Tired of being squeezed between resin price hikes and processors' resistance to another increase, Chinese compounders are integrating vertically and adjusting their portfolios by expanding in more promising sectors.
Kingfa Science & Technology Co. Ltd., China's largest domestic compounder, said it is moving upstream and filling niche resin markets such as high-temperature nylon and polylactic acid.
``It wouldn't make much sense for a compounder to start making commodity resins, but niche markets need strong players like us,'' Ji Jianliang said at last month's Chinplas show in Shanghai.
Ji is managing deputy general manager of Guangzhou-based Kingfa's Shanghai branch, Shanghai Kingfa Science & Technology Co. Ltd.
Kingfa first layed out plans to commercialize PLA production last fall. Since then, a few projects have been running, but the firm's annual PLA capacity remains undisclosed.
``Most PLA makers in China are small,'' said innovation department director Jeff Yang.
Kingfa's close relationship with Chinese processors translates to marketing advantages for new products like bioresins.
``Most likely, potential buyers of PLA are already using conventional plastic to make their products, be it bags or food-serving items,'' Yang said.
Kingfa also wants to grow beyond its core strength in the appliance sector, into information technology, construction and automotive. As a result, the firm is adding more specialized materials to its typical lineup of polypropylene-based compounds
In the first quarter, Kingfa's sales grew 40 percent nationwide, and the Shanghai branch scored a 70 percent increase.
At Shanghai Genius Advanced Material Co. Ltd., which claims to be the second-largest domestic Chinese compounder, automotive is the primary market.
``More than 60 percent of the product grades are for the auto industry, and 50 percent of sales come from auto,'' said marketing manager Aden Yang. ``High-end auto parts still need to be localized and the demand continues to go up.''
The 600-employee company operates 30 compounding extrusion lines in Hefei, eight in Shanghai and four in Ningbo.
In addition to compounds, Shanghai Genius is making composite sheet for car trunks and ceilings. ``We are also in the process of commercializing barrier polyethylene films,'' Yang said.
He said the processing business is more profitable than compounding.
``The market conditions are hard for compounders,'' Ji said. He pointed out that small compounders are going out of business, and the larger firms need to develop more competitive products.
Shanghai Genius does about $71.5 million in sales, and invests 10-13 percent of its annual sales in research and development.
A past Nobel Prize winner in chemistry, Alan J. Heeger, is a special adviser to the company's board.