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December 19, 2005 01:00 AM

China's growing TPE use spurs plant openings

Katherine Sima
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    Eyebrows rose when Roger Young presented his assessment of the TPE market in China at the Specialty Elastomers Asia/China Markets Conference last month.

    According to Young, vice president-Asia for consulting firm Roger Eller Associates, out of 23 multinational TPE compounders, only six companies currently have TPE manufacturing facilities in China. The remainder primarily rely on imports and channel partners to sell their specialty plastics in the PRC.

    The number of multinational manufacturers of TPEs in China is small when compared with China's percentage of global production of products using TPEs, which is huge.

    According to Young's figures, 50 percent or more of the world's cameras, fans, DVD recorders and telephones are manufactured here, with televisions, mobile telephones, laptop computers and automotive parts taking smaller, but still significant percentages.

    Young said that since manufacturing for many end products has already shifted from West to East, compounders should swiftly follow. In fact, three major compounders already have plans to open facilities in China during the next 18 months:

    * RTP Co. of Winona, Minn., will open a TPE facility in Suzhou this month.

    * GLS Corp.'s Suzhou facility will open in 2006.

    In the newest development, Bobby Liu, managing director of Kraiburg TPE China Co. Ltd., announced at the conference plans to open a manufacturing facility in southern China by early 2007.

    Kraiburg TPE China is a joint venture between Kraiburg GmbH of Waldkraiburg, Germany, and Milton Plastics Co. Ltd. of Hong Kong. Young said Kraiburg has been active in China since 1996, with Milton Plastics acting as sole distributor for Kraiburg's products in Greater China. The companies set up the joint venture in March 2004. Kraiburg has imported TPEs from its plants in Waldkraiburg and in Duluth, Ga.

    At the conference in Shanghai, Liu said TPE usage in China from 2000-04 has increased 10 percent annually. Young predicted that use will increase to 12 percent per year during the next two to three years.

    Liu said Kraiburg has seen sales growth during the past two years mainly in the automotive and information technology sectors, and expects the wire and cable industry to be an area of future growth. Liu emphasized that with hundreds of local compounders active in China, Kraiburg intends to focus on value-added applications. Kraiburg's objective is to provide quality and technical service that most local compounders might not be able to provide. He cited the automotive industry as one example where manufacturers need a lot of technical support and quality is critical. Wire and cable industries present another opportunity with its weather-resistance requirements.

    Lieu said Kraiburg's plant in southern China will produce 8.8 million to 11 million pounds per year, and will be equipped with the same equipment and extruders as the company's headquarters plant in Germany.

    Lower taxes and a weak dollar have increased multinational suppliers' TPE sales in China, Liu said. Additionally, most multinational molders prefer buying in U.S. dollars, which offsets import taxes, value-added taxes and handling charges, Liu said.

    Liu said he expects to supply most of the product in the new facility to molders in China, and considers regional exports secondary.

    Kraiburg expects the new plant to open in early 2007.

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