China and India expected to increase global WPC market share

North American manufacturers of wood-plastics composites (WPC) products currently enjoy market dominance of the nearly US$2 billion per year global industry, but India and China will have a growing impact in the years to come, according to a report released by Exton, Pa.-based consulting firm Principia Partners.
Principia’s “Formulating and Processing Advances in the Global WPC Industry 2005”, released earlier this month, reported that most producers of WPC decking products in the U.S. have increased production levels to meet a growing market and have migrated to higher output production technologies with line capacities in excess of 2,500 lb/hr.
Producers of WPC products in China and India currently do not have the scale of operations to justify or afford the high capital investments needed for such large-scale operations, and typically operate at line speeds of below 500 lb./hr, according to the report.
But North American dominance may not hold, for several reasons.
First, the report said, recycled high-density polyethylene (HDPE) resin costing US$0.55 per pound in the U.S. could be sourced at approximately a 22 per cent lower cost in China and India.
Second differences in labour rates could favour the Asia Pacific region. For example, labour rates in North America excluding Mexico range from US$20 to $25 per hour.
By comparison, equivalent rates in India and China are up to 10 times lower and result in a 50 per cent lower plant labor cost, giving producers in India and China the potential to have the lowest cost of goods sold (COGS), averaging nearly 25 per cent lower than characteristic North American operations, Principa reported.
As a result, if the scale of operations increases and higher capacity equipment is deployed in China and India, the characteristic COGS in these parts of the world could drop even further, according to the report.
“Our analyses will help those requiring a better understanding about the cost position of various processing approaches and differences by major geographic regions of the world,” Lou Rossi, a partner at Principia, said. “This study benefits existing participants as well as those just looking to enter wood-plastic composites.”