China's Chlor-Alkali Enterprises Faces High Costs in 2011   

The raw material procurement cost of the chlor-alkali industry will rise

In 2010, with the gradual recovery of the global economy and the financial market, the prices of energy products such as oil and coal rose substantially. As a result, the raw material procurement costs of basic industries, such as the chlor-alkali industry, increased rapidly. In addition, necessary investment in environmental protection also climbed dramatically. All these factors have brought the "low-cost" era of the entire chlor-alkali industry to an end.

The calcium carbide industry will consolidate its capacity

China Calcium Carbide Industry Association thinks that the calcium carbide industry will continue consolidating its capacity in 2011. Leading enterprises will expand their capacity, while backward capacity will be eliminated. Thus, the production and sales of calcium carbide in China may tend to come to a balance. The consolidation of calcium carbide enterprises with their upstream and downstream enterprises will speed up. Large-scale groups will dominate the market. In addition, the calcium carbide industry is on a large scale transferring its capacity to China's western and northern regions, such as Inner Mongolia, Xinjiang, Ningxia and Shaanxi regions and provinces, where there are abundant resources and energy. The calcium carbide capacity of these regions will account for a larger share in China's total calcium carbide capacity.
    In 2011, the raw materials procurement costs and labor costs of calcium carbide enterprises will continue rising, and their profits will further reduce. The calcium carbide demand in the PVC industry will directly affect the price of calcium carbide. Meanwhile, calcium carbide enterprises should pay more attention to extend new applications of calcium carbide. China's calcium carbide industry was obviously affected by the energy-saving and emission reduction policy in 2010, especially in the second half. Every place took measures to limit electricity consumption to varying degrees. Due to this, the production of calcium carbide plummeted, but calcium carbide prices soared.
    It is expected that as the Chinese government continues enforcing the energy-saving and emission reduction policy in industrial fields, the high-pollution and high-energy-consumption calcium carbide industry will face an even tougher environment in the "Twelfth Five-Year Program" Period (2011-2015). The high cost will be the biggest pressure that calcium carbide and downstream PVC industries will have to face in the next five years.

Crude salt production will remain stable, and its prices may rise

China Salt Associations experts predict that the weather conditions in 2011 will be conducive to sea salt production. China's sea salt output in 2011 will be higher than 2010 and the sales of sea salt will increase as soda ash and caustic soda industries need more sea salt. In recent years, China's sea salt capacity has gradually been shrinking, but the sales volume of sea salt has been increasing year by year. Thus, in the long term, crude salt prices will remain stable.
    In 2010, due to the continuing hike of salt prices, China's imports of salt increased. However, salt enterprises are still optimistic about the salt market prospect in 2011. Considering the low salt inventory in the end of 2010, before new salt products are launched into the market in 2011, the salt supply will be tight or even in shortage in China, so salt prices will rise at a moderate pace. However, imported salt will still affect salt prices in China in 2011.
    According to the trend of China's crude salt market in 2010, sea salt will have a better market prospect than lake salt and mineral salt in 2011. In recent years, although a lot of new soda ash and caustic soda projects have been built in China's central and western regions, the soda ash and caustic soda capacity in China's eastern and coastal areas is still very large. This provides sea salt a huge market. In addition, China's sea salt capacity has shrunk in recent years, and China's output of sea salt reduced in 2010. All these factors determine that sea salt prices will rise in short term. As the proportion of mineral salt in China's total crude salt output further increases, crude salt prices in China will be more closely associated with coal prices and other energy product prices. Although mineral salt can have a very large production scale, it still cannot compete with sea salt in the short time due to its higher production and freight costs.

Downstream industries of the chlor-alkali industry is recovering

In 2011, China plans to build a new polyvinyl chloride (PVC, paste resin) capacity of 4.495 million t/a and a new caustic soda capacity of 7.84 million t/a (planning to eliminate a backward capacity of 705 000 t/a). It is expected that the actual new capacity will be only about 40% -50% of the planned new capacity. Overall, the capacity expansion rate of the chlor-alkali industry has slowed down, but the contradictory between the supply and demand still exists. And the energy-saving and emissions reduction policy has had much greater direct impact on downstream industries of the chlor-alkali industry, bringing about a lot pressure on the downstream market of chlor-alkali products.

Economic recovery boosts the growth of PVC-based downstream industries

The economic recovery, particularly the construction of many infrastructural investment projects, directly stimulates the demand for chemical construction materials. In 2010, the production of plastic profiles and pipes increased rapidly. The production and sales of the plastic processing industry grew rapidly, supporting the hike of PVC prices to a certain extent. In 2010, the demand for construction plastics in China was 10 million tons, up 20% year on year. In China, as the demand for household plastic goods is huge, the demand in household product industries for synthetic resin in 2010 reached 7 million tons, up 18% year on year.
    From 2011 on, China will spend 20 years to promote urbanization, enhancing its urbanization rate to 65% in 2030. Therefore, the real estate industry will continue to maintain a strong demand for related chemical products in the future.
    China Plastics Processing Industry Association Secretary-General Ma Zhanfeng said that during the "Twelfth Five-Year Program" Period (2011-2015), the annual growth rate of the demand for plastic products is expected to reach 12% - 15%, thereby stimulating the rapid growth of the demand for synthetic resins.
    In 2010, PVC prices gradually climbed, growing by more than RMB1 000 /t compared to the same period of 2009, but plastic profile prices only grew slightly.
    It is predicted that in 2015, China's plastic pipe output will reach more than 11 million tons. Upstream industries should accelerate the development and production of resins for plastic pipes and develop functional PVC resins to solve the short supply of specialty resins.

Caustic soda-related downstream industries are recovering

Alumina industry

Chinese nonferrous metal experts said that in 2011, the expansion of China's alumina capacity will bring about a lot pressure to the market, but alumina prices will show an upward trend. China Nonferrous Metal Information Network estimates that China's crude aluminum output in 2011 will reach 19.5 million tons. Bases on this estimate, in 2011 China's demand for metallurgical grade alumina will reach 37.64 million tons, up 11.4% year on year, and China's alumina output will be 37.3 million tons, up 20%. In 2011, China will still h