China's wood-plastic composites companies hope that rising exports to Europe and a developing internal market will help offset slumping demand from North America, previously their mainstay market.
For the time being, that's what seems to be happening. Despite a lack of hard data, industry leaders at a recent conference said demand from new regional markets has kept business solid for many of China's biggest composite profile extruders.
“A lot of WPC [wood-plastic composite] plants, they have a really good export business and are not much impacted by the financial crisis,” said Toland Lam, president of the Wood Plastic Composites Committee of the Beijing-based China Plastics Processing Industry Association. “Most of them have more orders than they can produce, and a lot of them have to add capacity.”
His Huizhou-based firm, Meixin Manufacturing Co. Ltd., has upped annual output this year to 39.7 million pounds, five times what it was two years ago, Lam said at the China Third International Forum of Wood Plastic Composites, held Nov. 19-20 in Shenzhen.
Meixin's sales to North America have suffered, but European demand is picking up dramatically. Also, sales to customers in China are growing and now account for about 20 percent of Meixin's production, he said.
Europeans, who were slower to take up wood-plastic composites products than North Americans, have started to buy more, said Lam, Meixin's chairman. Europe lacks enough of its own domestic plants to fill those orders, he said.
“Even in the financial crisis, we have more orders than we can handle,” said Lam, who claimed that situation is also true for other large industry players in China.
Wayne Song, president of QC Future Plastics Machinery Co. Ltd. in Baoji, said the Chinese industry is seeing wood-plastic composite demand rise worldwide. Mainland China, in particular, represents many potential, untapped markets, he said.
“I would say it's the maturing acceptance of WPC around the world,” said Song, who also is president of Futuresoft Technologies Inc (USA) in Milburn, N.J. “Before, it was just the United States and Canada that accepted it, but now it's the Europeans and the Middle Eastern countries.”
But Song, who sits on CPPIA's wood composites committee, also said the financial crisis has created space in North America for Chinese-made products, which are “still relatively cheaper.”
In China, getting solid industry facts to back up assertions can be tough. But the committee estimates 60 percent of Chinese wood-plastic product exports are now bound for Europe — a switch from the a few years ago when most of them went to North America.
China's wood-plastic composite production has roughly doubled in the past two years, to about 330 million pounds, and it remains very export-dependent, the committe said. At least 70 percent of the wood-plastic composite products made in China are exported, though that has fallen from about 80 percent a year ago as demand in China rises, according to committee statistics.
The fast expansion in recent years also has left the industry with significant excess capacity. The committee estimates total capacity in China of about 1.1 billion pounds, suggesting capacity utilization is at only 30 percent.
That has left some firms struggling for work, even as others are adding capacity to meet new demand, Song said. Still others get into the market just on the anticipation of future growth, he said. “In China, if people see opportunity, everybody jumps.”
Song said many firms' profit margins remain low and companies, like his, that do a large piece of business with the U.S. could be hurt if the yuan continues to rise in value against the dollar.
Lam and others said the wood-plastic composite investment is following the typical Chinese industrial pattern of massive growth leading to massive excess capacity — as now is the case in solar power equipment. Demand eventually catches up, they said.
“This is a temporary overcapacity,” said Ji Jian Ren, a Meixin engineer. “The domestic requirement for WPC is increasing rapidly.”
China's growing wood composite industry is much smaller than in the U.S., which has about five times China's annual production.
But China has very strong domestic potential, Song said. He said his firm and several others have developed wood-plastic composite/aluminum frame windows for the local market, and are targeting interior applications.
China's window and door market is growing 11 percent a year, he said. The country's window, door and wall panel market is the largest in the world, about four times that of Europe, he claimed.
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