DuPont Co. plans to expand its South China nylon compounding capacity by 88 million pounds, as the company said demand continues to be strong in China's domestic auto market.
Wilmington, Del.-based DuPont plans to add a 66 million pound-per-year extrusion line for nylon 6/6 and a 22 million pound line for its Zytel HTN polyamide resin, with production targeted for mid-2009 at the company's existing plant in Shenzhen, said Philippe Hanck, sales and marketing director for DuPont's engineering polymers unit for Greater China, India and the Association of Southeast Asian Nations.
DuPont declined to reveal total capacity at the plant, but Hanck said it's part of a two-year period of heavy investment for the company in Asia, including adding compounding capacity for Zytel at its Ulsan, South Korea, plant, putting in capacity for specialty compounding in Shenzhen last year, and bringing a Singapore factory for the company's Vespel resins on stream this month.
Hanck spoke during an April 17 interview at the Chinaplas show, held April 17-20 in Shanghai.
China's automotive market remains a key driver of growth, and DuPont has seen 12 months of ``exceptional'' growth in Asia, Hanck said.
``Last year, in Asia, the first quarter of 2007 was very poor,'' he said. ``It had started in last quarter of 2006. After that we had exceptional growth, and the first quarter of this year has been exceptional. We have a period of 12 months of exceptional growth.''
But he said leading indicators are starting to show signs of slowing, rising costs have pushed some of the company's customers to move operations to Vietnam and other low-cost locations, and some export-driven markets have slowed down, as demand in the United States slackens.
The financial risk for some of the company's small and medium-sized customers has increased ``enormously'' as a result of tougher Chinese export regulations and the country's new labor law, he said.
For DuPont, however, orders have not slowed down in China, and that contradiction with broader economic trends is causing the company concern as it tries to plan how to approach the market, he said.
As well, he said raw-material costs from oil to ammonia have risen quickly.
``There has never ever been such a run-up in raw-material costs as in the first quarter of this year,'' he said. ``We have never had so many internal programs to reduce costs because we cannot ask our customers to take in everything, and we have never improved productivity so much, but it's not enough so margins have been eroding.''
He said some of China's rising costs present opportunities for DuPont as it drives companies to eliminate waste and look more seriously at engineering plastics to replace other materials.
Similarly, he said increasing Chinese vehicle emissions standards are boosting plastic demands: ``There is an incredible demand for engineering plastics and technology in China from the local market.''