Major Basic Chemicals Showed Further Improvement in 2017
By Cao Jianjun
The economic performance in China in 2017 is better than expected at the beginning of the year. It mainly benefits from the promotion of macro policies and incentive measures. The supervision on the banking sector in China will be further tightened in 2018. With the implementation of policies for encouraging the manufacturing sector by the Chinese Government, investments in entities will hopefully be accelerated. On the whole, the trend of economic growth in China will likely be moderately weakened in 2018. HIS Markit forecasts that the economic growth rate in China will be slowed down from 6.8% in 2017 to 6.5%.
The demand growth of major basic chemicals in China was quite slow during 2012-2016. It is however much quicker in 2017. The profit-earning ability of the sector maintains the briskness of 2016 and a further improvement is also made.
Calcium carbide: The cost makes increase, and the development is under pressure
1. The output is basically equal to 2016
Statistics made by the National Bureau of Statistics show that the total output of calcium carbide was 22.699 million tons during January-November 2017, a drop of 0.4% from the same period of last year. The output in the whole of 2017 is expected to be basically equal to 2016. The calcium carbide sector has suffered considerable impacts from the “environmental storm” since 2016 and many enterprises have suspended or restricted production. The rectification and mining restriction of limestone and the drastic price rise of blue coke have also seriously constrained the display of the calcium carbide capacity.
2. The price has made an evident increase and the profit-earning status in enterprises is improved
With impacts from the slack demand in downstream products such as PVC, the price of calcium carbide in the domestic market came all way down in the first half of 2017. A low price of RMB2 300/t even appeared in individual enterprises. The price of calcium carbide became stable with some increase in the third quarter and already reached around RMB3 400/t at the end of September. In 60 major calcium carbide producers monitored by China Calcium Carbide Industry Association, 18 commodity calcium carbide producers have basically made breakeven. In 42 calcium carbide producers matched with PVC units, 28 producers have earned profit, 7 producers have made breakeven and 7 producers have suffered loss. The profit-earning status in different regions has considerable difference. The profit-earning status in coal/power/calcium carbide integrated enterprises in Inner Mongolia, Xinjiang and Shaanxi is much better than calcium carbide producers in Hunan, Hubei, Yunnan, Sichuan, Henan and Gansu. It is also related to the considerable price difference of industrial power in different regions.
3. The work on de-capacity has made a sustained headway and the capacity surplus is eased
According to preliminary statistics made by China Calcium Carbide Industry Association, 40 calcium carbide producers, totally over 50 calcium carbide kilns, have shut down or shifted to other products in 2017. Their total capacity is 2.20 million t/a. Most of the capacity is concentrated in Shaanxi, Gansu, Guizhou and Inner Mongolia. It is expected that by the end of 2017 the capacity of calcium carbide in China will be around 3.00 million t/a lower than the capacity at the end of 2016, the overall operating rate will be 7% higher than 2016 and the capacity surplus will hopefully be eased.
4. The development of the calcium carbide sector in 2017 is mainly faced with following challenges
Prices of raw materials have made a sustained increase. The price of limestone has gone up by around RMB100/t. The high price of coal has also led to an increase of the blue coke price by RMB100/t as compared with the price at the beginning of the year.
The consumption of calcium carbide still has heavy dependence on the PVC sector. Around 80% of the calcium carbide consumption in China is concentrated in the PVC sector. The market of calcium carbide is therefore greatly influenced by the price trend of PVC. Because of this, calcium carbide producers have expanded new downstream application sectors such as lime nitrogen, cyanamide, 1,4-butanediol and vinyl acetate/polyvinyl alcohol to promote the optimization and upgrading of the consumption structure, but the result leaves much to be desired.
5. Outlook for 2018
The overall economic functioning of the calcium carbide sector will be kept stable. A lot of chemical capacities with outdated technology and unsatisfactory environmental protection quitted market in the first half of 2017. The restructuring of the chlor-alkali sector has also achieved major advances and offered a backing to the calcium carbide sector. The capacity of PVC has already tended to be stable and the operating rate has also gone up from 62% in 2013 to 79% today. The concentration degree of the PVC capacity has made a constant upgrading and the average scale of PVC producers has already increased to 310 kt/a.
Overall, the foundation for the long-term improvement of the calcium carbide market in China is not solid, prices of raw materials are making a constant increase, the pressure of safety and environmental protection is higher, the basic status of oversupply in market has made no fundamental change and problems of difficult operation and tight capital in enterprises are still prominent.
Chlor-alkali: The profit makes sustained increase, and more challenges have to be handled
1. The capacity maintains a rational growth and the concentration degree has a further upgrading
There are 160 caustic soda producers in China at the end of 2017 and the capacity reaches 41.02 million t/a, a net increase of 1.57 million t/a over the capacity at the end of 2016 (the new capacity being 1.84 million t/a, the phased-out capacity being 270 kt/a). The average capacity of each producer has gone up from 220 kt/a in 2013 to 260 kt/a today. The concentration degree has made a further upgrading.
There are 75 PVC producers in China at the end of 2017 and the capacity reaches 24.06 million t/a, a net increase of 800 kt/a over the capacity at the end of 2016 (the new capacity being 1.08 million t/a, the phased-out capacity being 280 kt/a). The average capacity of each producer has gone up from 270 kt/a in 2013 to 320 kt/a today.
2. The output of leading products makes an increase and the operating rate goes further up
Statistics made by the National Bureau of Statistics show that the output of caustic soda was 30.91 million tons during January-November 2017, an increase of 2.5% over the same period of last year. The output of PVC was 16.01 million tons, an increase of 4.8%. The operating rate of caustic soda reached 84% and the operating rate of PVC reached 74%, being respectively 1 percentage point and 2 percentage points higher than the same period of 2016 and being at the high level of past years.
3. The price of caustic soda is kept at a high level and the price of PVC makes evident fluctuations
Pushed by the demand in downstream sectors such as alumina, the price of caustic soda in China is kept at a high level in 2017. Owing to factors such as the price rise of caustic soda purchased by alumina producers and the overhaul of some caustic soda units, the price of caustic soda made a sustained increase in the first three quarters. With impacts from the production restoration of overhauled caustic soda units and the production restriction in alumina producers in North China during the heating season, the price of caustic soda started to come down near the yearend.
The price of PVC in China has made evident fluctuations in 2017. The market transaction price had a gradual floated decline in the first quarter. Owing to factors such as the concentrated overhaul of producers, the recovery of downstream sectors and the price rise of futures, the price of PVC started to go up in the second quarter and especially after May. The supply shortage of raw material calcium carbide and the constant price surge of futures led to a further price rise of PV in the third quarter. With impacts from the weakening of the caustic soda market and the price rise of futures, the price of PVC made a slight increase near the yearend.
4. The export amount of both caustic soda and PVC is reduced and the import amount of PVC is increased
The export amount of liquid caustic soda in China was 791 kt during January-October 2017, a drop of 21% from the same period of last year. The export amount of solid caustic soda was 454 kt, a drop of 31%. The price rise of caustic soda in the domestic market is the main reason for the reduction of the export amount.
The import amount of PVC pure powder in China was 639 kt during January-October 2017, an increase of 23% over the same period of last year. The export amount was 847 kt, a drop of 13%.
5. Upstream raw material sectors are basically stable and the downstream alumina sector maintains a rapid growth
The output of raw salt in China reached 58.982 million tons during January-November 2017, an increase of 4.9% over the same period of last year. With impacts from factors such as production restriction and structure readjustment, the output of calcium carbide was 22.699 million tons during January-November, a slight drop of 0.4% from the same period of last year.
Major downstream consumption sectors maintain a stable growth in 2017. Alumina as a downstream product of caustic soda has made a rapid growth. The output of alumina was 65.139 million tons during January-November, an increase of 10.5% over the same period of last year. It is also an important factor for the price rise of caustic soda.
6. The profit-earning status is satisfactory
According to statistics made by China Chlor-Alkali Industry Association to major enterprises for monitoring, the chlor-alkali sector suffered loss for 3 consecutive years during 2013-2015. The total profit of the sector was RMB5.2 billion in 2016. Economic benefits made evident improvements and the entire sector earned profit. The profit to be earned by the sector in 2017 is expected to have another increase over the profit in 2016.
Owing to comprehensive contributions of various factors, markets of major products in the chlor-alkali sector have fair performance in 2017, the production and operation in enterprises have made quite good achievements and the profit-earning status of the sector is also satisfactory. Factors such as supply-side reform and structure readjustment have combined to make the development of the sector more sound and rational.
It is expected that the market of caustic soda will have a complicated situation with impacts from multiple factors in 2018. With the more stringent inspection on safety and environmental protection, the operating rate of some chlorine-consuming enterprises will be at a low level and the regional output of caustic soda will make a reduction. A favorable backing will therefore be provided to the market of caustic soda. Due to impacts from environmental factors such as de-capacity and atmospheric control, however, downstream alumina producers will be faced with a lot of uncertain factors. The market of caustic soda in China will likely still have a trend of high-level consolidation in 2018.
The market of PVC will also have a game with impacts from various factors such as supply/demand, environmental protection, futures and raw materials. The new capacity will soon be released in 2018. The market supply of PVC in China will very likely make a further increase whereas the downstream demand will have seasonal changes. Market fluctuations are therefore expected to be aggravated.
Sulfuric acid: Disturbances exist in a good year
The market of sulfuric acid in 2017 has a good year seldom seen for long years. Reasons are mainly as follows. First, owing to the overall price rise of bulk raw materials in the international market and especially the price rise of sulfur, the price of sulfuric acid has made an increase. Second, downstream sectors and especially sectors using industrial sulfuric acid such as titanium dioxide and caprolactam have made an overall recovery and a backing is offered to the market of sulfuric acid. Third, the considerable output reduction of smelting sulfuric acid in Japan and Korea has led to a supply shortage of sulfuric acid in the international market. The price of sulfuric acid in the international market is therefore kept at a high level. The export amount of sulfuric acid in China hits a new high of past years and has eased oversupply in the domestic sulfuric acid market to a certain extent.
The “Evaluation Index System for Clean Production in the Sulfuric Acid Sector (Version for Opinion Solicitation)” that has been prepared for nearly 2 years is basically completed today. The document is expected to be issued in 2018. With the promulgation of a series of policies related to the sulfuric acid sector such as the new catalogue of hazardous and scrap products, the relocation of chemical enterprises to industry parks, the collection of the environmental protection tax, the establishment of the carbon trade market in China, the transformation, upgrading and green development of the sulfuric acid sector will be greatly promoted.
Nevertheless, close attention needs to be paid to some problems in the development of the sulfuric acid sector. The problem of excessive sulfuric acid mist is besetting the sulfuric acid sector. The “Stationary Source Emission: Determination of Sulfuric Acid Mist - Ion Chromatography” (HJ544-2016) was issued in March 2016. After using the new assaying method, the content of sulfuric acid mist in tail gas of sulfuric acid units is usually beyond the limit. China Sulfuric Acid Industry Association will highlight the quantitative research on ingredients of sulfuric acid mist and identify a suitable method for assaying sulfuric acid mist in the sulfuric acid sector so as to solve the problem of excessive sulfuric acid mist. The import dependence of sulfur in China is also kept at a high level. Starting from September 2017 the price of sulfur made a drastic rise and the increase margin exceeded 100% in a matter of 2 months. As the price of sulfur lacked the backing of downstream products, after the price reached the top it started a rapid downturn. The reduction margin is already close to 30% today and the declining trend is also not to be halted. The market of sulfur as one of the most important raw materials for sulfuric acid urgently needs a wind vane that can truly reflects the supply/demand status in both domestic and overseas markets.
Pesticides: There is greater overall prosperity
The pesticide sector in China has presented a trend of greater overall prosperity in 2017. Data from the Institute for the Control of Agrochemicals under the Ministry of Agriculture show that the export amount of pesticides in China was 1.208 million tons in the first 10 months of 2017, an increase of 9.25% over the same period of 2016. The export value was US$5.41289 billion, an increase of 19.40%. An increase in both the export amount and the export value was achieved. The total consumption of pesticides is stable with some reduction as compared with last year. The consumption of insecticides has made a reduction. The consumption of fungicides and seed treatment agents is basically equal to last year. The consumption of herbicides, plant regulators, pesticide additives and nematocides has gone up.
Many major changes in policies for the pesticide sector are made in 2017. The new “Regulations on the Control of Agricultural Chemicals” was issued at the beginning of 2017. The “Views of the Ministry of Agriculture on Strengthening the Administration and Promoting the Sound Development of the Pesticide Sector” was issued in June 2017. The promulgation of these new policies has produced profound implications over the pesticide sector. The production, operation and application of pesticides will be put under unified supervision and administration by agricultural departments. In the new pesticide production license system, the rule of “one enterprise one license” will be implemented. Licenses will be issued on the basis of production scopes. Production scopes of APIs will be defined according to product variety. Production scopes of formulations will be defined according to dosage form. Examination and approval will be made by provincial-level competent agricultural departments. Heavy pressures from environmental protection and safety have also produced major impacts on the pesticide sector and such impacts will still last in future. Not only the production of final products but also the supply of raw materials and intermediates will be involved.
With the steady recovery of the downstream demand and the sustained increase of the environmental pressure, the prosperity of the pesticide sector will hopefully make further upgrading. As the supervision on safety and environmental protection is becoming more stringent, leading enterprises in the pesticide sector will hold greater market domination whereas some medium and small enterprises will be faced with grave crisis between life and death. Such situation will play a positive role in promoting the readjustment and upgrading of the product structure and the green development of the entire pesticide sector.
Chemical fertilizers: Rehabilitation and de-capacity are inevitable trends
After experiencing a cold winter in 2016, the chemical fertilizer sector in China has made gradual rehabilitation in 2017. The nitrogen fertilizer sector, in particular, has successfully reversed loss to profit. The development of the entire chemical fertilizer sector is however still full of difficulties and the task of de-capacity is long and tedious. With the deep going of transformation and upgrading, the chemical fertilizer sector will gradually step onto the track of sound development.
1. The output of chemical fertilizers has made a sustained reduction
Data from China Petroleum and Chemical Industry Federation show that the output of chemical fertilizers in China was 50.454 million tons (100%, the same below) during January-September 2017, a drop of 5.2% from the same period of last year and the reduction margin was 0.7 percentage points higher than the first half of 2017. The output of nitrogen fertilizers was 31.814 million tons, a drop of 9.8%. The output of phosphate fertilizers was 13.683 million tons, an increase of 3.2%. The output of potash fertilizers was 4.835 million tons, an increase of 3.7%.
With impacts from various factors such as the elimination of outdated capacities, the reduction of the operating rate and the price rise of raw materials, the overall functioning of the nitrogen fertilizer sector in 2017 is better than last year. The main-business revenue of the nitrogen fertilizer sector was RMB176.49 billion during January-September 2017, an increase of 12.9% over the same period of last year. The total profit was RMB3.80 billion and the reversion of loss to profit was achieved.
The performance of the phosphate fertilizer sector is also more brilliant than last year. According to quarterly reports of listed companies, the net profit of 3 listed phosphate fertilizer companies (Lubei Chemical, Liuguo Chemical and Lutianhua) was RMB83.9727 million in the first three quarters of 2017, an increase of 105.24% over the same period of last year and the overall profit of the phosphate fertilizer sector was much higher.
The output of potash fertilizers has made an increase in 2017. Due to factors such as the drop of the selling price, however, the performance of listed potash fertilizer companies was just average in the first three quarters. With impacts from the sales reduction of potassium chloride and the Feb. 14 fire in Haina Chemical Co., Ltd., Qinghai Salt Lake Industry Group Co., Ltd. has suffered a loss of RMB859 million. The performance made by Zangge Holding Co., Ltd. is satisfactory and a profit of RMB675 million is earned.
2. The import amount is increased and the export amount is reduced
As prices of chemical fertilizers in the international market are quite low, the import amount of chemical fertilizers in China has made an increase. The total import amount of chemical fertilizers in China was 7.507 million tons during January-October 2017, an increase of 20.7% over the import amount of 6.2182 million tons in the same period of 2016. The import value was US$1.92 billion.
Policies for export tariffs of chemical fertilizers are much more favorable in 2017. Varieties of chemical fertilizers with no export tariff have a drastic increase. Urea, DAP, MAP, ammonium chloride, superphosphate, triple superphosphate, NP binary compound fertilizers and 10kg package chemical fertilizers all have no export tariff. The export tariff of NPK ternary compound fertilizers is also reduced by 10% from 30% to 20%.
As the output of potash fertilizers in China fails to satisfy the demand, the export tariff of potassium chloride and potassium sulfate remains to be RMB600/t. The export tariff of potassium nitrate used as fertilizer is still 5%. The export tariff of other mineral potash fertilizers is 30%.
According to statistics made by the General Administration of Customs, the export amount of chemical fertilizers in China was 20.833 million tons during January-October 2017 and the export value was US$5.05 billion, a drop of 7.8% and 6.8% respectively from the same period of last year. The export reduction of chemical fertilizers is mainly caused by the drastic export downturn of urea. Due to impacts from factors such as the price rise of coal and the elimination of preferential policies, the export of urea in 2017 is affected.
Contrary to the price trend in the international market, due to the slack demand the price of potash fertilizers in the domestic market has made a reduction. The price of potash fertilizers in the international market has made a slow increase and the market is satisfactory. The large contract price of potash fertilizers is US$230/t CFR in 2017, an increase of US$11/t and 5.02% over US$219/t CFR in 2016.
The import amount of major variety potassium chloride was 6.217 million tons during January-October 2017, an increase of 25.9% over the same period of last year. The average import price was US$226.5/t, a drop of 14.4% from US$264.7/t in the same period of last year.
3. The demand of chemical fertilizers comes down
Under the guidance of policies such as the action plan for the zero consumption growth of chemical fertilizers, the consumption of chemical fertilizers has made a sustained reduction. The demand of chemical fertilizers in agriculture is expected to have a gradual decline in future.
Regarding industrial applications, with stringent requirements on environmental protection and atmospheric pollution control the industrial demand of nitrogen fertilizers has gone up. Power plant desulfurization/denitration and vehicle-use urea, in particular, have become new bright spots in industrial demand. The development of other industries has also promoted the demand of industrial ammonium nitrate, industrial ammonium phosphate and industrial potash salts to a certain extent. The demand of chemical fertilizers in industrial applications is therefore expected to have a considerable increase. As the proportion held by the industrial demand is quite low, however, no great influence will be produced on the overall demand of chemical fertilizers.
The apparent consumption of chemical fertilizers in China was 46.336 million tons (100%, the same below) during January-September 2017, a drop of 2.9% from the same period of last year and the reduction margin was 0.3 percentage points higher than the reduction margin during January-June. The apparent consumption of nitrogen fertilizers was 27.863 million tons, a drop of 6.7%. The apparent consumption of phosphate fertilizers was 10.360 million tons, a drop of 2.5%. The apparent consumption of potash fertilizers was 7.991 million tons, an increase of 11.5%. The apparent consumption of DAP (physical goods) was 8.652 million tons, a drop of 7.0%.
4. The performance of the nitrogen fertilizer sector is outstanding
The overall performance of the nitrogen fertilizer sector in 2017 is better than 2016. Take urea for instance. Owing to the brisk demand in spring ploughing, the price of urea was at a high level at the beginning of 2017 and the ex-factory price was in a range of RMB1 600-1 700/t. With the constant drop of the operating rate and the price rise in the international market, the price of urea went all way up in September and reached RMB1 750/t, being the highest level in the whole year of 2017. The price of urea made a slight drop to around RMB1 700/t at the beginning of November. Due to the supply shortage of natural gas and the high price of coal, there will be no great possibility for the urea price to make a drastic downturn.
Since the end of the brisk demand season for chemical fertilizers in spring the market of potash fertilizers has been in a state of slight reduction and the price lingered in a range of RMB1 900-2 100/t with no big fluctuations. With improvements in the market transaction of compound fertilizers, the price of potash fertilizers will hopefully make a pickup at the end of 2017.
5. Outlook for 2018
The “Environmental Protection Tax Law for the People’s Republic of China” staring implementation on January 1, 2018 will increase the cost of production and operation in chemical fertilizer enterprises and also urge a group of enterprises with outdated technology and unsatisfactory environmental protection to conduct technical upgrading. The chemical fertilizer sector in China will develop amidst opportunities and challenges in 2018. With the deep going of supply-side reform, outdated capacities of nitrogen fertilizers and phosphate fertilizers have gradually phased out and the chemical fertilizer sector has made remarkable achievements in quality and efficiency improvement.
Stimulated by the demand of chemical fertilizers in spring ploughing, the round of firm price started in spring is expected to last up to March-April 2018. Despite small-margin ups and downs in the meantime, the overall situation will be promising. With greater constraints from environmental protection, the chemical fertilizer sector will maintain a relatively low operating rate.
Dyestuffs: Headway is made in stable development
1. Economic indexes achieve stable growth
Various economic indexes of the dyestuff sector presented a trend of small-margin growth during January-October 2017. The total industrial output value was RMB32.5 billion, an increase of 3.4% over the same period of 2016. The sales revenue was RMB28.9 billion, an increase of 1.6%. The profit and tax was RMB4.53 billion, an increase of 0.9%.
2. The production of dyestuffs makes some increase
According to statistic data from China Dyestuff Industry Association, the production of the entire dyestuff sector has made a stable increase in 2017. The output of various dyestuffs was 670 kt during January-October 2017, an increase of 4.8% over the same period of 2016. The output of organic pigments (incomplete statistics) was 90 kt, an increase of 0.4%. The output of intermediates was 180 kt, an increase of 5.2%.
3. The import and export trade of dyestuffs maintains a rising trend
Customs data show that both the export amount and the import amount of dyestuffs in China have maintained a rising trend in 2017. The export amount of dyestuffs was 233 kt during January-October 2017, an increase of 9% over the same period of 2016. The import amount of dyestuffs was 33 kt, an increase of 37%.
Chemical fibers: Eye-catching performance is made in various fields
The chemical fiber sector has made eye-catching performance in various fields such as science/technology, green sustainable development, talent fostering and capital market in 2017.
The green fiber pilot certification work guided by the Consumer Goods Industry Department of the Ministry of Industry and Information Technology and operated by China Chemical Fiber Industry Association was launched in March 2016. Another 8 chemical fiber enterprises have passed the green fiber labeling certification in 2017. Seventeen chemical fiber enterprises have passed such certification today.
“Xinfengming” has officially entered the A stock market in 2017. Guangwei Composites has also officially entered the capital market and become the first listed carbon fiber company. There are already several dozen listed companies in the chemical fiber sector today.
The development of the chemical fiber sector still has problems of imbalance and inadequacy. In the development of the sector in 2018, great efforts should be made to further deepen supply-side reform, adhere to de-capacity, de-stocking, cost reduction and weak spot shoring up, optimize the allocation of stock resources, expand the supply of high-quality additional resources and achieve the dynamic balance between supply and demand.
Silicone: The supply and the demand have sustained improvement, and a stable development is made
The silicone sector in China has made a rapid development in recent years. An important chemical product system with silicone rubber, silicone oil, silicone resin and functional silane as 4 major categories has been formed. Owing to environmental protection and raw material price rise, the price of silicone has made a drastic increase in 2017. By December 2017 the price rise margin of dimethylcyclosiloxane mixture (DMC) is as high as 90%. The prosperity of the sector has made a stable upgrading.
1. The capacity and the output make a further increase
There are 13 silicone producers in China in 2017. The total capacity is 1.391 million t/a and the output is expected to reach 940 kt, an increase of 4.5% and 4.3% respectively over last year. The average operating rate is 67.6%, being 0.2 percentage points lower than 2016. It is expected that the capacity of silicone will reach 1.70 million t/a in 2021, the output will be 1.25 million tons and the average operating rate will be 73.5%.
In the consumption of silicone in 2017, the consumption in construction, electronic/household electric appliances, power/new energies, medical/personal care, textile/clothes and industrial additives accounts respectively for 24%, 19%, 17%, 11%, 9% and 7% of the total. The proportion in daily articles and communication is respectively 4% and 2% and there is still a considerable development space.
2. Functional silane
The total effective capacity of functional silane in China is around 359 kt/a in 2017 and the output is expected to be 219 kt, an increase of 2.4% and 9.3% respectively over 2016. The operating rate is 4.8 percentage points higher. It is expected that due to the pressure of environmental protection and the elimination of some capacities the operating rate will go further up in 2018.
With the gradual maturing of emerging markets such as new energy vehicles, composite materials and surface treatment, the total capacity of functional silane in China will likely reach 408 kt/a in 2021. The average annual growth of the capacity is expected to be 3.1% during 2016-2021, being much lower. The average annual growth of the output will be 6.4%.
Functional silane can be classified by application into silane coupling agents and silane cross-linking agents. Sulfur-containing silane coupling agents have the biggest output. The output of sulfur-containing silane in China is expected to be 71 kt in 2017.
The demand of functional silane in China will likely reach 148 kt in 2017. In terms of downstream markets, markets with rapid growth include composite materials, coatings, metal surface treatment, construction water prevention and adhesives.
3. Vapor-phase silicon dioxide
The capacity of vapor-phase silicon dioxide in China is 121.8 kt/a in 2017, the output is 78.7 kt, the apparent consumption is 70 kt and the average operating rate is 64.6%. The output and the apparent consumption are respectively 11.5% and 8.4% higher than last year.
Vapor-phase silicon dioxide is mainly used as reinforcement for silicone elastomers and the consumption accounts for over 60% of the total. The coating/ink sector is the second major sector and the consumption accounts for around 10% of the total. The application of silicon dioxide in non-silicon adhesives/sealants and chemical machinery polishing (CMP) has also maintained a rapid growth. The total consumption of silicon dioxide in China is expected to reach 70 kt in 2017, an increase of 8.3% over last year.
4. The prosperity of the sector makes stable upgrading
Both the capacity and the output of silicone in China present a trend of stable growth in 2017. The price of silicone started a drastic increase from August. It became stable with some reduction in November and the market returned to rational. The price of silicone intermediate DMC was RMB29 000/t at the beginning of December, an increase of as high as 90% over the same period of last year. The profit-earning status of the silicone sector is improving today.
5. The demand in the international market is brisk and the export amount makes a sustained increase
Customs data show that the net export amount of silicone in primary form was 76 kt (physical goods) during January-October 2017, an increase of as high as 261.9% over the net export amount of 21 kt in the same period of 2016. The amount exported to Korea, the United States and India accounted for around 41% of the total export amount.
Papermaking chemicals: New opportunities for development should be grasped
With the greater severity of the environmental protection system and the readjustment of the industrial structure, the production and the price in the papermaking sector have made ups and down. Nevertheless, the overall operation is stable, the sales amount is higher and the profit has made a reduction due to impacts from raw material cost, labor cost and traffic cost.
The General Office of the State Council has circulated the “Implementation Plan for Prohibiting the Entry of Foreign Garbage and Advancing the Reform of the Solid Waste Import Administration System” in 2017. As waste pulp has always held an important position in papermaking fiber raw materials in China, the document will surely produce some impacts on the raw material structure of the papermaking sector. The papermaking chemical sector should adhere to technical innovation and grasp new opportunities for the development of papermaking chemicals.
Plastic processing: The green low-carbon strategy will be further implemented
The plastic processing sector in China has suffered pains from drastic price fluctuations of raw materials in 2017. Unduly price ups and downs of raw materials such as PVC and PU have produced great impacts on the plastic processing sector.
At the same time the plastic processing sector has made further green low-carbon development. There are mostly medium and small enterprises in the plastic processing sector today. Some enterprises with non-compliance and serious pollution have been forced to shut down in past years. The market environment of the sector is therefore purified. The plastic processing sector has improved and issued the “Guiding Views on Technical Progress in the Plastic Processing Sector during the Thirteenth Five-Year Plan Period” in 2017, defined the development orientation of “being functional, lightweight and ecological and making micro forming” and guided the entire sector to rely on technical innovation to achieve industrial upgrading.
With the explosive growth of express delivery and takeaway, environmental protection in packages for express delivery and takeaway has aroused widespread attention in 2017. Biodegradable plastic packages and sharing packages being promoted in express delivery have become hot spots. New packaging modes will give birth to a new sector.
Agricultural films: Bright spots exist in difficulties
1. The sector has meager profit and is full of difficulties
The agricultural film sector is still full of difficulties in 2017. The output of agricultural films in enterprises with a considerable scale was 1.789 million tons during January-September 2017, an increase of 0.51% over the same period of last year.
Unfavorable factors to the production of agricultural films in 2017 are following two. First, the downstream market demand is slack. Second, the more stringent supervision on the control of atmospheric pollution has forced most agricultural film producers to shut down, suspend production or make rectification. Due to the price rise of raw materials and the sustained increase of production cost elements such as labor, market competition is further aggravated.
It is expected that by the end of 2017 the total output of agricultural films in 1 000 producers will reach 2.90 million tons (being 2.88 million tons in 2016) and the total output of agricultural films in 200 producers with a considerable scale will reach 2.42 million tons (being equal to the output in 2016).
2. Bright spots in 2017
The “Polyethylene Blown Mulch Films for Agriculture (GB 13735-2017)” will start nationwide implementation on May 1, 2018. The implementation of the revised national standard “Mulch Films for Agriculture” will improve reuse and recycling behaviors of mulch films.
The Ministry of Industry and Information Technology issued the “Standardized Conditions for the Agricultural Film Sector (2017 Version)” on November 29, 2017. The document will start implementation on March 1, 2018.
Lithium cells: Policy readjustments trigger changes in competition mode
Data show that the total sales amount of new energy vehicles in China was 517 000 pieces in 2016. The market scale of lithium cells was around RMB111.5 billion. The market scale of power lithium cells was RMB60.5 billion, an increase of 65.8% over the previous year.
The new energy vehicle sector in China has made a sustained development in fluctuations in 2017. The output of new energy vehicles was 517 000 pieces during January-October 2017 and the sales amount was 490 000 pieces, an increase of 45.7% and 45.4% respectively over the same period of last year.
The output of power lithium cells was 6.42Gwh in the first quarter, 11.97Gwh in the second quarter and 13.25Gwh in the third quarter. The corresponding installed capacity was however respectively 1.27Gwh, 4.5Gwh and 8.9Gwh. The inventory pressure is therefore very high.
With intensive policy readjustments, the concentration degree of the power lithium cell sector has made a sustained upgrading in 2017. The market share held by CATL and BYD is close to 50% today. The market share held by top 10 power lithium cell producers is close to 80%. The market demand of lithium cell equipment has made a rapid expansion in 2017, the output value has made a drastic increase and the profit in enterprises has also made an evident upgrading.
The rate of subsidies for new energy vehicles will have a gradual reduction during 2016-2020. The rate of subsidies during 2017-2018 will be down by 20% from the rate in 2016 and the rate of subsidies during 2019-2020 will be down by 40% from the rate in 2016.
The focus of the lithium cell demand is shifting from the small cell market for consumer electronic products to the power cell market for electric transport means. Industrial and energy-storage markets have also been launched. Major application sectors of lithium cells will be concentrated in electric tools, light-duty electric cycles, new energy vehicles and energy-storage systems. Industrial scales of these sectors will maintain a trend of multiplying growth in next few years and the demand of lithium cells will be stimulated. It is expected that the market value of the lithium cell sector will maintain a stable growth in next few years and the market scale will reach RMB212.9 billion in 2022.
Chemical equipment: four problems constrain the development
Stringent environmental protection policies have forced many local refineries to shut down or suspend production in 2017. The development of the chemical equipment sector that was already in a trough is once again badly hit. Problems that constrain the development of the chemical equipment sector today are concentrated in following four aspects. First, the capacity has structural surplus. The inadequacy of high-end capacities and the serious surplus of low-end capacities exist side by side. Second, the homogenous competition is fierce. Third, the innovative ability is weak. Fourth, the international cooperation leaves much to be desired.
In the “Some Views on Accelerating the Rehabilitation of the Equipment Manufacturing Sector” issued by the State Council large chemical complete equipment is included in 16 key areas for major breakthrough in future. The rapid implementation of the “B&R” strategy has provided a wide market space to chemical equipment manufacturers and the development of the sector will have new opportunities. To cope with the present situation, enterprises should readjust product structure, develop high-end products, improve product quality, enhance brand awareness, conduct transformation and upgrading through technical renovation, raise automation and smartness level and expand overseas markets.
The manufacturing industry in China will make further developments in future. At the macro level, the government will further integrate chemical sectors and eliminate low-efficiency and outdated capacities. More existing chemical enterprises will move to chemical industry parks to strengthen safety and environmental protection control and enhance upstream/downstream integration. The supervision on safety and environment will be further tightened. The chemical industry in China will still maintain a brisk growth in demand and capacity in following years.
