Guangdong Liansu Technology Industrial Co. Ltd., which claims to be China's largest manufacturer of plastic pipe, plans a major push into the U.S. market.
The privately held company plans to spend about 200 million remnibi ($25.7 million) to add significantly to its capacity this year, and will use some of that to start exporting smaller-diameter PVC pipe for residential, commercial and industrial uses to the United States. If the plan is successful, Liansu believes it will become the first Chinese firm to ship significant quantities to the U.S.
Liansu plans to add 50 extrusion lines at its headquarters in Foshan, China, in 2007, giving it about 200 lines total.
Company officials would not disclose sales targets for the U.S. but said they have a long-term U.S. market strategy to sell pipe of 6 inches or smaller in diameter, the size they say is economical to ship from Asia.
``Our goal is to have a big market share in the U.S. market regarding piping, fittings, decking and vinyl fencing, especially for the piping and the fittings,'' said Wes Wang, North American regional sales manager, in a Feb. 12 interview at the company's headquarters.
``It's just the beginning ... [but] we have already invested a lot of money in this project,'' he said.
Previously, Chinese pipe firms have shied away from the U.S. market, in part because of stringent certification requirements. But Liansu officials said they manufacture to ASTM International standards and have some of the approvals needed, such as NSF International certification for some of their pipe and fittings, and expect to get all necessary approvals soon.
Victor Lin, vice president and director, said Liansu is looking for links to the U.S. market and is talking with a large U.S. pipe manufacturer about supplying some products that would be rebranded by that firm. It also is interested in selling its products directly and building the Liansu brand name in North America, Lin said.
Officials said they think lower labor costs and the firm's technology will allow it to sell pipe and fittings for 5-10 percent less than North American competitors, even after shipping, with a lot of that savings coming from the cost of molding fittings on its 500 injection presses.
The cost of resin is about the same in China as in North America, but Lin said Liansu's vertical integration into manufacturing extrusion machines gives it cost and technology advantages.
Its machinery unit makes about 200 extruders a year, with almost half used internally by Liansu. The company said it wants to explore making PVC powder, as well.
The firm started a 100-person research and development center in Foshan in 2003, and puts 2-3 percent of its annual sales of about RMB 3 billion ($386 million) into research, Lin said. The research center also gets some government funding to work on broader projects.
Of course, it can be a long way from ambitious plans to success in a market, particularly when going to another culture. But a tour around Liansu's mammoth campus - home to several thousand employees in Foshan, about 70 miles from Hong Kong - makes it clear that the company has substantial resources.
Lin said the company currently owns eight pipe-making plants in China and Vietnam, and is building three more manufacturing campuses in Beijing, Nanjing and in the area of Qiqihar.
It's unclear how North American competitors will react. An attempt by some Asian plastics firms four years ago to enter another segment of the U.S. building products market - vinyl window profiles - led to trade friction.
In that case, after several Asian profile makers received U.S. certification, U.S. companies questioned whether foreign profiles could be inspected properly for contamination from lead and other hazardous materials. As a result, the American Architectural Manufacturers Association tightened its certification requirements, limiting overseas profiles.
Robert Walker, executive director of Uni-Bell PVC Pipe Association in Dallas, said in an e-mail that his members have not expressed any similar concern about pipe imports from China. He said he was not aware of any substantial plastic pipe exports from China to the United States.
Wang acknowledged that some of Liansu's Chinese competitors question the wisdom of trying to compete overseas in a market of relatively low-value products, where shipping can be expensive.
``People say we are crazy,'' he said. ``If you want to take Americans' market share, your price has to be very competitive.''
Less than 5 percent of Liansu's pipe is exported today, but Wang said the firm wants that figure to reach 50 percent worldwide in five years.
Lin said the company's Chinese markets continue to be strong. The country's real estate sector remains solid, despite some government concern that it is overheating, and the company's diversification helps it weather downturns in specific segments.
Liansu has the capacity to make about 396 million pounds of pipe a year, from PVC, polyethylene, polypropylene and materials like plastic-metal composites. The firm is owned by Wong Luen Hei, who founded it as a plastic drainage pipe maker in 1986, when he was in his mid-20s.
Pipe accounts for about 90 percent of its sales, but the firm also has units for making electrical products and trading in chemicals. It is also trying to launch into the wood-plastic composite lumber market, including sales to the U.S. market, Wang said.