By Steve Toloken, Plastics News
Guangzhou, China -- While manufacturers around the world search for signs of economic recovery, China's domestic plastics industry appears to be picking up steam, spurred on by the government's large infrastructure stimulus spending.
Several leading plastics firms say their domestic business is returning to levels before the crisis, and one projection said the industry will resume overall double-digit growth in the second half of this year.
Any possible recovery could be uneven and fragile, however, because of continued severe overcapacity in manufacturing companies and struggles in the country's export sector, particularly in hubs like Guangdong province.
Still, some companies said they are bullish on strong local demand, particularly in industries like construction, automotive and electronics for the local market.
"From our orders you would say we have almost recovered from the bad situation," said Willis Guan, deputy president of global sales and marketing at China's largest compounding firm, Kingfa Science and Technology Co. Ltd in Guangzhou, Guangdong province.
But like others, he cautioned that it's hard to tell if it's sustainable, as sales have only approached pre-crisis levels in the last month or two.
China's largest injection press making company, Ningbo Haitian Plastic Machinery Group, said domestic sales have climbed to pre-crisis levels since April.
A Haitian executive told Plastics News at the NPE2009 show that the country's 4 trillion yuan ($586 000 million) stimulus package has helped boost consumer confidence and ultimately orders, but he also said Haitian may be faring better than other Chinese manufacturers because of an upgraded product mix.
Statistics show some signs of an uptick. The country's largest plastics industry trade group, the China Plastics Processing Industry Association, projected in June that growth in the second half of the year would be more than 10 percent, from just over 9 percent earlier in the year.
The country's Ministry of Industry and Information Technology said plastic end-product output grew more than 7 percent in the first five months of the year, even as export output declined 12 percent. More broadly, China's GDP rose 7.9 percent in the second quarter, up from 6.1 percent in the first quarter.
The growth reflects a trend of Chinese firms focusing less on exports and more on their domestic market.
"We see some structural changes in the China plastics processing industry and the growing demand as a consequence of our customers adapting to their own drop in exports," said Helmar Franz, executive vice president at Haitian in Ningbo, Zhejiang province. "Chinese molders are able to do this very fast."
For some export-oriented firms, though, conditions remain very difficult.
Alfred Au, vice chairman of the Hong Kong Mould and Die Council, said that business in export sectors like mould making for mobile phones and electronics are off 50 percent. He said manufacturing in China has substantial overcapacity, agreeing with a June estimate from Hong Kong industrialist Victor Lo that there's roughly 30 to 40 percent manufacturing overcapacity in the export-oriented South China region.
"If you visit those manufacturers now, most of them are working at 30 to 40 percent of their capacity," said Au, who believes the changes are permanent and the previous boom times for China's manufacturers will not return as they had been.
"I think the golden period is past - it is not just a seasonal problem," said Au, who is managing director of Hong Kong-based Inmold Technology Ltd. "We are facing the most complicated time in our lives."
Chinese extruder maker Nanjing Giant Machinery Co. Ltd. said it is seeing signs of improvement - sales are now at about 80 percent of pre-crisis levels, compared to 50 percent earlier in the year.
But it's not clear if conditions will improve in the next few months, said General Manager Huo Qingxian, who said business at the Nanjing, Jiangsu province based firm remains tight and customers continue to ask for steep discounts: "It's very, very quiet… Everybody wants to keep money in their pocket."
Some firms interviewed said they are pushing ahead with investments.
Kingfa is planning to build a factory in Zhuhai, Guangdong province to focus on biobased plastics, and Hong Kong compounder Ngai Hing Hong Co. Ltd plans to set up a small facility in Tai Po, Hong Kong, to take advantage of new tariff arrangements under the Closer Economic Partnership Agreement between Hong Kong and mainland China.
Ngai Hing Hong director Anthony Wong told Plastics News that the company's mainland Chinese business is at levels it was before the economic crisis and growing solidly, and its exports are showing some, albeit fragile, signs of picking up.
But he said ultimately, the Chinese economy is not decoupled, and a full recovery will be linked to how the rest of the world does: "The future still depends on the worldwide economy."