China’s polyurethane sector is becoming more sophisticated as government demands on producers and consumers’ demands on products increase. Simon Robinson spoke with the team at Momentive.
Growth in the Chinese polyurethane market has started to slow because of the impact of several key factors. These include the aggressive rise in PU raw material prices and the government’s policy to improve EHS, as well as a drive to higher technology and higher quality products especially for the export market, according to Tony Lanchak, global vice president of urethane additives at Momentive.
Talking at the recent PU China 2017 event in Guangzhou, China, he said that the 13th five-year plan called for a nuanced approach to growth, with some polyurethane sectors scheduled to grow, some shrink slightly, and others to follow the average of flat growth.
‘Many processors have closed because of extremely strong health and safety enforcement,’ Lanchak said, adding that emphasis has been on smaller flexible foam producers. Anecdotally, Urethanes Technology heard of towns where the whole flexible industry had been closed, and it was up to companies to prove they met the required standards before they were permitted to reopen.
Chinese foaming technology and companies are expanding outside China, and beginning to go global. ‘We are seeing Chinese starting-up new foam plants in South East Asia as well as in the US. Both flexible and rigid producers,’ Lanchak added.
China’s local car manufacturers are starting to challenge the MNCs, and over the next five years or so, Lanchak believes China will start to export cars. ‘Today, we already see some of this, with Chinese made vehicles in Brazil, for example,’ he said.
Rising demands for higher quality products in China means that the density of foam is increasing.
Several years ago, flex foam was produced at densities between 15-20 kg/m3, but now density has risen typically to between 20-25 kg/m3, Lanchak said.
‘Foamers are moving from lower to higher density as the middle class in China is growing,’ he added. ‘If you look back five or 10 years, higher quality material was mostly exported, but now it is going into the domestic market and is made by local producers. Demand is going up the value chain.’
However, polyurethane growth is being held back in one area: building insulation. Here Ryan Huang, technical marketing manager for rigid foam in the Pacific and Asia said, ‘Government regulations have limited the use of rigid polyurethane as an insulation material because of fire standards.’
Globally for rigid foam, around 60% of volume is used in applications in construction and building. Combustion-modified high density foam, for example, is one area where there could be scope for growth if regulations were to change, he suggested.
Huang added that the domestic refrigeration market in China has matured. ‘Fridge makers are making bigger fridges, and side-by-side and three door models are becoming increasingly popular,’ he said. Fridges are replaced when there is a need to change them, typically once every 10 years, he added.
In the past, the Chinese government subsidised fridge purchases, and there is a feeling that this could be repeated in 2018. ‘The cold chain is booming. PU foam for cold storage and transport is booming,’ Huang added. ‘The growth is big, but it’s from a small base.
Lanchak claimed that the Chinese like to see the thing they are going to eat before they buy it. ‘But that is changing,’ he said. ‘China imports more food from overseas, and this need to be insulated in transit.’
There is a strong market for reefer containers, and cold storage has a very small slice of the panel market. Around 40% of China’s rigid demand is in this area. The refrigerated container market is growing at around 10%/year. ‘There is lots of room to grow,’ Huang added.
Lanchak said that the polyurethane industry faces competition from other materials in the rigid business because of the high cost of MDI. ‘In flexible foam, we also see the same thing,’ he added.
In products destined for the furniture and mattress businesses, Yilong Luo, Asia Pacific slab R&D leader, said that the PU industry is experiencing competition from fibres, steel spring and other forms of upholstery padding, just as in the west.
There is growth in niches, such as viscoelastic foam and flame lamination, which is still the largest use of flexible polyurethane in China, he suggested.
Flame lamination represents the biggest use of polyurethane at the car makers. ‘We are working hard to develop technology to save the customers money,’ Luo added. ‘This could be in developing additives that help give a more uniform block density.
‘It’s not just about dollars, but how to use the block and get more foam from it,’ Lanchak added.
At the same time, Momentive is working in China to develop lower odour foams, said flexible moulded foam technologist Mary Ma. ‘One of the big changes in China,’ she said, ‘is the move in the automotive sector to foams which emit lower levels of VOC, FOG and aldehydes.’
Lanchak believes that if a company is going to operate in China, it will need to have investment all the way back to raw materials. ‘Our model is to make where we sell,’ he said. ‘And today 80 to 95% of what we sell in the Pacific region is made in Nantong, one of MPM’s flagship sites.’
The company’s Shanghai Technology Center opened in 2008. ‘We have continued to invest across the Pacific, we’ve expanded our Nantong site several times since its inception, and we have offices, technology service centres and additional manufacturing in India, SEA, and Japan. We have people across all of Asia including Korea, Thailand, Indonesia, Vietnam,’ he said.
‘We think we are well invested in China. In the future growth will focus on Vietnam, Indonesia and the Philippines as well as India,’ he concluded. ‘The volumes are on a different base of course but they are following a similar path of China.’