Chinese companies that make wood-plastic composites think of themselves as a new, environmentally friendly industry, and one that so far has been basically immune from any economic slowdown. That's about to be put to the test.
The good news, though, as the industry sees it is that investment in WPC continues. Demand is still projected to grow more than 60 percent in the next two years, as China keeps building and the industry gets a lift from WPC products in high-profile events like the Olympics, the World Expo Shanghai in 2010, and the 2010 Asian Games in Guangzhou.
But there are signs that the fast-paced growth is coming under stress. Firms heavily involved in exporting are seeing slowdowns, as the housing crisis takes its toll in the United States and Europe, and the rising yuan, new labor laws and other domestic issues in China risk putting a damper there.
One of China's largest WPC firms, Qinchuan Future Plastic Machinery Co. Ltd., for example, said that the slowdown in the United States and Europe is having a big impact on exporters.
QC has several million dollars worth of inventory bound for export that's now stuck in warehouses in China, and others in the industry have similar problems, said Wayne Song, chief executive officer of QC. ``That is very bad for us.''
China's domestic building industry, a key market for WPC windows, doors and decking material, has not slowed down, but Song thinks it will see a delayed impact from the worsening global economic picture.
``I think it is delayed; it is not showing up yet,'' said Song, who believes there is also a risk of overinvestment in China's wood composite industry.
Song and other officials were interviewed at the China International Forum on Wood Plastic Composites in Shenyang. It was sponsored by the Wood Plastic Composite Committee of the China Plastic Processing Industry Association.
Other industry officials say they do not expect much slowing in the industry.
Toland Lam, the head of the China committee, said world economic problems are going to have a significant impact on overall gross domestic product growth in China, and that will not be good for wood composite makers.
But he predicted the impact will be less for the industry, which has been growing between 15 and 30 percent a year.
``When we look at the WPC industry you find out it may not be as bad,'' he said.
One factor, he said, is that the wood composites used in the Olympics and in the Shanghai and Guangzhou events will stimulate demand elsewhere in China. That's important for a new and relatively small industry that depends on getting out word of its products, said Lam, chairman of wood composite maker Meixin Manufacturing Co. Ltd. of Huizhou, China.
``The government people [planning the Olympics and the Shanghai and Guangzhou events] recognize WPC products,'' he said. ``When they recognize these materials, many cities will use them.''
China makes just 331 million pounds of wood-plastic composites each year, compared with 1.7 billion pounds in the U.S. Industry officials estimated loosely that the industry in China could grow to 551 million pounds of production in two years.
There are also real challenges.
Lam said the biggest challenge is poor quality and companies that focus only on cutting costs. It was a point echoed by others at the conference, and prompted calls from some industry leaders to set up a Chinese standard for the products, similar to that in the United States.
But the industry continues to attract investment, including some suggesting that companies are increasingly interested in upgrading technology.
German equipment maker ReifenhÃ¤user Extrusion GmbH & Co. recently sold its first wood composite line in China, to a customer that is going to make products for the domestic market, said Thomas Eisemann, head of sales for the firm's extrusion center in Troisdorf, Germany. German equipment can cost 10 times that of Chinese-made equipment, he said.
Chinese firms are upgrading as well. Song said QC Future has developed energy-saving wood-composite/aluminum windows that are rated to survive powerful earthquakes, and a two-screw extruder that can process up to 2,204 pounds of material per hour, including regrind.
Another conference speaker said the future of the global wood composite industry will not be in traditional markets like decks or doors, and urged the Chinese industry to innovate.
Mohini Sain, director of the Centre for Biocomposites and Biomaterials Processing at the University of Toronto, said companies should think about innovating and getting into markets like structural products, auto parts and other more lucrative markets.
Sain, who prefers to use the term ``natural-fiber composites,'' said, for example, that the auto industry will use three to five times more natural-fiber composites by 2015, to a worldwide average of 220 pounds per car, driven by cost and by a desire for greener materials.
He said some carmakers are using the materials in car bumper fascias, door carrier modules and underbody panels, replacing metal and all plastic parts. Europe is leading in natural-fiber composite applications in cars, he said.
``For the Chinese market, look for value added and good applications,'' he said. ``You can make not only doors, decks and fences but you can make stronger materials and much lighter materials.''
Sain said he thinks the industry will keep growing quickly, even in the face of an economic slowdown, in part because it is good for the environment, using waste wood, agricultural products and plastic to make usable products.
But oil prices will be important, with high prices helping the industry, he said.
``If oil is $100 a barrel, I think the market will drive in the direction predicted,'' he said. ``If oil prices go down, that is a different scenario.''