Glycine Producers Face a Tough Time   
-- serious capacity surplus in China   
By Meng Hui  

In 2009 China consumed around 25 000 tons of food-grade glycine in the production of food, medicine and feed. Around 90% of industrial-grade glycine was used in the production of glyphosate. The demand for glycine dropped significantly due to the downturn of the glyphosate market.

Capacity expansion leads to overcapacity  
    
In 2007, drawing by the soaring demand and price of glyphosate in the global market, Chinese investment in the construction of glycine plants also increased rapidly. As of 2009, China has more than 20 glycine producers, of which Hebei Donghua Chemical Group has the largest capacity of about 200 000 t/a, and other 10 producers like Chongqing Sanxia Paints Co., Ltd. have a capacity of over 10 000 t/a each. Chongqing Sanxia Paints Co., Ltd. is the sole company using the hydrocyanic acid route, the rest glycine producers all adopt the chloroacetic acid ammonolysis process to produce glycine, and most of them have their own chloroacetic acid production units.
   As of the end of 2009, China's glycine capacity reached 380 000 t/a, while at the end of 2007, China's total glycine capacity was only 140 000 t/a. Meanwhile, China's capacity to produce glyphosate increased from 290 000 t/a in 2007 to 620 000 t/a in 2009. Thus, the rapid growth of China's glycine capacity was largely due to the blind expansion of its glyphosate production capacity.  
   Moreover, many large scale new glyphosate production units are now being under construction in China. It is expected that in 2010, China's glyphosate capacity will increase by over 150 000 t/a to 770 000 t/a. In China, some chemical companies with chloroacetic acid production units already are also planning to build large-scale glycine production units. Due to the impact of the global financial crisis and the rapid fall of glyphosate prices, some of new comers were forced to suspend or delay their new glycine projects or expansion plans in the first half of 2009. But they restarted the construction again when the market situation improved slightly in the second half of 2009. For example, Chongqing Sanxia Paints Co., Ltd. had intended to construct a 50 000 t/a natural gas - hydrocyanic acid - hydroxyl acetonitrile - glycine production line. But due to the downturn of the market, it only completed a 16 000 t/a production line, and the remaining capacity will be completed in 2010. In addition, some chlor-alkali and pesticide manufacturers are also preparing to build glycine production units. It is expected that China's glycine capacity will increase by about 60 000 t/a in 2010.
    According to statistics, China produced about 480 000 tons of glyphosate in 2008, and about 330 000 tons in 2009 due to the sluggish exports and demand. From an ideal projection, if China produce 480 000 tons of glyphosate in 2010 and 75% of glyphosate will be produced from glycine, then the glyphosate's demand for glycine will be about 220 000 tons. But China's glycine capacity has reached 360 000 t/a now and will reach 440 000 t/a at the end of 2010. The glycine capacity will exceed the demand from glyphosate production a lot. Surplus is significant.

China's major glycine producers and their production capacity as of 2009
                         (thousand t/a)
Company              Capacity             Remarks
Hebei Donghua Chemical Group
    200.0    including a 40 000 t/a refined glycine unit
Jiangxi Electrochemical Zhongda Chemical Co., Ltd.
    40.0    mainly sold to Fujian Sannong Group Co., Ltd. for the production of glyphosate
Nantong Dongchang Chemical Industrial Co., Ltd. (controlled by of Nantong Jiangshan Agrichemical & Chemicals Co., Ltd.)
    20.0    mainly supplied to the controller for the production of glyphosate
Yuanshi Hongsheng Chemical Co., Ltd.
    20.0    including a 5 000 t/a feed-grade glycine unit
Taizhou Xinzhi Chemical Co., Ltd.
    20.0    completed and put into production at the end of 2009
Chongqing Sanxia Paints Co., Ltd.
    16.0    using the hydrocyanic acid route, to be expanded to 50 000 t/a in 2010
Taizhou Gaowei Chemical Co., Ltd.
    15.0    supplied to Zhejiang Wynca Chemical Industry Group Co., Ltd. for the production of glyphosate
Jiyuan Fangsheng Chemistry Co., Ltd.
    10.0    put into production in the second half of 2009
Others    40.0
Total    381.0
Source: CNCIC


Sluggish demand resulted in a low operating rate

In 2007, the imbalance between the supply and demand of glyphosate led to a serious shortage of glycine, so many Chinese enterprises began to construct glycine production units. The majority of the new installations were put into production in mid-2008 or later. At that time, the global financial crisis just broke out, so the demand for glyphosate slumped in the international market and its prices dropped sharply. From the fourth quarter of 2008 to the first half of 2009, nearly 50% of the glyphosate plants were idled temporally or maintained a low operating rate. The sluggish demand from downstream made the operating rate of glycine plants in China drop to about 50%. Many glycine plants were shut down as soon as the construction on them was completed. Many existing glycine producers are losing money and are very difficult to maintain their production and operation.

The growth of the demand is not optimistic  

China's glyphosate production capacity continues to increase. In 2009, the EU decided to suspend temporally the imposition of antidumping tariff on imported China-made glyphosate. It is expected that China's exports of glyphosate and domestic demand for glyphosate will increase in 2010. But it is worth noticing that new large-scale glyphosate plants built in recent years do not consume glycine. For example, Jiangsu Red Sun Group Corporation's 100 000 t/a glyphosate project, Jiangsu Yangnong Chemical Company Limited's 30 000 t/a glyphosate project and Anhui Huaxing Chemical Industry Company Limited's 20 000 t/a glyphosate project all adopt the iminodiacetic acid route to produce glyphosate. Thus, the proportion of glycine to glyphosate capacity will gradually reduce. Based on the current statistics, it is expected that in 2010, China's glyphosate production capacity will reach about 770 000 t/a. Of which the capacity of glyphosate plants using the glycine route will be about 470 000 t/a. Because glyphosate plants using the glycine route can produce a lot of intractable pollutants, in the future more new plants will produce glyphosate from iminodiacetic acid. Therefore, in the future the growth of the demand for glycine is not optimistic. If the operating rate of glyphosate plants using the glycine route is 100%, they will need about 280 000 tons of glycine in 2010. Along with the 25 000 tons demand from the food, medicine and feed industries, China's market demand for glycine will be about 305 000 tons in 2010, well below the 440 000 t/a glycine capacity.

Many smaller glycine producers will be eliminated  

Due to the market downturn, many small and medium