With a 25% sales increase in 2010 and a double-digit sales growth forecast for 2011, Rhodia Engineering Plastics is on track to boost its compounding capacity in China. The company expects to complete a 40% expansion at its Shanghai facility by July.
The expansion is needed in order to follow the growth of the market, said Frank Laganier, engineering plastics Asia Pacific director. The recent acquisition in India will add some capacity, but it will soon be absorbed in the regional market, he said. Rhodia had also announced a 10% expansion in South Korea in May.
The Shanghai plant, which opened in 2006, was designed for twice its current capacity, the company said. After the current expansion, one more capacity increase is planned for 2013, to ultimately reach the designed capacity.
Rhodia said it will be adding jobs at the Shanghai site to operate the new line as well as to manage logistics for the extra production.
Speaking of the booming auto sector in China – a major end market for Rhodia’s nylon products, Laganier said the 30-plus percent growth rate in 2010 “does not seem sustainable in the long term”.
While strong domestic demand continues to drive the industry, car production growth rate is likely to slow down in 2011, back to more “reasonable” levels, he said. The Chinese government has ended a tax break for the purchases of small cars, and Beijing is limiting the number of licenses plates to curb traffic.
At the same time, however, the use of engineering resins for auto applications will continue to grow rapidly, as automakers in China strive for weight reduction and better fuel efficiency.
Chinese manufacturers are still “very shy in using [nylon] engineering resins for applications that are very common for Rhodia's customers in Europe and [South] Korea,” Laganier noted. There is plenty of market potential, as nylon consumption in each car climbs from a current average of 5kg to the standard consumption of 15-20kg.
Some Chinese automakers are also making progress into export markets. Great Wall Motor’s recent announcement that it will invest in an assembly plant in the Philippines is a good example of the trend to produce auto parts in China that will be assembled in other countries, he said.
Rhodia Engineering Plastics expects China sales to grow around 15% in 2011. Auto market will remain strong, and the electrical and electronics market — which was slow during the second half of 2010 — is showing a solid recovery, in spite of the upcoming Spring Festival.
“2011 will probably be a good year for engineering plastics in Asia in general, and for Rhodia in particular,” Laganier said.
Rhodia increases its production in China