WCN March 08 Decals p45-47

WorldCargo
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CONTAINER INDUSTRY
Container decal sales booming
D
ecal suppliers, in common with all other sectors producing components for the container industry,
have experienced a boom in sales
during the past year,as annual box
production soared almost 30% to
more than 4M TEU.
This equated to an estimated
supply of at least 2.75M individual decal sets during 2007, up
a third on the 2.07M provided in
2006. As the accompanying table
shows, annual decal production
had previously peaked at 1.9M
sets in 2004 but was lower in both
2005 and 2003.
As might be expected, the vast
majority of decals are applied to
standard container equipment
(over 90%), with 5% or less used
for reefer marking and the balance
fitted to other more specialised
equipment - including tank, swap
body, palletwide and domestic
containers. Relatively few decals
are produced for replacement on
existing equipment because today
very little container refurbishment
is carried out by owners.
This remains the case despite
the more recent climate of higher
newbuild prices and can be attributed both to the higher construction standards generally adopted
in the past decade by box builders
and rising labour charges associated with any sort of depot/reconditioning work.
Longer lasting
Such as been the improvement in
material quality/specification during recent years that decal longevity is now usually taken for
granted. The superior grades of
vinyl film used today often resist
weathering for a decade or longer
and do not need replacing before
the container is resold into secondary use. Much the same applies to the paint mask or stencilling alternative, which in any case
can be touched up relatively simply with fresh paint.
Naturally, there is still the occasional horror story concerning
premature failure involving both
types of marking, but as in the past,
the cause is normally due to bad
initial application or use of inferior materials not originally specified by the purchaser.
Even the latter practice is now
being curbed as the availability of
high-grade vinyl film stock and
permanent inks has improved
within China and box builders
become increasingly skilled at decal hanging and paint marking. In
addition, far fewer screen printing companies/decal converters
are today willing to cut corners
than might have occurred in
former years.
Nevertheless, the decal supply
industry remains under intense
pressure to keep prices low and,
in the face of rising material and
production costs, participants
continue to seek further savings.
Vinyl decal manufacture has been
hit by higher oil prices in the past
two years and increased wage
costs in China and elsewhere as
it remains a relatively labour intensive process.
Downsizing
In order to reduce their expenditure, many container buyers have
long since opted for the simple expedient of minimising their livery size and avoiding elaborate
colour reproduction, with many
leading leasing companies leading
the way.The price of one of these
“minimalist” vinyl decal sets has
hardly changed in recent years,
with the very cheapest still costing just a few dollars.
By contrast, the most expenMarch 2008
Although the demand for container decals has risen
strongly on the back of a record jump in newbuild production, suppliers of self-adhesive vinyl sets and the
paint mask alternative continue to face big challenges
sive alternative, featuring a large
full-colour graphic banner, is
priced in excess of US$100-150
per set when made in vinyl film.
Not surprisingly, much of this
work has already migrated to the
paint mask system, which can offer the same effect for less than
half the cost of vinyl decals.
However, the debate still rages
as to which marking system is the
most practical to use.Advocates of
the paint mask option continue to
cite the lower cost and simplicity
of application and the suitability
for larger logo designs. Ongoing
maintenance is simplified as well,
as faded decals can be easily repainted and freshened up as part
of routine servicing at depots.
More familiar
Summary of global container decal manufacture (x1000 sets)
Year
2003
2004
2005
2006
2007
Dry freight
1,470
1,760
1,560
1,900
2,550
Reefer
70
80
90
95
115
Other*
60
60
75
80
85
Total
1,600
1.900
1,725
2,075
2,750
*Tank, palletwide, swap body and domestic types
UASC, IRISL, K-Line, RCL and
- before its merger into Textainer
- Capital Lease. Paint-on decals are
now reckoned to be applied to
around 30% of all container production, with further new converts being won each year.
Vinyl adherents
Other container buyers, however,
remain opposed to using anything
other than vinyl film. particularly
those whose livery is contained
within a small rectangular decal,
which, they argue, is costlier to
paint on. A few notable adherents
have also switched back to vinyl
decal use in recent years.They further point out that as all containers must carry mandatory ISO,
BIC and other regulatory marking, which are also more eco-
nomic to make from vinyl, there
are hidden costs when painted
decals are selected in isolation.
There are also environmental
considerations as paint-on decal
kits usually produce a lot of paper
and other waste, while the manual
decal painting process itself is being increasingly seen as a health
hazard and may yet be subject to
restrictions in China
On the other hand, vinyl
manufacture and screen printing
is hardly friendly to the environment either.
The paint-on procedure is also
becoming more costly because of
the higher labour content and has
been impacted by recent wage
rises in China. Furthermore,
painted decals are generally
viewed to be less suited for brilliant white application, although
most accept that the paint mask
system does work effectively for
black and other dark colours.
The highly ultraviolet-resistant
vinyl printing inks (supplied
mainly by Sericol - part of the
Japanese Fuji Group) that are used
today are also cited as being more
durable than any painted alternative.The decal material is itself also
highly resilient, following the introduction in recent years of more
highly-engineered, thinner and
tactile grades of calendered-type
film.This represents an important
advance on earlier-generation
products as the new versions perform just as well as the longerestablished cast film alternative.
Cast vinyl films were originally
selected by the majority of container buyers - despite their greater
cost - because the thinner-gauge
specification was easier to apply
and the product experienced less
degradation through shrinkage or
weathering throughout its service
life. Calendered film is now used
for the majority of vinyl decal production, however, with all major
suppliers offering both calendered
and cast versions for container
end-use.
Close control
The manufacture of vinyl precursor film has long been controlled
by four established suppliers and
no others have managed to compete effectively over the longer
Moreover, most box builders are
now conversant with the painton system and its application after
the initial container coating process and even employ automated
stencil applicator machines. Some
container manufacturers can offer decal stencilling in-house,
without any third party involvement, while just about all Chinese
vinyl decal producers also offer
paint mask versions of their own.
One pure “paint-on” specialist remains steadfastly in business
in the shape of Dado Corp of
South Korea.This firm pioneered
the paint stencil technique more
than 15 years ago and also developed an Automated Decal Application Machine ( ADAM) for use
at high-throughput container factories. However, Dado is understood to be finding the going increasingly tough as it lacks the
market clout and flexibility of
mainstream decal producers,
which are able to supply both vinyl and paint-on types.
Dado is still selling stencil kits
to German shipping lines and
Maersk Line, which has long been
the biggest supporter of painted
decals. Maersk has utilised the system for over eight years and reckons to have saved itself tens of millions of dollars in the process.The
company has adopted full use of
the stencilling process, including
the installation of ADAM, at
Maersk Container Industr i
(MCI)’s recently opened dry
freight container factory in
Dongguan, south China.
MCI Dongguan built over
85,000 units during 2007 - its first
full year of production - the vast
majority of which were paintmarked and destined for Maersk’s
own fleet. The paint mask system
is also used at the MCI reefer factory in Qingdao.
Maersk has, however, recently
adopted a new downsized livery,
and though it plans to continue
stencilling decals on all new 40ft
production, vinyl sets will now be
used for 20fts.
A larger run of up to 200,000
units are due for delivery to
Maersk in 2008, at least half of
which will be constructed by
MCI factories. Again, the vast
majority will be 40ft high cubes.
Maersk accounts for a significant
portion of all container production featuring painted-on decals
and has long worked with Dado
to promote the concept.
Other recent users of the paint
mask option include CMACGM, APL, GE SeaCo, Fesco
Lines, MSC, Hamburg Süd,
45
WorldCargo
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term. Margins remain tight and
high-volume production is essential, together with a closely controlled manufacturing and distribution process.All four companies
- 3M Co, Arlon Inc, AveryDennison and MACtac - have
achieved this, although each approaches the business in a slightly
different way.
3M is one supplier to have relocated the manufacture of container film to the Chinese mainland, having opened a facility in
Shanghai two years ago. This has
since created its own comprehensive distribution system, headed by
a team of five dedicated personnel exclusively handling all container-related business. It sources
locally manufactured precursor
materials and can supply finished
film direct to the screen printer
within a few days.
3M claims that manufacturing
in China has allowed it to secure
extra container film business at the
expense of its competitors and notwithstanding the greater use of
paint mask systems - has allowed
the company to maintain its overall market share.The success of the
Chinese operation has been further underpinned by 3M’s wider
CONTAINER INDUSTRY
with production volumes rising by
over 30% on 2006 and sales up by
almost 25% .The outlook for 2008
is less certain, as container output
is very likely to be down on the
2007 record. 3M reports that January 2008 started strongly, but sales
were slightly lower than one year
earlier when its output soared to
twice the level achieved in January 2006. In all, film production
dropped by around 30,000m2 during January on the preceding year,
while February was as usual relatively quiet due to the Chinese
New Year holiday.
Maersk Line has adopted a new, downsized logo. The paint mask system will
continue to be used for 40ft boxes, but vinyl decals will now be used for 20fts.
Inset: Maersk’s previous larger sized paint-on logo
commitment to producing many
other film types for export and domestic use within China, which
has helped to establish a strong
“sales footprint” within the country as a whole.
3M film is sold principally to
the largest decal-printing companies in China, including Ocean
Shine Decal Industries, New Century Decal and Graphictech. Over
80% of decals made from the company’s film are ultimately re-exported, with decreasing amounts
of precursor film stock sent for
decal conversion outside China.
3M has previously sold small
quantities to outlets in Taiwan and
South Korea, but implies that this
business is no longer competitive.
In 2007, less than 400,000 m2 of
film was supplied to the former
country, which made up only a
small fraction of its overall output.
Calendered push
A big drive for 3M in recent years
has centred on promoting the
company’s calendered film product, which now makes up more
than half of total sales. This contrasts with the past, when 3M’s
output almost entirely comprised
cast film. The sale of calendered
vinyl film rose by 45% last year,
while cast film production remained relatively static.
Most screen-printing companies now prefer calendered film
and are increasingly reluctant to
pay extra for the cast alternative,
which has prompted 3M to maintain a sizeable stock of calendered
material in order to meet sudden
surges in demand.
As it was, 2007 proved to be
one of the company’s busiest years
ever for decal film manufacture,
Home and away
Avery-Dennison has also centred
its manufacture of container decal film in China and been actively
building up its presence there since
2004, while MACtac continues to
produce at its home factory in
Belgium and distributes through
a recently enhanced Asian division,
which trades through offices in
Singapore and Shanghai.
MACtac launched its newly
developed CF (Container Film)
range three years ago and has since
managed to gain substantial addi-
tional sales. It comprises three different specifications of cast-type
film: CF100, which is highly conformable and thus suited for
ribbed or corrugated steel surfaces;
CF200, for curved profiles; and
CF300, for application to flat plate.
The more engineered CF100 series comes with a 10-year warranty, CF200 offers eight years, and
more standard CF300 seven years.
All three are available either in
white, black or clear sheet.
Arlon, meanwhile, continues
to manufacture at its factory headquarters on the US West Coast.
As explained by Ron Hopkins,
Arlon president, its close proximity to Los Angeles/Long Beach
allows for a fast “backhaul” transport and distribution of finished
materials, with only a limited presence necessary in China itself.The
company’s US factory is highly accredited and amongst the most advanced in the world, while all materials are imported direct into
bonded zones within China
where most screen-printing shops
are located. This generally avoids
the need for Customs’clearance.
Hopkins explained that a cru-
The incidence of premature decal failure has become less common as the availability
of high-grade vinyl film stock and permanent inks has improved in China
cial difference between Arlon and
rivals, such as 3M and AveryDennison, is that the vast majority of Arlon’s business in China is
of container decal type, whereas
the other two are producing a
much broader range of film products for Chinese end-use. This, in
his view, requires a local manufacturing presence in order to ensure that materials of correct specification are supplied to different
end-users.
Arlon further believes there is
now less price advantage to be
derived from producing in China,
as wage and other manufacturing costs are rising there and more
industrial unrest is in prospect.
Moreover, the upward trend in
wages could accelerate as the
Chinese government is currently
intent on limiting working hours
to a maximum five-day week and
enforcing official rates of overtime and holiday pay.
Capital gain
Arlon’s former parent, Bairn Co,
sold out to New York investment
firm, Steel Partners, in April 2007,
which has provided extra capital
and a new focus for operations.
Steel Partners currently controls
a spread of manufacturing/engineering firms valued at over
US$5B. Arlon’s main plant has
since been subject to further upgrade and a renewed drive is
underway to generate additional
international business, at the forefront of which is the sale of premium-value film for the container
decal industry.
As part of the initiative, Arlon
has further enhanced its aftercare
service and now offers full 24/7
support. It is also seeking greater
feedback from screen-print customers to help identify other areas
for potential cost saving (such as
waste reduction) in order to improve its competitiveness, but without sacrificing margins.
This action has been prompted
by a perception that the makers/
buyers of finished container decals are finally, after many years of
aggressive pricing, becoming more
quality conscious.
In a separate initiative, Arlon
has been actively seeking out and
evaluating new manufacturers of
printing ink, to augment its use
of the long-favoured Sericol
brand. It certified Manoukian (of
Italy) during 2007 and has since
added Chaiyaboon (based in
Bangkok) to its list of approved
suppliers.This acceptance followed
extensive weather and other testing of each company’s ink product to ensure they can provide the
necessary long-term service life.
Extended range
Arlon, which is celebrating 50
years in the graphics/decal manufacturing business in 2008, extended its container-related product range last year with the launch
of the new 70A series of engineering-grade vinyl film.
The new product, which has
been extensively weather-tested,
offers both the conformability of
cast film and durability/pricing of
calendered film, and is available in
gloss black, brilliant white and
clear sheet. It is of 75-micron
(0.003in) thickness and designed
for application over rough steel
surfaces.This compares with about
100-micron gauge for the existing 72A series.
The 70A film is being targeted
specifically at new customers, with
sales building up slowly during the
past year. It gained an important
customer in late 2007 when approved by Maersk Line for the
company’s new downsized livery.
As the 70A series gains ground,
however, there is little sign that the
established 72A series is losing its
popularity. Such is the innate conservatism of the container indus46
March 2008
WorldCargo
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CONTAINER INDUSTRY
try that many screen printers, as well as
their customers, still request 72A film.,
which has been in production for over
20 years and predates Arlon’s involvement
in the container decal sector.
Arlon made its debut in the container
business in the late 1990s with its takeover of Meyercord International Inc, although even today, some customers still
refer to Meyercord when in contact or
placing repeat orders. A drive is accordingly underway to conclusively rebrand
the company’s container decal products
and lay the “ghost” of Meyercord to rest.
Meyercord was known for supplying
its own inking system, although this was
dropped several years ago in favour of
using the third-party Sericol brand.Arlon
decided even earlier to offer cast film for
container decal end-use and has since
boosted sales to the point where they are
rivalling 3M in volumes terms. Its sales
trend has thus been opposite to 3M’s in
that Meyercord’s original exclusive
manufacture of calendered-type material
has since given way to a much increased
output of cast film. Upwards of 40% of
Arlon’s current sales of container decal
film is of cast type, following a further
20% growth in 2007.
Arlon still cites 3M as its main rival in
the container decal sector, followed by
MACtac, which has raised its profile in
recent years, and Avery-Dennison. Production has also continued strong for
Arlon throughout the opening months
of 2008, with a broadly similar quantity
of film supplied as during the same period in 2007, which ultimately proved to
be the company’s best-ever year for sales.
decals,because of fears about new Chinese environmental regulations affecting
both the manual spraying of paint and
disposal of stencil waste, as well as renewed concerns as to the future longevity/durability of lighter painted shades.
As it is, the vast majority of paint-on
decals supplied by Ocean Shine are for
larger and more coloured side panels,
usually including owner name, logo and
emblem/flag.Two recent converts, which
used paint stencils from Ocean Shine for
the first time in 2007, were UASC and
IRISL. The former is set to order a further 60,000 TEU from box builders during 2008. The company also supplied
some of the first stencils used by the MCI
Dongguan factory.
Ocean Shine is planning a further
upgrade to its operation with the adop-
tion of a twin-shift system, coupled with
some additional capacity expansion and
the further introduction of higher-value
environmentally friendly product lines.
Growing competition
These largest producers are facing growing competition in the shape of
Graphictech Decal Co, which has been
active since 2001 and supplied an estimated 600,000 TEU equivalent of container decals during 2007.The company
is now producing at a new 3000 m2
workshop in Taicang, opened in early
2007, as well as maintaining output from
its original factory in Shenzhen. Both
sites offer a potential capability to produce decal sets equivalent to almost 1M
TEU per year, with over 60% of that at
Taicang. Graphictech currently claims
more than 75 container-buying customers, including many in Europe that are
trading through its local office in Hamburg, which was set up in 2006.
Two other established Chinese decal
producers are located in the Yangzhou
district in central China.These comprise
Yangzhou Asia-Tonghui Marking Co,
which has also been in production for
more than a decade, and the relative newcomer KPC (Yangzhou Kevin-Profit
Marking Co). Both have an approximate
capacity to manufacture over 300,000
sets annually, including paint stencil types,
and mostly sell directly to Chinese box
builders on behalf of their customers.
KPC’s main activity is the construction
of special containers for the Chinese
domestic market, which is carried out
nearby on a dedicated production line.
Decal production outside China is
largely a phenomenon of the past and
today meets only a tiny fraction of global
demand. Some localised output is still
carried by Bangkok Decal Industry for
the South East Asian container market,
whilst, as mentioned, South Korea and
Taiwan each retain at least one screen
printer specialising in container decal
work.
In Taiwan, Luntai Co remains in production for Evergreen Line and its subsidiary factory EHIC Malaysia and Hanjin
still sources a percentage of its total decal
requirement from a home supplier.
Elsewhere - across North America,
the UK, Germany, Italy and South Africa - all such manufacture for the volume container sector has long since
ceased. ❏
Increasingly powerful
The all-important screen printing side
of the container decal business is similarly dominated by a very small number
of increasingly powerful names - all based
in China.The market leader is New Century Decal (Shenzhen) Ltd, which is
wholly controlled by Chinese interests
and has been in production for almost
20 years. It has, to date, sold decal sets
equivalent to 6.5MTEU, and now has
the capacity to produce over 1M sets
annually.
New Century’s output in 2007 was
reportedly equivalent to 1.5M TEU, with
this total up significantly on 2006. The
company is predicting a comparable
quantity for 2008 and a newly expanded
manufacturing site was opened this
month, increasing its annual capacity by
another 60%. The majority of sales still
concern vinyl decals, with paint mask
stencils making up the balance. It has supplied most major container buyers (lines
and lessors) over the years, as well as the
majority of box building factories across
China.
The smaller Shanghai Pudong New
Century Decal Co also remains active,
but produces far smaller quantities than
the Shenzhen operation. The company
remains a wholly separate venture, after
splitting away from the Shenzhen management several years back, although
there are rumours that the two plants may
yet again be reconciled.The Pudong factory is understood to be in need of modernisation as its manufacturing process
is restricted and relatively labour intensive and it is losing competitiveness in
comparison with the more automated
plants operated by larger rivals. Placing
the company back under the wing of the
Shenzhen operation would likely help
secure the necessary financing.
Still shining
Another leading decal converter, with an
annual manufacturing capacity of close
to 1M sets, is Ocean Shine Decal Industries (Shenzhen) Ltd, which has recently
been acquired by Jutal Co, a local diversified industrial group listed on the Hong
Kong Stock Exchange.The Ocean Shine
plant is similarly based in the Shenzhen
economic zone and has been in production since 1995.
Ocean Shine achieved a further 70%
expansion in output during 2007, with
recent production dividing relatively
evenly between self-adhesive vinyl and
paint mask stencils, although the latter is
not expected to grow so rapidly in future. The reason, according to Ocean
Shine, is because some container buyers
are switching back to the use of vinyl
March 2008
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