The plastics market is entering a phase of strategic mergers and consolidation as companies focus on scale, efficiency, and long-term growth.
China’s manufacturing industry is experiencing a significant shift as it navigates softer domestic demand and broader global economic challenges. Plastic manufacturers in particular have accelerated their international expansion strategies, supported by government-backed incentives and subsidies for trade exhibitions. In recent years, many Chinese companies have redirected their focus toward ASEAN markets such as Malaysia. This strategic move gained momentum following the Covid-19 pandemic, the imposition of US tariffs, and tighter environmental, social and governance (ESG) standards in Europe that limited market access.
According to Kenanga Research, the influx of Chinese producers into the region has intensified pricing competition, placing considerable pressure on Malaysian plastic packaging companies. Chinese manufacturers are reportedly prioritising high capacity utilisation, which has contributed to aggressive pricing strategies.
Following a visit to the Shanghai World of Packaging exhibition, Kenanga Research observed that China’s prolonged price-driven competition—often described as “involution”—is gradually shifting toward competition based on product quality.
The research house highlighted that Malaysian players are actively adapting rather than remaining passive. Thong Guan Industries Bhd has diversified geographically into European and US markets, expanded its food and beverage portfolio, and ventured into property development. Scientex Bhd has similarly established a stable property division alongside its core operations.
BP Plastics Holding Bhd is investing in additional blown-film production lines to improve value-added offerings for customers, while SLP Resources Bhd continues to target specialised, higher-margin product segments and selectively expand into new markets.
On the domestic front, Kenanga Research noted a growing number of companies entering customised and bread bag segments as a means of diversifying revenue streams.
Given tightening margins and overlapping expansion strategies, the research firm anticipates a higher probability of mergers, acquisitions, or broader consolidation within the sector moving forward. It maintained a “neutral” outlook on the overall industry but retained an “outperform” rating for Thong Guan Industries.
Separately, artificial intelligence is emerging as an increasingly relevant theme within China’s manufacturing ecosystem. Chinese producers are adopting AI across multiple operational areas, particularly in automation of machinery and labour processes. This trend is partly driven by rising labour costs, which have increased more than fivefold over the past two decades, prompting greater focus on efficiency and technological innovation.
News Courtesy : The star