Market Developments:
It's all relative

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Every so often it does us good to realise where we are in the grand scheme of things, sometimes it is how big we are and sometimes it is small we are. As an Australian exiled in Britain, Robin Kent sometimes sees things differently.

First published in Window Industries December 2003.

Minnows in a big pool?

The UK PVC window industry processes around 150,000 tonnes of PVC per year and has done for the past 15 years or so. It goes up, it goes down but this is the rough UK level.

The significant UK systems companies (and the Continental ones that have established bases here) number around 20 so the average systems company probably processes around 10,000 tonnes of PVC-U per year. There are bigger, there are smaller but the order of magnitude is what matters.

So where does this fit into the grand scheme of things? Two true stories just to get the feel of what might be happening out there in the bigger world:

Turkish delight

I was in Turkey a couple of years ago as a guest of the Turkish plastics federation (PAGEV). At the dinner to end Ramadan I was seated next to one of the systems supplier delegates. To get an idea of how big his company was, I asked how many tonnes they processed per year. He told me that last year (2000) his company processed 45,000 tonnes but next year (2001) they were planning to process 55,000 tonnes! As I came out of shock, I was only capable of saying "Big, very big" but he modestly said "Oh no, not big - Muzzamer he's big" and indicated Muzzamer at the next table. It turns out that in 2000, Muzzamer's company processed 60,000 tonnes and the plans for 2001 were to process 75,000 tonnes. 

These two Turkish companies produced nearly as much PVC profile as the entire UK industry - and there were a lot more companies in the room with us at the time. This is not rubbish profile either; in many cases it is quality certified by the best of the German test houses and carries all the right certificates. The prices are also excellent and I have sourced Turkish profile for clients in Georgia (it used to be part of the USSR) and their experience with it has been superb. Delivery is only a 4 day lorry journey across the Caucasus Mountains so it pays to get the orders right. My Turkish contacts tell me that the industry is still expanding and that the growth rate is still at the 10-15% level, these companies are serious.

Chinese whispers

Fast-forward to November 2003 and a small press release in British Plastics and Rubber. This noted that Cincinnati Extrusion and Krauss Maffei have confirmed the placement of orders for extruders by Dalian Shide - a Chinese PVC extrusion company. Dalian placed an order for 165 Cincinnati extruders to bring the total number of Cincinnati extruders operated up to 352. At the same time Dalian placed an order for 240 Krauss Maffei extruders to bring the total number of Krauss Maffei machines operated by Dalian up to 280. The extruders are to be delivered to Dalian's factories in Dalian, Shengdu and Shanghai and will increase the annual output to 1,000,000 tonnes. One company will have an output approximately 10 times that of the whole UK industry. A small bit if research shows that if growth is considered then Dalian has done more than a little growing, the company started PVC extrusion in 1995 with 12 extruders producing around 12,000 tonnes per year, and by 2002 was producing around 500,000 tonnes per year. Interestingly the company decided in 2000 that PVC supply could become a problem and invested $1.2 billion in building a 500,000 tonne VCM and PVC plant due for completion in 2003 (when the plan is too build another 500,000 tonne plant). Dalian Shide do not produce rubbish profile either - the company has held ISO 9002 since 1998 and is moving forward with approval to ISO 9001: 2000 and ISO 14000. These guys are serious.

These are systems suppliers that put all of the UK systems companies into the minor leagues.

In the fabrication league, the UK idea of a 'super fabricator' is company producing anything over 2000 windows per week. In other parts of the world this would barely get a mention. Consider the Japanese window fabricator where one production line completes a window every 17 seconds (for those without a calculator this is around 35,000 per week).

A developed industry?

The UK replacement industry is seen as rapidly becoming mature and there are even concerns about where the next market is going to come from. So where does this fit into the grand scheme of things? Two true stories just to get the feel of what might be happening out there in the bigger world:

Georgia is an independent country located between Russia and Turkey and has a population of just over 5 million people. Tbilisi, the capital city is around the same size as Birmingham and home ownership is in the region of 96%. When the communist government fell apart then you were given the house that you lived in and most people therefore own their own home. Most of these haven't had any maintenance carried out since they were built (communism didn't work that way). I have been working with the second largest fabricator in the capital as they try to increase their production from 20 windows per week to 80 windows per week using a labour force of around 15 men. I know this sounds a lot but most of them aren't there at any one time so it is not really a problem.. The largest fabricator in Tbilisi makes around 60 windows per week so market leadership is in sight!

India has one of the fastest growing economies in the world with an average growth rate of 6% since 1990 and it currently has the 5th highest GDP in the world (the UK lies 8th). This growth has been driven by the availability of large numbers of well-educated people skilled in the English language and rapid growth has taken place in industries such as software, software services, call centres and manufacturing. Large numbers of the population are now striving to become 'middle-class' and they have Western aspirations for material goods and comfort standards. India has a total population of just over 1 billion and if 10% of the population achieves middle-class status then this is a developing market of 100 million consumers, about the same number of 'middle-class' consumers in the UK and Germany combined. That is a developing market to die for.
Next month I'm off to Bosnia and Herzegovina - after the years of war, snipers in the streets and shelling from the hillsides ('The hills are alive with the sound of mortars') - the market in Sarajevo is picking up again. A population of 4 million and lots of redevelopment, pack your flack jacket and come on in, the market is fine.

The UK certainly looks a lot different from the outside; as the Australians, Turks, Chinese, Japanese, Georgians and Indians will all tell you.

 

Last edited: 11/03/10

© Tangram Technology Ltd. 2003

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