Development of the composite market in China
(Published on September 2007 – JEC Magazine #35)
AN INTERVIEW WITH Zhiping SONG CHAIRMAN OF CHINA NATIONAL BUILDING MATERIALS GROUP CORP. LTD (CNBM)
JCM: In your opinion, what is driving the composite market in China today?
Mr. Z.P. Song: Well, to put it simply, the acceleration of the industrialization process in China, the demand generated by domestic growth, and the increase of exports are the main forces driving the development of the Chinese composite market.
According to statistics, China has become the largest producer and consumer of unsaturated polyester resin and epoxy resin in the world. In 2006, the unsaturated polyester resin output was 1.03 million tons, epoxy resin was 520,000 tons, and glass fibre reached 1.2 million tons. This is equivalent to the production level of the USA in 2004. Composite materials have developed rapidly with a double-digit annual growth rate. China’s composite output reached 2.26 million tons including 1.4 million tons of thermoset composite materials, 480,000 tons of thermoplastic composite materials and 380,000 tons of copper-coated laminates, ranking second in the world after the USA. Composite product sales in China were approximately USD6.95 billion. It should be noted that the price of FRP products remained very low for many years, about one fourth of international prices, hindering the healthy development of the Chinese composite industry.
With the rapid growth recorded over the past decades, the applications for composite materials are also expanding rapidly in China. At the moment, composite materials have thousands of applications in industries such as automotive, aircraft, boats, construction, aerospace, wind energy, offshore oil/gas, pressure vessels, national defence and sports goods.
The launch of the Chinese-manned space shuttle and large aircraft programmes provide great opportunities for the development of advanced composite materials and related technologies, which will lead to technological progress and product upgrading in the composite industry. China’s scientific development and sustainable development strategy herald a bright future for the development of energy-saving and environmentallyfriendly composite products, such as those used in desulphurization engineering, CNG gas bottles, wind turbine blades, methane tanks and recyclable thermoplastic auto parts. It is estimated that the average annual growth rate of wind power in China will be more than 40% over the next few years. The increasing demand for composite materials for wind power applications should not be neglected.
Tariffs have reduced since China became a member of the WTO, which helps Chinese composite companies to import highquality raw materials, introduce advanced technology and equipment, and export composite products and equipment. At the moment, many composite products are being exported to Asia, Africa, Europe and America, and the equipment being exported is rather competitive and wellaccepted by international markets. The expanding domestic demand and sustained export increase are two important engines driving the development of Chinese composite materials.
JCM: You are a leader in this business. Can governmental policies influence the development of the composite market?
Mr. Z.P. Song: Whether in China or in any other country, the orientation of governmental policies always tends to affect the development of the composite market. The Chinese government has been advocating an economical society, encouraging environmental protection and the development of clean energy. Stepping back in time, China’s macro-policy has always provided ample room for the development of the composite market. Take the rotor blade market for example. China voted in a renewable energy law on January 1st, 2006, triggering the fast development of the wind energy industry. China’s new installed capacity for wind energy reached 1,347 MW in 2006, more than twice the past total installed capacity. The total installed capacity has now reached 2,604 MW, making China the sixth largest market in the world.
Therefore, the fast development of wind energy provided a vast market for the composite rotor blade industry. In this field, the National Development and Reform Commission intends to generate a total accumulated installed capacity of 15,000 MW by 2015, 30,000 MW by 2020, 100,000 MW by 2030, and 400,000 MW by 2050. Their objectives will be achieved in advance due to policy encouragement. As another example, China’s government strictly and clearly legislated to stop smallscale glass fibre production (crucible process) that is energy-consuming, highlypolluting and inefficient in order to promote direct melting E-glass fibre production, which is an energy-saving, high-efficiency and high-quality technology. These policies and stipulations clearly promote technological progress and quality improvements in the Chinese glass fibre industry.
JCM: How can the composite sector progress in China?
Mr. Z.P. Song: I would like to make it clear that it is the rapid development of the Chinese economy – especially the increasing demand for high-quality composite products – that promotes the development of the Chinese composite industry. As company managers, we attach great importance to the role of the following factors in the development of composite materials:
Taking full advantage of the national industrial policy supporting composites
Owing to their excellent overall performance and energy-saving production processes compared to traditional materials like steel, cement and aluminium, composite materials are drawing much attention from the Chinese government and authorities. The Chinese government has already designated them as a ‘sunrising’ industry and formulated relevant industrial policies to encourage their development. For example, the research and application of composite materials have been incorporated into the key government-funded scientific research programmes. Composite businesses listed as “modern high-tech enterprises” can be granted preferential treatment in terms of land and tax benefits. Composite fishing boats can benefit from preferential treatment and registration fees for replacing old wooden boats. Having their products elected “Famous products of China” stimulates the commitment of companies to improve the performance and quality of their composite and glass fibre products, which to some extent raises the overall level of the industry.
Advocating scientific and technological innovation to boost development
We firmly believe that it is only by scientific and technological innovation that a company can maintain its core competencies. In order to encourage innovation, CNBM grants awards annually to the subsidiaries, projects and individuals who have made progress in saving energy, reducing emissions, reducing costs and improving quality. For instance, the programmes “R&D of FRP products used in desulphurization engineering”, “Research of an engine hull for launch vehicles in space activities” and “Carbon fibre hull with a reinforced network structure integrally produced by the filament winding process” all received the CNBM award in 2006. This way, we promote the commitment of companies to scientific and technological innovation. We are committed to integrating production, education and research to ensure that scientific and technological achievements can be efficiently converted into productivity. Large domestic companies such as Taishan Fiberglass Inc., Jushi Group and Zhongfu Lianzhong Group all have R&D centres that are helping to build a solid foundation for technological upgrading and new product development.
Adopting international practices and actively taking part in international communication
Chinese composite companies have realized the importance of adopting international standards in international cooperation and trade. By introducing advanced technology and equipment, and participating in international professional events such as JEC, ACMA, China Composites and SAMPE, Chinese composite companies are gradually bringing their product quality standards up to scratch with international standards, which improve the quality level of their products to a large extent. Nowadays, Chinese composite companies are capable of providing composite parts for the world’s leading aircraft manufacturers such as Airbus and Boeing, and for Chinesemanned space crafts, “Long-March” rockets and satellites. This indicates that Chinese composite materials are gradually becoming recognized and accepted by the international market. Composite parts jointly manufactured by Chinese companies and their French, German and Japanese partners are used extensively in the carriages for a new type of high-speed Chinese train.
Cultivating our talents
In China, more than ten universities have set up degrees in composite materials. They provide hundreds of professionals to the composite industry every year. To solve production problems arising in small and medium-sized companies, the relevant industry associations have organized various activities such as technical exchanges and professional training courses to promote the technological progress of the composite industry. Moreover, the training and development of production employees should not be neglected. The Zhongfu Lianzhong Group could serve as a good example. To meet technical requirements for the production of wind turbine blades, the Group provides special technical and production training which greatly enhances the quality and production skills of its employees.
JCM: Which sectors are to be explored in particular?
Mr. Z.P. Song: At present, CNBM’s composites business platforms mainly focus on glass fibre, fibre products and composite materials. In April 2007, we brought the world’s largest direct melting E-glass fibre line (with an annual capacity of 120,000 tons) into production. Since then, CNBM has become the largest glass fibre producer in Asia with a total capacity of 310,000 tons per year. It is also one of the largest glass fibre producers in the world. We will continue to improve our glass fibre production capacity and strengthen our development efforts in large-scale production and specialization to become the largest glass fibre producer in the world.
As far as composite materials are concerned, we are mainly focusing on advanced products such as pressure vessels, rotor blades, high-pressure oil pipes, composite products for tertiary petroleum production, insulation products and pipes for nuclear power stations, water pipes, tanks for the chemical and food industries, desulphurization, boats and yachts, and auto parts.
The development target of CNBM’s composite business is to meet the market demand by enhancing R&D into new technologies and products, focusing on new energy solutions, environmental protection, transportation, and sports and leisure applications. We will emphasize the development of new technologies and processes for large composite wind turbine blades to improve efficiency, lower costs, further reduce harmful emissions and reach an environment-friendly production process. The China Composites Group Corporation (CCGC), a subsidiary of CNBM, introduced German technology and equipment for a 1.5 MW rotor blade in 2005, and put it into production in March 2006. By the end of 2007, CCGC will reach a capacity of 600 sets of 1.5 MW rotor blades. With a view to meeting the European market demand, CCGC acquired the German company NOI at the beginning of 2007 and incorporated SINOI, which is not only an overseas R&D centre but also a 2 MW rotor blade producer with an annual output of 100 sets. We have launched an R&D plan for 3 MW rotor blades to meet the Chinese market demand. By 2010, we will achieve an annual capacity of 3,000 sets of MW class rotor blades that will be compatible with a variety of wind conditions and power requirements in order to become the main supplier in the Chinese rotor blade market and a major supplier in the global market.
Additionally, we will enhance our R&D and improve our production capacity for composite boats & yachts and highpressure bottles according to the market demand.
JCM: What is your strategy for CNBM’s development in China and abroad?
Mr. Z.P. Song: In the 21st century, CNBM is entering a promising era of development. Economic globalization will radically change the competitive situation in the Chinese building materials industry. The local industry urgently needs to incorporate strong groups to face this challenge. The rapidly expanding national economy and the soaring demand in both domestic and overseas markets represent great opportunities for the fast development of CNBM. China’s sustainable development strategy sets higher technological requirements for our company and we must have strong scientific and technological innovation capabilities. Therefore, the development strategies of CNBM focus on the following four aspects:
Scientific and technological innovation
Scientific and technological innovation is a fundamental way to improve any company’s skills. CNBM is an innovative company and regards innovation as a life force and a source of development. Technological innovation, management innovation and system innovation have been identified as an important base for us. The group will put more effort and investment into the renovation of traditional industries with advanced technologies, into R&D, and into the production of new products and equipment. The group’s scientific research institutes and state-grade technological centres need to cooperate with manufacturing units to improve their scientific innovation capabilities. They also need to develop core specialties and help accelerate progress in technology so as to boost the group’s development, making scientific and technological innovation one of the key pillars supporting the development of CNBM.
Economic globalization has dramatically changed the structure of competition, which calls for the emergence of a leading group to address the resulting challenges. Through the reallocation of resources and industrial integration, CNBM is becoming the Chinese leader in the building material industry. We have grown into a multibusiness group with core specialties through strategic reorganization and restructuring. By doing this, we are able to use resources more efficiently, reduce production costs and develop high-tech products.
We are optimizing our export structure by increasing our exports of a) complete sets of technology and equipment, and b) hightech, high-quality and high-value-added products, while decreasing our exports of resource-based products. By stressing international communication and cooperation, CNBM is becoming one of the world’s leading suppliers of comprehensive services in the global building materials industry.
In March 2006, the group was listed on the Hong Kong Stock Exchange for the first time, becoming a major player in the international capital market. This is a milestone in our development towards a world-class building materials company. So far, the group has four publicly listed companies. Its target international markets in the short term are the Middle East, Southeast Asia, the Commonwealth of Independent States, South Asia and Africa. We will explore the international market gradually in the future. Our ultimate goal is to grow into a world-class building material manufacturer.
Invigorating the company through human resource development
Our strategy is to keep our leading position in recruiting, using and retaining talented people in management, science and technology, so as to provide substantial personnel and intellectual support for the scientific and technological innovation of our subsidiaries.
JCM: What is your main target and do you plan to invest?
Mr. Z.P. Song: The targets of CNBM’s composites business are: 1) to build it into a core industrial platform of civil composite products, to stride forward as a mass industrial group with technology and market leadership focusing on energy, environmental protection, construction, transportation, boats and yachts, and leisure industries; 2) to implement a basic mass industrial strategy by consolidating current assets, expanding CNBM through mergers and acquisitions at low cost; 3) to place emphasize on building the Tongxiang glass fibre production base, the Lianyungang composite industrial zone, the Changzhou composite production base, the Weihai boat & yacht production base, and to gradually develop so as to become a leader in the glass fibre and composite products industry in China. We will devote more investments to our glass fibre production base in order to further improve our quality level and capacities, broaden our glass fibre product ranges, and work to become the world’s largest glass fibre producer.
Over the next three years, we will put emphasis on building the Lianyungang composite industrial zone in order to increase our market share through continuing growth of our earnings in FRP pipes & tanks, high-pressure bottles, and desulphurization equipment. We will appropriately adjust the product structure, support and invest in composite rotor blades, according to country and market demand. CNBM’s annual production capacity for MW class rotor blades will be more than 3,000 sets by 2010, and we’ll become the main supplier in China and a major supplier in the world, joining global competition.
In the Changzhou composite production base, we’ll support and invest in the development of glass fibre mats and new functional floorings, taking advantage of our core technology, the high market demand and high added value to keep a leading position in China.
We already have the best local production base for composite fishing boats and yachts in Weihai (Shandong province) and our products are exported to Asia, Europe and Africa. Leisure and amusement have become an indispensable part of human life as living standards keep increasing. Luxury yachts should become a hotspot of consumption for families and companies over the next 10 years in China, with better market prospects. We’ll manufacture high-value-added luxury yachts at a suitable time to develop the potential local market.
JCM: What is CNBM’s position in the world? Do you have any overseas development plans?
Mr. Z.P. Song: As the largest manufacturer of building materials in China and a provider of comprehensive services in the global building materials industry, CNBM’s philosophy is to make “efficient use of resources to serve the society”. Our aim is to become one of the most competitive transnational corporations in the global building materials market through extensive international cooperation. CNBM has established close relationships with more than 20 well-known global companies including Saint-Gobain and Lafarge (France), Kingfisher and Pilkington (UK), Knauf (Germany), Fugro (Netherlands), Armstrong Holding Inc., Johns Manville and Owens-Corning (USA), Mitsubishi, Nippon Steel and Toli (Japan), Cemex (Mexico) and LG (South Korea). Subsidiaries such as BNBM Homes Co. Ltd., B&Q Shenzhen, Changzhou Liberty Toli and Changzhou Zhongxin Tianma Glass Fiber Products Co. Ltd. have set up strategic partnerships with famous companies from Japan and the USA, among others. With strong R&D and a complete set of equipment, CNBM and its subsidiaries have won contracts for more than 50 engineering projects such as largescale production lines for float glass, cement and ceramic tiles in the Middle East, Africa, Southeast Asia, and South Asia.
The group has witnessed a rapid increase in both imports and exports, with a total volume amounting to USD1.13 billion in 2006.
By implementing a strategy of “going global”, CNBM has set up branches in the USA, Japan, Australia, Vietnam, etc., and subsidiaries in the USA, Hong Kong, the UAE, Papau New Guinea, and Russia. In the first quarter of 2007, the CNBMfunded Huaxia Composite Corporation Ltd was established in South Africa. Production lines with an annual capacity of 10,000 tons of chopped strand mat were also commissioned.
Initiating an overseas acquisition plan was an important move at the beginning of 2007. CNBM announced the acquisition of NOI Rotortechnik GmbH (NOI), a German wind turbine blade company, in January 2007. This acquisition not only initiates the group’s overseas acquisition policy but it also strengthens our belief and resolution to go global and become a world competitive manufacturer of composite materials.
In the years to come, CNBM will adhere to its philosophy of mutually beneficial cooperation and excellent services, with the goal of offering a better return. CNBM is going global step by step.
|China National Building Material Group Corporation (CNBM) is a state-owned enterprise in charge of administrative affairs in building material industry. |
CNBM has a total assets of 20 billion RMB yuans (1,9 billion euros or 2,6 billion dollars); a staff of 30,000; 200 affiliated companies; four publicly listed companies in which CNBM has a controlling percentage of shares; 11 publicly listed companies in which CNBM has a substantial percentage of shares. CNBM is among the top 500 Chinese companies.