermoplastic elastomers.
DSM has moved further into higher-end specialty materials in recent years. The firm punctuated that move in April 2002 when it sold its lower-margin petrochemicals unit - including major European polyethylene and polypropylene assets - to Saudi Basic Industries Corp. [Sabic] of Riyadh, Saudi Arabia.
Basell - the Hoofddorp, the Netherlands-based firm that ranks as the world's largest polypropylene maker - this month will begin construction of a new PP compounding plant in the Suzhou Industrial Park near Shanghai. The plant is expected to open in early 2005 and eventually will have an annual capacity of 130 million pounds.
The new plant ``will further strengthen [Basell's] global advanced polyolefins' supply network for customers in the automotive, appliances and industrial sectors,'' according to Basell advanced polyolefins president Sergio Danesi.
Basell, a joint venture between BASF AG and Royal Dutch/Shell Group, posted sales of almost $5.9 billion in 2002.
Noveon, based in Brecksville, Ohio, will build a thermoplastic polyurethane plant near Shanghai. The plant is set to open in late 2004. Currently, Noveon supplies Asian customers with TPU from plants in the United States and Belgium.
``Asia is a key driver for our future growth,'' Noveon Vice President and General Manager Julian Steinberg said. ``The new manufacturing facility is being put into place to add global capacity and improve service levels to our customers in China and the Asia-Pacific region.''
Through the first nine months of 2003, Noveon's sales were up more than 5 percent to $855 million vs. the year-ago period, but its pretax profit slipped almost 9 percent to $148 million.
DSM, Basell and Noveon join a growing list of resin makers and compounders that have announced Chinese expansion projects in recent months. That list includes GE Plastics and Ampacet Corp.
Even if DSM, Basell and Noveon aren't the first to establish compounding beachheads in China, they still can benefit, according to John Jones, president of Applied Market Information LLC, a consulting firm in Wyomissing, Pa.
``The growth in China is such that if [DSM, Basell and Noveon] can establish themselves now, they can still be timely,'' Jones said in a recent telephone interview. ``China is consuming a lot of product. Their output isn't just for the export market. Their automotive growth is especially strong.''
Building a compounding site also might be a way for a resin maker to test the water in China, Jones said, since compounding assets require far less capital than resin assets do.