GUANGZHOU, CHINA (Feb. 28, 2:40 p.m. ET) — China's thirst for cleaner water is creating opportunities for some plastics firms, as it pushes others to adopt cleaner manufacturing practices.
Addressing water scarcity is a top priority of the government, with analysts at the Hong Kong-based China Water Risk project noting it got “heavy mention” in the country's latest 12th Five Year plan, reflecting worries over long-term problems from water scarcity and pollution.
All that attention has plastics pipe manufacturers, makers of filtration systems and others expecting more demand, even as they face more pressure to clean up their manufacturing processes, judging from interviews at the Water China 2012 show, held Feb. 23-25 in Guangzhou.
“It is a big opportunity,” said Scott Wu, general manager for Glynwed Pipe Systems (Shanghai) Co. Ltd., a unit of Brussels, Belgium-based Aliaxis SA, one of Europe's largest plastic pipe makers.
Foreign manufacturers have some advantages, he believes: “Today in China and Asia there are lots of local players. Their weakness is technology and systems.”
Glynwed, which has a joint venture pipe extrusion factory with more than 40 production lines in Zhongshan, Guangdong province, sees cities using more plastic pipes in water systems, even as steel remains preferred for cost reasons, he said.
Still, he said governments in smaller cities like Zhongshan are now investing more in waste water treatment, following the lead of the bigger cities such as Shanghai, Beijing and Guangzhou, Wu said.
Glynwed is putting more focus on Asia generally, opening its first Asia headquarters January 1 in Malaysia, he said.
It moved a top executive from its Belgian headquarters to Kuala Lumpur to look at investment opportunities and oversee what had been separately-managed subsidiaries in Asia, Wu said.
Certainly environmental groups highlight water challenges. The China Water Risk project, which is funded and managed by the environmental philanthropy wing of Hong Kong investment advisory firm ADM Capital, estimated that the world faces a 40 percent shortfall in water supply by 2030.
“With climate change exacerbating water scarcity, water risks clearly are here to stay and businesses are starting to take notice as water, or rather the lack of it, affects their bottom-lines,” said CWR, which also noted that last year saw a meeting of the State Council, China's top administrative body, just to discuss water issues.
The meeting's “principal concern was China's ability to meet demand for water in the future, given current levels of water resources and pollution,” CWR said.
China's government did not in the past put as much attention to water, but that has changed and led to significant plastic pipe and fittings investment, according to Xie Tian Hui, general manager of Shanghai Carrier Special Valve Co. Ltd., who has worked in the plastic pipe industry in China for several decades.
“Now the government emphasizes technology to control and deal with wastewater” and drinking water, Xie said. “[The market] will develop better and better in these years.”
Shanghai Carrier distributes pipe from Taiwan-based pipe maker Hershey Value Co. Ltd. and does some of its own plastic fittings.
The Chinese market is also becoming more quality oriented, with pipe buyers are starting to put quality first and price second, a switch from their traditional price focus, Xie said.
Another China executive interviewed at the Guangzhou show, however, said the market in China remains very price-sensitive.
Many of the country's plastic pipe companies are smaller, privately-owned firms that find it difficult to attract investment, or must pay high interest rates from banks, said Jane Shen, China national sales manager for Compton, Calif.-based IPS Corporation, which makes additives for the plastic pipe industry.
“The cash flow is very tight in here,” said Shen, gesturing to nearby booths of local pipe makers. “This market, yes, it is huge, but it is very competitive with pricing. The cheapest will win the bid.”
One American firm said its China business has been growing.
Fairburn, Georgia-based filtration equipment manufacturer Porex Corp., which makes filters from polyvinylidene fluoride and polyethylene, said its China business has been growing and now accounts for 30 percent of global sales in filtration products, said Susan Shen, Beijing-based Asia sales manager. Porex established a Beijing sales office three years ago.
“For waste water it is a huge potential market,” she said, noting that much of the demand comes from factories that need to recycle wastewater. “The reuse market is growing a lot.”
Chinese factories are under increasing pressure to clean up their waste water, and some have taken advantage of a Hong Kong-government funded effort, the Cleaner Production Partnership Programme, to help pay for the work, said Vickie Xiao, senior engineer with the office of the Hong Kong Productivity Council in Shenzhen, Guangdong province. HKPC is a quasi-governmental group that supports upgrading among local manufacturers.
Hong Kong-based Ace Plastics Technology Ltd., for example, used the CPPP at a factory in Zhuhai, Guangdong province, to help pay for a 1.3 million Chinese yuan (US $206,000) selective ion exchange system to reuse waste water, Xiao said in an interview at the CPPP booth at the show.
The system reduced Ace's costs by about 15,000 yuan (US $2,380) a month, from both lower water consumption and lower costs to clean the water, and has a 10-year payback period, CPPP said.
“This kind of company uses a lot of water, and they must reuse their waste water,” she said.