Weihua aims for the top 10

As part of a wide range of industrial activities, the MDF business of Guangdong Weihua Holding Co Ltd has assumed increasing importance in the portfolio of this privately-owned group - which was publicly listed on the stock exchange at the end of 2006 - since it started production on its first MDF line in 1997. The MDF products are all branded 'Weilibang' and the factories all have characteristic entrance gates in which a tiled circular column on the right hand side represents the tree, while a series of tiled rectangular panels on the left represent the wood based panels produced. That first MDF line, Meizhou Weilibang, was built 10 years ago in Meizhou City in Guangdong province in the south of China - a province famous for its furniture producers. Meizhou lies about five hours' drive from Guangzhou City, in the east of the province. The machinery was provided by Shanghai Wood Based Panel Machinery Co Ltd (SWPM) and the single, nine-opening, press line has an annual capacity of around 70,000m³. Weihua's second MDF line, Zeng Cheng Weilibang, was built in 2001 in Zeng Cheng on the outskirts of Guangzhou City. This line has a 15-opening press, again from SWPM, and a capacity of 120,000m³/year. Both these lines have a press platen size of 4x16ft (1.22x4.8m). For line three, Weihua turned to European suppliers and selected German company Dieffenbacher as the main supplier for everything except raw material preparation. The refiner came from Andritz and line capacity is 200,000m³ from a 28.5m continuous CPS press. The location selected for this line was Qingyuan, 45 minutes drive north of Guangzhou, and production started in 2004 (WBPI August/September 2005, p46). Line number four was again awarded to Dieffenbacher, with another CPS press, although a shorter one this time at 18m, giving a capacity of 120,000m³/year. The refiner was once again from Andritz and the mill, Taishan Weilibang, was built in Jiangmen City, about 90 minutes' drive southwest of Guangzhou. It started production in October 2006. This is the line which WBPI visited this year and we will return to it later for a more detailed look. For line five, at Yanchung between Guangzhou and Maoming, Weihua reverted to domestic supply for the machinery, again awarding the contract to SWPM. This project, which went into production in late March this year, has a 12-opening press and, for the first time in one of Weihua's Chinese-sourced lines, has an Andritz refiner. Annual capacity is anticipated to be in the region of 200,000m³ of MDF. So we can see that between 1997 and 2007, Weihua has built five new MDF lines, but it does not stop there. Three more lines are already well on the way, with site work already commenced. One is, for the first time, outside Guangdong province - a long way outside. Located in Liaoning province in north east China, the mill will have a Siempelkamp ContiRoll continuous press line with Andritz refiner. At the time of my visit to Taishan in late March the contracts for Liaoning had already been signed, the land purchased and ground work commenced. The 23.8m ContiRoll was due to commence production at the end of 2008 with a nominal capacity of 200,000m³, producing HDF for furniture manufacturers. Meanwhile in Qiu County in Hebei province, near Beijing, another Dieffenbacher CPS press line, but this time with a Pallmann refiner, is also under construction, to the same schedule as Liaoning and the same 200,000m³ capacity for HDF. The third new project is also under construction, this time in Xiangfan City, Hubei province. It is another Dieffenbacher CPS line with Pallmann refiner (Weihua wants to compare the performance of its Andritz and Pallmann refiners) and is again of the same capacity and on the same schedule as the other two new lines, with the same product in mind - HDF. When all these lines are up and running, the eight Weihua mills will have a combined annual design capacity of around 1.3 million m³, making it a very significant player in the Chinese MDF/HDF industry. The obvious question was why the company decided to build three mills simultaneously. Mr Lu Chuan Feng, vice general manager of Taishan Weilibang Wood Industry Corporation Ltd explained that Mr Li Jianhua, chairman of the Weihua group, wants to make his company one of the top 10 producers in the world. "Also, according to our analysis, the market here will still be good for the next five or six years and I don't see any problem in selling the extra capacity," said Mr Lu. "At this moment, we have to worry more about the raw material than the market." Mr Lu went on to explain that the reason for the wide geographical spread of the Weihua mills is down to two factors - the wood supply and the market - with the main market for all the mills being furniture and thin board. "All our factories are quite close to both the raw material and the market," he said. The developing trend for overseas furniture manufacturers to set up factories in Guangdong province must help demand for MDF/HDF, but Mr Lu said that the company also plans to export part of its production and is already active in the Middle East. "All the mills are using a mixture of wood, but principally eucalyptus," said Mr Lu, who admitted that local wood supply was not plentiful around Taishan and that the wood has to be brought in. "However, the group has its own plantations and every line has a forestry company planting eucalyptus," he said. The Qingyuan mill has a short-cycle press line for overlaying with melamine papers, made by a Chinese manufacturer in Guangdong province, and this has a capacity of 1.2 million m². "This is the only [value adding] line in the group and we do not plan to have any more," said Mr Lu. "We have decided we have enough capacity and there are a lot of smaller sub-contractors carrying out short-cycle pressing anyway." Each Weihua factory has its own resin plant and so will the three new lines, all producing resins to E1 and E2 standards. So far all the capacity development of the Weihua group has been in MDF or HDF, not particleboard, but Mr Lu said that the company may consider particleboard production in the future. In view of the shortages of wood supply generally in China, I asked Mr Lu what he thought about the future for wood based panel production in the country. "Many of the producer companies have planted a lot of trees and I think that will solve the problem," he said. Recently there has been much discussion in the international financial press about the removal of tax concessions for some manufacturing companies in China and Mr Lu acknowledged that Weihua has benefited from special tax concessions on all its sites and tax-free imports of German machinery. "The new regulations to remove these tax advantages will negatively impact our business," he conceded. There have been a lot of new mills adding a lot of capacity to the market in China in recent years and I asked Mr Lu how Weihua distinguishes itself from the competition. "We are planning to produce more thin board because a lot of Chinese lines make only thicker panels and I believe we are the only company that can make 2.2mm for example," said the vice general manager. Thin board, he explained, finds a market in furniture, gift boxes (a big market in China) and in car and ship interiors. "The current market is good, with the best price being for thin board at the moment," said Mr Lu. "We have been in this business for 10 years now and so we have the experience, the people and good technology - and a very good sales team centred on Guangzhou."