The allure of the Chinese coatings market remains strong, as two of the top coatings companies—Akzo Nobel and DuPont Performance Coatings—announced plans to expand their operations in the country.
DuPont Performance Coatings announced that it and Beijing Red Lion Coatings Company Limited, Beijing, have formed automotive coatings joint ventures in Beijing and Changchun, China, both operating under the name DuPont Red Lion. The JVs—of which DuPont controls 60%—have already started operations.
Through the agreements, DuPont has increased its stake in an existing joint venture and has entered into a second joint venture, both named DuPont Red Lion. The objective: modernizing coatings production to support the Chinese automotive industry with locally manufactured and technically serviced products, according to the company.
The joint capacity of the two JV plants will start at 20,000 tons of paint per year. Financial terms of the agreements were not disclosed.
“In China, about 1.2 million cars and about 1.5 million commercial vehicles are produced annually. As one of the fastest growing automotive markets in the world, China will play an increasingly important role in our future business plans,” said John R. Lewis, vice president, DuPont Performance Coatings Asia growth initiatives. “Almost all international automotive manufacturers are planning major investments to increase production in China, which already has exhibited stable, double-digit annual growth rates. A major share of this growth will be generated by the Chinese operations of our current global customers such as Volkswagen, Ford Motor Company, General Motors, Citroen, Toyota and Nissan that are seeking reliable local production of high-quality paint systems. These two plants will form the basis for serving our customers and achieving optimum penetration of the Chinese market,” Mr. Lewis said.
In Beijing, DuPont Red Lion will build a new production site for OEM paints as well as an application center. Following completion in mid 2004, production will be relocated from the present plant in Beijing to the new one, which will allow DuPont to manufacture waterborne products.
DuPont is increasing its stake in this joint venture with Beijing Red Lion Coatings Company Limited, through acquiring the interests previously held by Akzo Nobel Coatings International B.V. The Changchun site, located in northern China near DuPont’s established joint venture with Volkswagen, will undergo a $15 million expansion.
At Akzo Nobel, Chinese plans are focused on the decorative paint market. The company will invest in a new decorative coatings facility, which will produce water-based wall paints for the Chinese market. It will be built on the company’s existing site in Suzhou near Shanghai, where Akzo already operates plants for its car refinishes, transportation coatings, powder coatings and coil coatings businesses.
“China continues to be one of the most important emerging markets for the coatings group and this investment underlines our ongoing commitment to establish a significant presence there for all our key businesses,” Rudy van der Meer, member of Akzo Nobel’s board of management responsible for coatings, said in a statement. “Akzo Nobel has been selling decorative paints in China under the Levis brand for nearly five years and this has enabled us to establish a solid foothold in this fast-expanding market. We now need a new facility to further grow the business.”
Akzo Nobel’s Levis paint sold in China is currently manufactured in eastern Shanghai, but production will be moved to Suzhou once construction is complete, according to Jan Andersson, general manager of Akzo Nobel Decorative Coatings International. Work on the factory is scheduled to begin by the end of the year, with the new facility scheduled to be operational by the first quarter of 2005. The factory will include R&D facilities; warehouse space for raw materials and finished goods will also be built.