Demand for Paraformaldehyde Increases Steadily

By Cui Changchun   

The two types of paraformaldehyde are the solid form and that
with a low degree of polymerization. Solid variety is difficult
to depolymerize and reacts poorly when used as a synthetic
material, its applications have gradually diminished. The
variety with low polymerization degree has high purity, good
water solubility, complete depolymerization, looseness and even
particle size. It alleviates familiar problems with industrial
formaldehyde of high packing requirements, poor storage
stability and inconvenient transportation. It is therefore an
ideal substitute for industrial formaldehyde.

Rapid output increase

China started its paraformaldehyde production at the end of the
1970s. Production capacity had reached 11 thousand t/a by 2001
and the output that year was 3.9 thousand tons. China then
introduced technologies from abroad to construct large
production units. The 15 thousand t/a paraformaldehyde unit of
Zhenjiang Lee Chang Yung Comprehensive Petrochemical Co., Ltd.
started production in June 2002. Through repeated expansions,
the paraformaldehyde capacity of the company has reached 30
thousand t/a. The 20 thousand t/a paraformaldehyde unit of
Nantong Jiangtian Chemicals Co., Ltd. started production in
September 2003. Paraformaldehyde production in China has grown
to a considerable scale today. The total capacity was around 90
thousand t/a in 2006 and actual output was around 55 thousand
tons. China's paraformaldehyde capacity increased at an average
annual rate of 52.2% from 2001 to 2006, with output growing 69.8%
annually.
   Adding to that base, some companies including Shanxi Sanwei
Group and Yantai Wanhua Polyurethane Co., Ltd. are constructing
paraformaldehyde units with a total capacity of around 30
thousand t/a and these units will be put on stream in 2007. Thus
the capacity to make paraformaldehyde will reach 120 thousand
t/a at the end of 2007, and the domestic market demand can be
basically satisfied. It is expected that capacity will further
increase by around 30 thousand t/a to reach 150 thousand t/a in
2010.

Import growth slowdown and high price level

Owing to the brisk growth of downstream demand, China's output
of paraformaldehyde has not met the domestic market demand for
many years. Great quantities have to be imported from abroad each
year. The imported amount was more than 45 thousand tons in 2003
with import dependence of over 70%. With the completion of new
units, the market share of domestic products has increased
constantly. China imported 27.3 thousand tons of
paraformaldehyde in 2006, accounting for 34.3% of total
consumption. Imported paraformaldehyde in the domestic market
today comes mainly from Spain, the United States, the
Netherlands, Germany, Taiwan province, Britain, Korea and Japan.
Products from the United States and Spain hold a considerable
market share.
   With the impact from the paraformaldehyde supply/demand and
the high oil price in the world market, the import price of
paraformaldehyde has stayed high in recent years. The average
import price during 2004-2005, in particular, rose from US$468
per ton to US$580 per ton, an increase of 23.9%. As the market
demand will continue to be brisk and there is a considerable gap
in quality between domestic products and foreign products, the
import price will remain high in the near future.

Balanced supply and demand

China's consumption of paraformaldehyde has grown rapidly in
recent years. The apparent consumption was 47.5 thousand tons
in 2001 and has increased to 79 .6 thousand tons in 2006 with
an average annual growth of 10.9%.
   Quite a few pesticides such as glyphosate, acetochlor,
butachlor and phorate use paraformaldehyde as a raw material in
their production and the demand is rising. Glyphosate is a
non-selective herbicide. With the worldwide dissemination of GM
(genetically modified) crops, glyphosate has become a major
product in the herbicide market. China has more than 30
glyphosate producers today. Around 25 of them use
paraformaldehyde as raw material and their total capacity is
more than 150 thousand t/a. Quite a few large glyphosate
producers in China are expanding capacity by technical
renovation. It is expected that the capacity of glyphosate will
increase by 106 thousand t/a before 2010. China has more than
10 acetochlor producers today. The output of acetochlor was
around 15 thousand tons in 2000 and reached 30 thousand tons in
2004. In addition, production of alachlor, tetramethrin,
phorate, tricyclazole and dazomet also uses paraformaldehyde.
It is expected that the demand for paraformaldehyde in the
pesticide sector will grow to around 110 thousand tons in 2010.
   In addition, paramaldehyde has huge potential as a substitute
for industrial formaldehyde. Many pharmaceutical, coatings and
resin producers have already successfully used paraformaldehyde
with low polymerization degree to replace industrial
formaldehyde. With further development of agriculture, of
industry in general, and more particularly of the pharmaceutical
industry, the demand for paraformaldehyde will increase
constantly. The demand for paramaldehyde in these sectors will
reach around 25 thousand tons in 2010.
   It is therefore expected that the overall demand for
paraformaldehyde in China will reach around 135 thousand tons
in 2010. As production capacity will be around 150 thousand t/a
at that time, supply and demand will be basically balanced.
   China's near-future consumption of paraformaldehyde is quite
uncertain due to dumping and environmental issues. Demand is
narrowly concentrated, with around 60% consumed in producing
glyphosate, and more than 80% of that glyphosate exported. As
antidumping activities restrict the export of glyphosate, the
paraformaldehyde sector will surely be seriously affected.
Moreover, China's glyphosate synthesis units that use
paraformaldehyde as raw material generate a lot of waste water
(unlike the units that use an alternate synthesis method). If
environmental concerns force these units to restrict or suspend
production, the domestic paraformaldehyde market will shift
into oversupply.
   Producers and relevant research institutes should therefore
actively promote applications of paraformaldehyde in
non-pesticide sectors to expand the market demand.

Supply and Demand of Paraformaldehyde
            in China from 2000 to 2006 (thousand tons)
Year    Output    Import    Export    Consumption
2000     3.0     37.5       -    40.5
2001     3.9     43.6       -    47.5
2002     8.1     36.6       -    44.7
2003    17.6     47.3     0.2    64.7
2004    29.7     36.4     1.0    65.1
2005    36.5     42.0 &nb