Current supply and demand situation of formaldehyde in China and forecasts

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In 2000, the national formaldehyde production capacity more than doubled compared to 1998, reaching around 5 million tons per year, with production mainly concentrated in 5 provinces； Shandong has a production capacity of 1 million tons per year, Jiangsu 680,000 tons per year, Hebei 660,000 tons per year, Guangdong 370,000 tons per year, and Liaoning 270,000 tons per year. The total production capacity of formaldehyde in these five provinces is approximately 3 million tons per year, accounting for 60% of the country’s total production capacity. In 2000, the actual national production of formaldehyde was 2.068 million tons, an increase of 12.57% compared to 1999, which was 5 percentage points higher than the average growth rate of the national economy; it thus represents a chemical product with rapid development. Entering 2001, the production and consumption of formaldehyde in China continued to grow at a high rate; the total national production of formaldehyde reached 2.344 million tons, an increase of 10.18% compared to 2000. At the Yantai conference on the formaldehyde industry held in October 2000, I predicted that national formaldehyde consumption would reach 2.36 million tons per year by 2003; it seems that this prediction was rather conservative, as the national production of formaldehyde already reached that level in 2001. In the coming years, from 2003 to 2005, the production and consumption of formaldehyde in our country will continue to show strong growth, with a rapid pace of development. The main reason for this is the significant expansion expected in China’s key downstream products that utilize formaldehyde. The downstream products of formaldehyde mainly include 16 categories with hundreds of varieties, such as urea-formaldehyde resin, phenol-formaldehyde resin, polyformaldehyde, urotropine, pentaerythritol, neopentyl glycol, trimethylolpropane, trimethylolethane, dimethylolpropionic acid, pyridine and its derivatives, acetylene chemicals, 1,4-butanediol (PBT, THF, PTMEG, Y-butyrolactone, N-methylpyrrolidone, vinylpyrrolidones, polyvinylpyrrolidones), vinylon, MDI, chelating agents, slow-release fertilizers, nitroalkane derivatives (trimethylolnitromethane, trimethylolaminomethane), urea-formaldehyde pre-condensates, fiber treatment chemicals, paper treatment chemicals, and more. The main downstream product of formaldehyde in our country is formaldehyde resin; the production capacity for other various downstream products of formaldehyde is very limited, and their output is insufficient, requiring imports from abroad to meet market demand each year. In 2001, 79,622 tons of phenolic resin were imported, along with 13,499 tons of melamine resin, 63,605 tons of MDI, 126,500 tons of TDI, 109,000 tons of polyoxymethylene resin, 43,641 tons of paraformaldehyde, 10,677 tons of pentaerythritol, 5,110 tons of pyridine and its salts, approximately 30,000 tons of 1,4-butanediol, 4,936 tons of furan, approximately 20,000 tons of PTMEG, 15,487 tons of trimethylolpropane, and so on. In the coming years, the downstream products of formaldehyde in China that are expected to see rapid growth in terms of production capacity and output include six major categories: urea-formaldehyde resin, polyformaldehyde resin, paraformaldehyde, 1,4-butanediol, MDT, and polyols. It is estimated that in 2005, the domestic demand (consumption) for formaldehyde will reach approximately 3.26 million tons per year, based on a conservative estimate (Table 2), with an average annual growth rate of 11%. Table 1 Forecast of Domestic Formaldehyde Demand (10,000 tons)
Demand Use | 2002 | 2005 | Average Annual Growth Rate (%)
Urea-formaldehyde resin | 119 | 146 | 4.5
Phenol-formaldehyde resin | 18 | 22 | 4.4
Melamine resin | 6 | 8 | 6.6
Pentanol | 12 | 8 | 10.0
Urotropine | 9 | 10 | --
Neopentyl glycol | 1 | 2 | 20
Trimethylolpropane | 0.3 | 2 | 110.0
Slow-release fertilizers | 2 | 4 | 20.0
Vinylon | 1 | 1 | --
Polyformaldehyde resin | 0 | 25 | --
Polyoxymethylene | 1.5 | 15 | 180.0
Synthetic pyridine | 0 | 2 | --
1,4-Butanediol | 1 | 10 | 200.0
MDI | 2 | 18 | 160.0
Medical industry | 8 | 10 | 5.0
Pesticides | 6 | 9 | 10.0
Others | 20 | 24 | 4.0
Total | 206.8 | 326 | 11.0

1. Current Situation and Forecast of Urea-formaldehyde Resin
In the next 5 years, there is significant potential for the development of urea-formaldehyde resin in China, mainly due to the rapid growth of the wood-based panel industry and the construction decoration sector, which leads to an increasing demand for adhesives. In 2000, the national production of the three types of panel materials (plywood, particleboard, and medium-density fiberboard) reached 17.4 million cubic meters; the amount of formaldehyde used in this production was approximately 90,000 tons, accounting for 57% of the total formaldehyde produced in China that year. In 2005, China’s production of triply coated paper is expected to reach 21.6 million meters, with an annual consumption of formaldehyde of around 1.46 million tons, resulting in an average annual growth rate of about 4.5%. At present, in the adhesive industry in China, traditional liquid urea-formaldehyde adhesives are still the main ones that are produced and used; the production and utilization of powdered urea-formaldehyde resins remain very limited. As a result, the release of free formaldehyde from panels is high, posing a threat to human health. Abroad, liquid urea-formaldehyde adhesives produced from high-concentration formaldehyde are mainly used, while over 80% of powdered urea-formaldehyde resins are employed in the wood processing industry. In September 2000, the Tonghua Adhesives Branch of Jilin Forest Industry Co., Ltd. put into operation a German-made facility capable of producing 10,000 tons per year of powdered urea-formaldehyde resin; the products manufactured by this facility are used in the production of composite wood floors, and the performance of these floors as well as their free formaldehyde emission levels meet German DIN standards. Yuntianhua Group has also built a facility for producing powdered urea-formaldehyde adhesive, but the sales of its products have been sluggish. In order to reduce the harm caused by free formaldehyde to the environment and human health, China has begun to set limits on the release of free formaldehyde from engineered wood products. The Chinese Academy of Environmental Sciences and the **Engineered Wood Quality Supervision Center jointly drafted the (Technical Requirements for Engineered Wood Products with Low Formaldehyde Emissions) ； The formaldehyde content in medium-density fiberboard should be <40 mg per 100 grams of board, in particleboard it should be <50 mg per 100 grams, and in plywood it should be <20 mg per 100 grams. This will lead to changes and technological advancements in traditional domestic glue-making processes, and it will also further promote the widespread use of powdered urea-formaldehyde resin. It is predicted that the demand for powdered urea-formaldehyde resin in China will reach 216,000 tons by 2005. 2 Current Status and Prospects of Polyoxymethylene Resins At present, the world’s production capacity for polyoxymethylene resins is around 800,000 tons per year, while the demand is about 680,000 tons per year. Of this, the United States accounts for 204,000 tons, Europe for 192,000 tons, Japan for 100,000 tons, and Asia for 190,000 tons. Asia experiences the fastest growth, with an annual growth rate of around 16%. China has a certain scale of production for polyoxymethylene resin; the production capacities of Shanghai Solvent Factory, Shijinggou Joint Chemical Plant, and Shenzhen DuPont Company together amount to 13,000 tons per year. The 10,000 tons per year production facility built by Yuntianhua Group using Polish technology came online in July this year, **increasing the self-sufficiency level of domestic polyoxymethylene products. However, the consumption of polyoxymethylene in China is growing quite rapidly, with its main uses being in three areas: automotive parts, electronic and electrical components, and light industrial products. In 1999, 90,600 tons of polyoxymethylene were imported, and this figure rose to 108,300 tons in 2000, representing an average annual growth rate of 19.5%. The import volume in 2001 was 109,000 tons. In order to change the situation of relying entirely on imported products, many enterprises and **relevant regulatory authorities are actively establishing new large-scale production facilities; these will be the key products for development in the downstream sector of formaldehyde in our country over the next 5 years. It is reported that the project of Shanxi Broccoli Technology Co., Ltd. to produce 20,000 tons of polyoxymethylene per year has been approved by the **Planning Commission; the total investment amounts to 580 million yuan, with completion and operation planned within 2 years. The methanol plant of Daqing Oilfield, belonging to China National Petroleum Corporation, has had its recently submitted project for an annual production capacity of 20,000 tons of polyoxymethylene approved for implementation by the **Planning Commission. The Economic and Technological Development Zone in Nantong City, Jiangsu Province, has recently joined forces with the American company Degussa, the Japanese companies Polyplastics and Mitsubishi Gas Chemical to invest in the construction of China’s largest polyoxymethylene production facility in Nantong. The facility will have an annual production capacity of 60,000 tons of POM, with an investment of $140 million; it is expected to be completed and put into operation in 2004. By 2005, the total domestic production capacity for polyoxymethylene was around 120,000 tons per year; assuming an operating rate of 70%, the annual consumption of formaldehyde (at 37% purity) was approximately 250,000 tons. 3 Current Status and Prospects of Polyoxymethylene: In the coming years, polyoxymethylene will also be one of the key downstream products of formaldehyde that will see significant development in China. Polyoxymethylene is primarily used as a raw material for pesticides, in the production of acetochlor, butachlor, glyphosate, chlorimuron-ethyl, and diuron. Its consumption accounts for about 70% of the total domestic consumption of polyformaldehyde ； Secondly, it is used in the production of high-quality paints for automobiles, accounting for about 10% of the total consumption ； Those used in the production of phenolic resins, melamine resins, and ion exchange resins account for about 5% of the total consumption ； The remaining approximately 5% is used in other applications such as the production of papermaking additives, fragrances, vitamin A, and developing agents. There are only a few small-scale facilities in the country, with a total production capacity of around 8,000 tons per year. The products have a high degree of polymerization and poor water solubility, which limits the expansion of their application markets. In 1998, the domestic demand was 26,000 tons; it rose to 35,000 tons in 1999, representing an average annual growth rate of 35%. In 2000, the demand approached 45,000 tons. Due to a shortage between domestic production and demand, imports increased year by year: 21,774 tons in 1998, 29,806 tons in 1999, 37,514.5 tons in 2000, and 43,640 tons in 2001, with an average annual growth rate of 16.5%. In the coming years, domestic demand for polyoxymethylene will continue to rise. Many companies are already paying attention to this emerging field, and large-scale production facilities will be built. In July 2001, Nantong Jiangshan Co., Ltd. signed an agreement with the Italian company OTEC to introduce a production facility with a capacity of 20,000 tons per year; it was expected to be completed and put into operation in 2003. In addition, some companies are planning to build paraformaldehyde plants. It is estimated that the total domestic production capacity of polyformaldehyde in 2005 will reach 60,000 tons per year, with an annual consumption of formaldehyde of around 150,000 tons. Status and prospects of 1,4-butanediol. 1,4-Butanediol is one of the important products derived from formaldehyde; it can further be processed into PBT resins, polyurethanes (used in coatings, plastics, synthetic leather, adhesives, shoe soles, etc.), spandex, elastic materials, furans, polyfurans (PTMEG), Y-butyrolactone, N-methylpyrrolidones, N-vinylpyrrolidones, polyvinylpyrrolidones, and more. In recent years, the demand for 1,4-butanediol has been increasing rapidly both domestically and internationally. In 2000, the overseas production capacity was 1 million tons per year, while the demand was 655,000 tons per year; approximately 80% of this was produced using the Reppe process. By 2005, the overseas production capacity was expected to rise to 1.66 million tons per year, and the demand to 849,000 tons per year, with about 55% of it being produced via the Reppe process. New plants primarily use the hydrogenation of butane or maleic anhydride for production. Between 2000 and 2005, the average annual growth rates for production capacity and demand were 13.5% and 5.9%, respectively. Currently, the domestic production capacity for 1,4-butanediol is 14,600 tons per year, while the demand is around 40,000 tons per year; the actual production is less than 10,000 tons. In the year 2000, imports amounted to approximately 29,000 tons. It is estimated that the national demand in 2005 will reach 75,000 tons per year, with an average annual growth rate of 17.5%. Among the existing l,4-butanediol production facilities in China, only a few small plants use the alkyne-aldehyde method; the only large-scale facility still employs the butane method (Shandong Shengli Oilfield Petrochemical Co., Ltd., with a production capacity of 10,000 tons per year). Due to a shortage of butane as a raw material, this facility fails to meet its production targets. Over the next 5 years, the construction of facilities for producing 1,4-butanediol using the alkyne-aldehyde method will accelerate in China. Three large-scale facilities are set to be built; the facility operated by Shanxi Shanwei Group, which uses second-hand equipment imported from the US company ISP and has an annual production capacity of 20,000 tons, has already been put into operation. Fujian Sanming Chemical Plant has obtained approval to build a facility with an annual capacity of 25,000 tons by utilizing imported technology, and another company in Sichuan also plans to build a facility with an annual capacity of 25,000 tons using similar technology. If all three facilities are completed as planned, the total domestic production capacity for 1,4-butanediol via this method will reach 75,000 tons per year. If only two facilities are brought online, the domestic production capacity will be around 50,000 tons per year, with annual demand for formaldehyde (at 37% concentration) amounting to about 100,000 tons. 5 Current Status and Prospects of MDI: MDI, whose scientific name is 4,4’-diphenylmethane diisocyanate, is one of the downstream products of formaldehyde. Over the next 5 years, MDI will represent an important area for formaldehyde consumption in China. MDI is primarily used as a raw material for polyurethane foam plastics, in the construction industry, refrigeration sector, packaging industry, and industrial insulation applications ； Used as a raw material for spandex, a polyurethane elastic fiber, in sports apparel, swimsuits, underwear, socks, and other clothing industries ； Used as a raw material for polyurethane adhesives; it is the best adhesive for the shoe industry and tape production ； Used as a raw material for polyurethane coatings in the construction and home improvement industries ； Used as a raw material for polyurethane synthetic leather, in the apparel industry, home decoration industry, and automotive industry ； In short, MDI has a very wide range of applications. From 2000 to 2004, foreign demand for MDI is expected to grow at a rate of 8–9%, with annual demand reaching 3.085 million tons. China’s MDI industry started relatively late; in 1979, the Yantai Synthetic Leather Factory (now known as Yantai Wanhua) introduced Japanese technology to build a plant with an annual production capacity of 10,000 tons. At present, this capacity has been increased to 40,000 tons per year. The target is to reach 60,000 tons per year by 2002, with further expansion to 80,000 tons per year in 2003. At the same time, work began on building a super-large facility in another location with an annual production capacity of 160,000 tons of MDI. The demand for MDI in our country is growing rapidly, while domestic production is very low. In 1998, the apparent consumption was 0.4 million tons per year, with imports amounting to 10.2 thousand tons; by 2000, imports had risen to 57 thousand tons. In 2001, the import volume was 63,600 tons, with an average annual growth rate of 11.5%. It is predicted that domestic MDI demand will grow at a rate of 50% per year before 2005; as a result, several new production facilities are being built, including a 40,000 t/year facility operated by Liaoning Qingyang Chemical Industry Company, a 160,000 t/year facility in the Shanghai Chemical Industry Development Zone, and a facility that is planned to be constructed by Jiangxi Jiujiang Petrochemical Complex. By 2005, the total domestic MDI production capacity is expected to exceed 400,000 t/year. Assuming an operation rate of 85%, the annual consumption of formaldehyde will be around 170,000 t. 6 Current Status and Forecast of Polyols: The domestic production capacity for pentaerythritol is over 80,000 tons per year, while the demand is around 40,000–50,000 tons per year; thus, there is an oversupply. Imported products are of high quality at low prices, posing a significant impact on the domestic market. The import volume was 10,700 tons in 1999, 7,424.6 tons in 2000, and 10,676.8 tons in 2001. The import volume in the first 9 months of this year has already exceeded that of the entire previous year, and it is expected that the import volume this year will exceed 10,000 tons. The domestic production capacity of neopentyl glycol is approximately 30,000 tons per year, and its output is sufficient to meet domestic market demand. However, the production capacity of trimethylolpropane is very low, and its output is far from sufficient to meet market demand; as a result, large amounts are imported. The import volume was 14,268 tons in 1999, 15,194 tons in 2000, with an average annual growth rate of 6.5%, and the import volume reached 15,486.9 tons in 2001. After more than two years of experimental research, Beijing Beilang Organic Chemical Factory put into operation a new production process for trimethylolpropane with an annual capacity of 1,000 tons in October this year, and has begun building a large-scale production facility with an annual capacity of 5,000 tons. In addition, the R&D institute of Jihua Company has also developed a new process, and the company plans to use this process to build a production facility with an annual output of 5,000 tons. It is estimated that in 2005, the production capacity of trimethylolpropane facilities in the country will reach 12,000 tons per year, with an annual consumption of formaldehyde of around 20,000 tons. Based on the above analysis, it can be seen that although the trends in formaldehyde production and consumption in our country over the next few years are promising, with rapid growth rates and increasing consumption levels, the situation is not entirely optimistic. Since future development will mainly focus on the six downstream products of formaldehyde, each of these new facilities will need to be equipped with a formaldehyde raw material production unit for self-production and self-sales. Although the existing formaldehyde production capacity in the country is already excessive, due to small-scale facilities and limitations in the quality of the formaldehyde produced, it is still not possible to integrate this production with the downstream products that are set to be developed; as a result, the situation of overcapacity remains unchanged. Moreover, the more new facilities are built, the greater the impact on the existing ones. Faced with the emergence of this new landscape in the future, every existing formaldehyde-producing enterprise must carefully consider its own direction of development and seek its precise position within the dynamics of the market.