Diversification is key to Shengda’s product mix

Having started out in 1997 as a producer of laminate flooring based on bought-in imported, and then domestically-produced, HDF, Chengdu Shengda Company built its first HDF manufacturing line in 2007, setting up a new subsidiary company, Sichuan Shengda Man Made Fibreboard Co Ltd, for the purpose.

That company placed a contract with Dieffenbacher of Eppingen, Germany, for a continuous press line. This is quite unusual in China as most panel makers start with domestically-produced multi-opening press lines before moving up to continuous pressing.

The Dieffenbacher CPS press which Shengda bought was 8ft x 18.22m and the design capacity of the line was 160,000m3/year of 3mm thickness panels.

Dieffenbacher supplied the equipment from the sifter to the saw after the press, while the refiner came from Andritz of Austria and chippers were sourced from domestic Chinese manufacturers.

Then, in late 2007/early 2008, Shengda laid plans for a second MDF/HDF line and also floated the company on the Shenzhen stock exchange in July 2008. That flotation was evidently a success, enabling the planned second line to go ahead.

A site was chosen in Guangyuan City, Sichuan Province, and general manager Mr Pan Zhen Qi told WBPI when we visited in February 2010 that the site was chosen because of its abundant wood supply. This wood resource was to come from forest owned by Shengda Forestry, another group company.

The contract for the line was again awarded to Dieffenbacher, which supplied from green end, including air graders, to the glue kitchen and press line, and on to raw board handling at the end of the line.

A sophisticated sanding/sawing line was supplied by Holzma of Germany with a sander from Steinemann of Switzerland.

The CPS continuous press was 23m long this time and eight feet wide. The line’s design capacity was 220,000m3/year.

This second production line was ready to run commercially in June 2010, but this was delayed until September due to raw material supply problems in July and August, admitted Mr Pan: “We only produced 70,000m3 in 2010,he said.

“However, since last December the situation has changed because last year we only bought wood raw material from around Guangyuan. Now we have extended to a 300km radius of the factory and we are getting supplies of pine and mixed hardwoods in small diameter logs. But wood costs are rising – by about 10-15% in the last year.

“Market demand for our production is still rising, though, and we can sell all the board we make,confirmed the general manager.

Mr Pan admitted that resin costs are rising even faster than wood prices and that Shengda had only managed to increase its selling prices by a little, due to strong competition in the market.

Electricity supply for the factory is generally satisfactory, he said, although occasional problems are experienced in the winter when water levels are low, since the electricity supply relies on hydro-electric generation in this area.

The wood supply for line 1 in Chengdu is separate from that for line 2 in Guangyuan (300km away) and as a result, line 1 is producing more board as it has a better supply of that raw material. This is helped by the fact that Chengdu is a logistical centre for the province.

In 2010, line 1 produced 130,000m3, mainly in eight and 12mm HDF for the group’s own laminate flooring production. As the 160,000m3 design capacity was based on 3mm, Mr Pan pointed out that he is in fact producing to above design capacity on line 1.

Meanwhile line 2 produced furniture board in 2.5 to 4.75mm and door board in 7.5 to 8mm thickness.

Guangyuan is a forested area, but the government has tightened the rules on harvesting, which has caused some problems.

Shengda does have its own forest resources of more than 100,000mu (6,666ha) close to Guangyuan and the company as a whole owns more than 200,000mu.

“However, at present we are getting almost no raw material from our own forest because we can’t get permission from the provincial government to fell the trees,said Mr Pan. “It has taken time to ‘educate’ the government to release more wood.

“Even though Shengda Company owns the forest, there is a very low limit to how much we can cut and so the cost of extraction is too high. Therefore we have to purchase wood from outside suppliers at present.

“From this year, the government is allowing us to cut more of our own trees and that will represent 5% of our consumption this year, a figure which will increase in coming years.”

With regard to selling the panels his factory produces, Mr Pan felt that from 2011 on there would be no difficulty in running at full capacity and selling all that production.

Original plans to consider building another line on the site at Guangyuan once line 2 was up and running have been shelved, for obvious reasons concerning wood supply, but the principle has not been dropped.

“We have already signed a contract early this year with Shanghai Wood Based Panel Machinery Co Ltd (SWPM) for a four-feet-wide continuous press,said Mr Pan. “The factory will be built at Dazhou in Sichuan province, 450km east of Chengdu and 240km from here.”

The general manager said that Dazhou is a greenfield site and that the line will have a capacity of 160,000m3 a year. “We don’t expect any problem with wood supply there,he confirmed.

The Dazhou line will be mainly for thicker board of 12mm and up and is intended to start production at the end of 2011.

Shengda has certainly not moved too far from its roots; laminate flooring, in which it began, is still a very good market for the company.

“The Shengda brand is very famous and we still have over 1,000 shops in China as well as exporting to North America, Europe (EU), Russia, Japan and Korea,said Mr Pan.

The group is also still manufacturing the other flooring products in which it specializes – from solid wood and bamboo.

Another new project for the group is a 300,000 unit/year door factory in Qinbaijiang, Sichuan. Shengda has traded in doors for some years, but this will be its first manufacturing facility.

It is also building another factory in Qinbaijiang to surface its MDF panels for supply to cabinet manufacturers.

Every panel maker in China is experiencing increasing competition in its markets and Shengda is no exception to that rule.

“In the last few years, competition has got stronger and stronger and we don’t want any more [large-capacity] continuous lines here,said Mr Pan. “But because Sichuan is a very big furniture producer, consuming about two million cubic metres of MDF/HDF, we will pay increasing attention to our quality to capture our market.”