Demand Growth for PU Sole Undiluted Liquid Slows Down

By Wang Lei

High capacity in China

The output of shoes in China was more than 9.0 billion pairs and
the export amount was 6.9 billion pairs in 2005, accounting for
50% and 75% of the world total respectively. The capacity of PU
(polyurethane) sole undiluted liquid in China reached 534
thousand t/a in 2005, accounting for 75% of the world total.
   The production of PU sole undiluted liquid in China is
contributed by Zhejiang and Guangdong provinces. The capacity
in these two provinces accounted for 75% of the national total
in 2005. Production is also made in Shandong, Fujian, Sichuan
and Jiangsu provinces.

Great impact from shoe export

The export of shoes in China is faced with many difficulties in
recent years and the production of PU sole undiluted liquid is
also affected. Due to the antidumping activity launched by EU
against shoes from China and the restriction on shoes from China
imposed by Argentina, Brazil and Turkey in 2005, the export of
shoes in China met obstacles and the demand of PU sole undiluted
liquid was affected. The drastic price rise of raw materials in
2005 also increased the production cost in PU sole undiluted
liquid producers. Medium and small producers were shut down or
shifted to other products. The output of PU sole undiluted liquid
in China was 195 thousand tons in 2005, a drop of 11.4% from 2004.
   The PU sole undiluted liquid market in China today has the
following features:
    (1) Large producers have prominent advantages
    Owing to low production cost and high product quality, large
producers such as Huafeng Group have entered the stage of benign
development. Some producers have acquired the price negotiating
power for main raw materials and further consolidated their
competitive advantages.
    (2) Medium and small producers are faced with greater
pressures
    Due to fierce competition, medium and small producers are
faced with greater pressures. They are more sensitive to market
factors and there are also more frequent price fluctuations of
products.
    (3) Production is more concentrated
    Compared with previous years, the production of PU sole
undiluted liquid is matched more closely to the distribution of
the shoemaking sector. Wenzhou is the center of the shoemaking
sector in China and owns nearly 600 shoe producers. It also holds
50% of the PU sole undiluted liquid capacity in China and
large-scale production has already been formed in the city.
    (4) Production is shifting to the western region
    The shoemaking sector in the eastern region has absolute
advantages, but is already faced with the pressure of increasing
cost. The western region has abundant raw materials, labor
resources and extensive markets and the investment condition is
also improving. The shoemaking sector and related sectors such
as PU sole undiluted liquid started the shift to the western
region in the past 2 years.
   Besides export barriers, the PU sole undiluted liquid market
in China will also have impacts from following factors. (1) Raw
material supply and price fluctuation: The raw material supply
deficit and the great price fluctuation in the past 2 years have
produced a great impact on the PU sole undiluted liquid market.
The supply/demand of major raw materials, pure MDI
(diphenylmethane diisocyanate) in particular, will continue to
affect the development of the sector. (2) Substitution of EVA
(ethylene-vinyl acetate copolymer) sole material: Due to the
price factor some shoe producers using PU soles shifted to use
EVA sole in 2005. The shift constituted an important factor
affecting the PU sole undiluted liquid market in 2005.
    The PU sole undiluted liquid sector in China will grow stably
after 2006. The output of PU sole undiluted liquid is expected
to reach 316 thousand tons in 2010.
    The demand growth of PU sole undiluted liquid in China has
been much slowed down. A rapid growth can hardly be seen in future.
Expansion projects are however still being executed. The
competition in general-purpose products is therefore becoming
fiercer. Efforts must be made to control further capacity
growth.
    PU sole undiluted liquid producers in China have great
number, small average capacity and uneven technology level.
Medium and small producers have high energy/material
consumption and low productivity. That is the major problem in
the development of the sector. Efforts should be made to foster
large companies, eliminate outdated capacity and enhance
overall competitive edge.

Major PU Sole Undiluted Liquid Producers
          in China in 2005           (thousand t/a)
Producer                                Capacity
Wenzhou Huafeng Group Co.                   100
Wenzhou Yutian Resin Co.                    60
Wuxi Double Elephant Chemical Industry Co.    60
Wenzhou Detai Resin Co.                     20
Wenzhou Dengda Chemical Co.                 26
Foshan Gaoming Yecheng PU Co.                24
Wenzhou Longfeng Chemical Industry Co.      20
Jiangsu Yutian Kunshan Chemical Co.         20
Jinjiang Taixingda Rubber & Plastic Co.     20
Yantai Huada Chemical Industry Co.            20
Zhongshan Kao Chemical Co.                  19
Dongguan Baojian Shoes Material Co.         18
Guangzhou Dongsung Chemical Co.              16
Source: CNCIC