A few years ago, Chinese consumers took their electronics home on the back of a bicycle. Now, consumers in major Chinese cities put their plasma televisions in the back of a new Buick Sail or Volkswagen Passat for the trip home.
The more comfortable ride does not make the manufacturer's dreaded ``last mile'' any easier for electronics, though - the thousands of new drivers on the road every year and stop-and-go traffic challenge even the most careful packaging specifications.
Nova Chemicals Corp. is serving the local market with its Arcel moldable foam, and recently decided to partner with a Taiwan-based company to expand sales in China.
Arcel, a 70 percent polystyrene/ 30 percent polyethylene interpolymer, allows for smaller and safer packaging, which Dan Nelson, Nova's vice president of global moldable foam resins, said saves money on both shipping and damage costs.
Those two qualities are especially important now that many original equipment manufacturers ship to consumers directly, and in China, shipping can be more punitive than in North America.
Worldwide shifts in distribution models and supply chains are one of the reasons Nova decided to partner with Taiwan's Loyal Chemical Industrial Corp. to produce the material. The Ningbo Arcel plant, called Changqiao Chemicals Co. Ltd., will be close to Loyal's joint venture with Mitsubishi Corp. and Toho Corp. - Ningbo Heqiao Chemical Industrial Co., which produces expandable polystyrene.
C.T. Liao, Loyal's president, said Arcel complements Loyal's product line in Ningbo. Loyal claims to be the largest EPS producer in China, and the second largest globally. Nova claims the top spot for EPS in North America.
Expanding growth
Nova's sales and marketing of Arcel in Asia began in 1996 in Southeast Asia. The company established its regional representative office in Singapore in 1995, but moved the Asia base to Shanghai earlier this year to serve multinational customers manufacturing in China and shipping product overseas, as well as domestic Chinese customers.
Locating the Asian center in Shanghai ``just made sense,'' said Chris Hogan, Nova's managing director for the Asia-Pacific region. The company already has a representative office in Beijing, responsible mainly for PE technical sales; and an office in Singapore, covering Southeast Asia for PE and styrenic polymer sales. Those two offices report to the Shanghai office, which covers sales of styrenic polymers, PE and styrene monomer.
Nova began selling PE to China in 1985, and in 1997 started a PE joint venture in Tianjin. The Tianjin facility receives bulk shipments of PE from Nova's Joffre, Alberta, plant, and repackages it in 55-pound bags for sale in China.
The Arcel production facility will follow a similar process.
Nova produces the Arcel interpolymer in North America and will ship inert solids to Ningbo in containers that hold 44,000 pounds. The Ningbo facility then will impregnate the interpolymer with gas and package it, while the Shanghai office will handle sales.
``Arcel can be shipped and used anywhere in the world,'' Nelson said on a recent trip to Shanghai. The company already ships Arcel inert polymers to Thailand, Singapore, Malaysia, Latin America and Australia for production.
Foam cushion accounts for 15 percent of total cost to market of consumer goods, but that amount can be reduced significantly using Arcel - by more than 10 percent in some cases, the company claims - through reduced size, better protection and fewer returned goods. Nova plans to make Arcel even smaller by launching product with a 25 percent smaller bead Jan. 8.
Nova's 2004 annual report said Arcel sales tripled over the previous two years, and the company projects global demand by the end of 2005 at nearly 160 million pounds. The company forecasts that global production of Arcel will be 100 million pounds per year by the end of 2006, still falling short of demand. The company hopes to double 2006 production levels by 2008.
Nova expects the majority of demand growth to the end of 2005 to remain in Arcel's traditional market of packaging for high-end electronic goods like printers, televisions, computers and monitors.
However, Nova's second frontier supplying to automotive, furniture manufacturing and other consumer appliance industries also is expected to provide the company with more profit going forward.
It is no coincidence that in China, Nova's sales of Arcel initially will focus on multinationals in the export market, Nelson said. But the company also counts domestic computer manufacturer Lenovo as a client, and hopes to expand its base of domestic electronics manufacturing clients quickly to well-known Chinese manufacturers such as Haier, Changhong and TCL.
