Engineering Plastics Usher in Rapid Development Period
By Zheng Kai

With the rapid development of the manufacturing industry in
China, application sectors for plastics have become more
extensive and the consumption is increasing constantly. Owing
to their excellent mechanical property, electric behavior,
chemical resistance, heat resistance, abrasion resistance, size
stability, weather resistance, lighter weight than metal
materials and small energy consumption in molding, engineering
plastics have become products with the most rapid growth in the
plastic industry of the world. Both the capacity and the
consumption of engineering plastics will still maintain a rapid
growth in 2006.
    The Chinese Government will devote itself to the
construction of a resource-saving and environment-benign
harmonious society from 2006 to 2010. The shortage of energies
and resources that affect the long-term development in China
will be solved through implementing the medium and long-term
economic development program with independent innovation as the
core. The economy in China will take on the road of coordinated
and sustainable development. During the period from 1996 to 2005,
China regarded the "production technology and equipment of
engineering plastics and the high performance of
general-purpose plastics" as the high-tech commercialization
project of the state with development priority. During the
period from 2006 and to 2010 China will still regard the "the
production of composite materials, functional polymers,
engineering plastics and low-cost new plastic alloys" as the
project of industrial distribution readjustment encouraged by
the state.

1. Cost increase squeezes profits

Automobile and electronic/electric sectors are important
application sectors for engineering plastics. While developing
further in these two sectors, the market competition became
fiercer and more internationalized in 2005. The profit-earning
ability in some engineering plastic processing companies needs
to be improved.

    (1) Automobiles have higher requirements on material
property

Energy conservation and environmental protection have become
two major topics in the automobile industry. Light weight,
comfort and energy conservation are the latest trends in the
development of the automobile industry. More and more plastics
are being used in automobiles. The National Development and
Reform Commission has already formulated policies to speed up
the localization of automobile components and also defined the
fuel consumption standard for automobiles. Raw materials also
had a price rise in 2005. To reduce the production cost, many
automobile manufacturers have lifted restrictions on materials.
Compared with the electronic/electric sector, the processing
level of automobile components is improving rapidly today. New
processing equipment and processing processes have been used in
great quantities. The application level and the consumption of
engineering plastics are increasing constantly.

    (2) Electronic/electric requests quick localization of
material sources

The consumption of engineering plastics in the
electronic/electric sector accounts for 29% of the total. With
the export increase of electrical appliances, the consumption
of engineering plastics has presented a trend of rapid growth.
The low technical content and added value of domestic products
don't affect the huge demand of engineering plastics in the
manufacturing industry. Due to the cost pressure, the localized
supply of materials has become all the more urgent and provided
an extensive application prospect for engineering plastics.

    (3) Market competition is fiercer and more
internationalized

Attracted by the huge market demand in China in recent years,
multinationals have strengthened localized production and
expanded production scale in China so as to fortify their market
position and optimize resource distribution. The engineering
plastic sector in China will face with fierce internationalized
competition. To cope with such a situation, domestic producers
have to raise product's technical content, enhance service
consciousness and market development ability, increase R&D
input and avoid great waste caused by low-level redundant
construction and low-price unhealthy competition.
   The market demand of engineering plastics in China was robust
in 2005, but the profits in companies were thin. The growth in
the price of energies and raw materials was much higher than the
growth in the ex-factory price of industrial products. The
profit-earning ability in most processing sectors was affected.
The delayed payment in some buyers also led to serious capital
occupancy of products in companies. The consumption of
engineering plastics in 2005 increased by 11.9% compared with
2004, and the growth being lower than previous years. The main
reason for the growth reduction was the price rise of raw
materials. Many processing companies had to cut down orders with
thin profits and also use some reclaimed materials.

     (4) Recycle of scrap plastics becomes a focus

More attention has been paid to the recycle of scrap plastics.
There are mainly two reasons. One is to reduce the cost. The
recycle of scrap plastics is a market that can not be overlooked.
(It almost accounts for one fifth of the total consumption of
engineering plastics and has not been included in statistical
data over years.) The product quality is however not stable and
has to be standardized. Otherwise, it would cause an unsound
usage of engineering plastics and seriously affect the intrinsic
quality of downstream products. The other is to implement the
concept of cyclic economy, reduce environmental pollution and
save energies and resources.

2. Projection

With the impact from macro control and oil price, the growth of
the plastic industry in China will be slowed down in 2006. The
consumption growth will be down by 8 - 10%, but the capacity will
continue to have a two-digit growth. The market of engineering
plastics will be somewhat affected, but the overall growth is
expected to be 15 - 18%, still being higher than 2005. The
electronic/electric sector will still be a major application
sector. Automobiles, construction materials, high-grade
packing materials, sports/body-fitting equipment and medical
apparatuses will become markets with considerable growth. Due
to the restriction on the use of polyvinyl chloride, engineering
plastics will likely be used in the toy sector.

    (1) General-purpose engineering plastics

(i) Polyamide

In the engineering plastic sector the consumption of polyamide
is expected to be 260 thousand tons in 2006. The consumption
proportion will be 65% for polyamide 6, 27% for polyamide 66 and
8% for long carbon chain polyamide and high-temperature
resistant polyamide. The 50 thousand t/a polyamide 66 unit in
Shenma Group has already started production and its capacity
will expand to 100 thousand t/a. Shanghai Genius Advanced
Material Co., Ltd., Wenzhou Juner Polymer Materials Co., Ltd.
and Shangdong Yanzhou Mining Bureau are developing new
high-temperature resistant polyamide and long carbon chain
polyamide to replace imports. It is expected that with the growth
of the automobile industry and the accelerated localization of
automobile compo