The chlor-alkali industry is entering a new phase of restructuring
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This post was last edited by sunjl1981 on 2013-1-6 at 20:07. The arrival of the financial crisis accelerated the emergence of issues that already existed in China’s chlor-alkali industry, such as overcapacity, unreasonable layout, and low industry concentration. Experts say the chlor-alkali industry urgently needs to recognize the current situation of overcapacity and excessive growth, phase out outdated production capacity, and promote industrial upgrading. At the China Chlor-Alkali Forum held in Nanjing from February 26 to 28, Li Jun, president of the China Chlor-Alkali Industry Association and general manager of Shanghai Chlor-Alkali Chemical Co., Ltd., said that a reshuffle in the chlor-alkali industry has already begun. Over the past decade, China’s chlor-alkali industry has developed rapidly, becoming a major producer of chlor-alkali products in the world. This is mainly reflected in the fact that national PVC production reached 2.64 million tons in 2000, and 9.71 million tons in 2007. The development in the central and western regions has been even more rapid; in the southern, southwestern, and northwestern regions, the PVC production capacity rose from 557,000 tons in 2000 to 5.815 million tons in 2008, which is more than 10 times the level of 2000 ； The use of the ion exchange membrane process has seen rapid growth; in 2008, the production capacity of caustic soda using this method was 7.5 times that of 2000 ； The rapid development of PVC produced by the calcium carbide method: in 2008, the production capacity of PVC via this method was 6.5 times that of 2000 ； The degree of internationalization is increasing gradually; imports of ethylene and its derivatives are on the rise, while exports of caustic soda have grown rapidly, making the country the world’s second-largest exporter of caustic soda. PVC has shifted from being an imported product to one that is exported, and the country’s ability to handle international disputes is also improving over time ； Environmental protection standards are continuously improving, and the park-based circular economy industry chain has become the direction for development. However, a series of problems have also emerged during the development process. First is the contradiction between rapid development and a low capacity utilization rate, resulting in severe overcapacity. It is understood that from 2004 to 2008, the average annual growth rate of China’s caustic soda production capacity was 20%, while the average annual growth rate of production volume was 16% ； During the same period, the average annual growth rate of PVC production capacity was 24%, while the annual growth rate of output was only 15%. In 2008, the output amounted to 8.81 million tons, a 5.3% decline from the previous year, marking the first time that negative growth was recorded. The operating rate of the entire PVC industry was 62% in the first half of the year and 49% in the second half, dropping below 40% at its lowest point. Although the utilization rate has risen recently, prices have started to fall. Nevertheless, ongoing and planned projects remain high. Although the current situation is not optimistic, due to underestimations of overcapacity and the impact of the financial crisis, many planned projects have been delayed or postponed, with few being canceled. Second, the capacity layout is unreasonable. The coal resources in the area north of the Qinling-Dabie Mountains account for 90.3% of the country’s total, while water resources account for only 21.4% of the total nationwide. By overemphasizing the abundance of resources such as coal mines, salt mines, and lime mines, China’s main production areas for chlor-alkali products are located in the northwest, ignoring the constraints posed by water scarcity. Since the main consumption areas are located along the southeast coast, the existing resource advantages have also been **weakened by logistics costs**. At the same time, regions where industries such as alumina production, papermaking, and the petroleum sector are concentrated consume large amounts of caustic soda. The central and western areas, which have abundant calcium carbide resources, focus on PVC production, resulting in significant regional imbalances in the supply of alkali and chlorine. Third, the industry concentration is low. It is understood that there are over 8 PVC manufacturing enterprises in the United States; 4 of these enterprises have a production capacity of 1 million tons per year, with an average capacity of 760,000 tons per year ； Japan currently has 5 PVC manufacturers, with an average capacity of 470,000 tons per year. According to the statistics from 2008, there were over 100 PVC manufacturing enterprises in our country, with an average production capacity of 160,000 tons per year; only 4 enterprises had a production capacity of over 500,000 tons per year. This has led to waste of resources to some extent, **reducing the competitiveness of these enterprises, especially in the field of high-end products. Overcapacity, unreasonable layout, and low industry concentration have severely constrained the development of this sector. It is reported that, due to the combined effects of overcapacity and the financial crisis, the prices of products produced by China’s chlor-alkali enterprises have fallen below their costs. Declining demand has led to unsold inventory, resulting in significant losses for these enterprises; their cash flow is under severe strain, and their operations are facing serious difficulties. Some companies are on the verge of bankruptcy due to cash flow issues, and Inner Mongolia Haiji Chlor-alkali Chemical Co., Ltd. has entered reorganization proceedings. Under these circumstances, an era of reshuffling in the chlor-alkali industry has quietly arrived. For example, in order to expand its product portfolio, Hebei Jinniu restructured Canghua on April 24 of last year, while Pingmei and Shenma jointly established China Pingmei Shenma Energy Chemical Group on December 5 of last year ； To further extend its industrial chain, Yantai Wanhua acquired Ningbo Donggang Electrochemical on March 7 last year ； On November 8 last year, the full listing of Yuntianhua also demonstrated a trend toward development in the large-scale chemical industry. The participants believed that to overcome these challenges, enhance the scale and competitiveness of enterprises, and achieve healthy and orderly development of the industry, it is necessary to recognize the current situation of overcapacity and excessive growth, approach new and planned projects with caution, phase out outdated production capacities, and promote industrial upgrading. However, Li Jun also pointed out that due to the low industry concentration, integration will be extremely difficult. This post was last edited by yzhms on 2009-3-11 21:32. Note ← ) # ← , .
Incomplete statistics on ongoing projects in China’s chlor-alkali industry show that there are 16 calcium carbide-based chlor-alkali plants whose planned production capacity exceeds 300,000 tons each; the total planned capacity of these plants amounts to 10.3 million tons, which is higher than China’s apparent consumption level of 9.21 million tons in 2006. The additional PVC production capacity that these 16 large-scale calcium carbide-based manufacturers plan to establish amounts to 8 million tons, and this does not take into account the production capacity from the ethylene-based method, which is encouraged by industrial policies. Over the 5 years since 2001, the annual compound growth rate of domestic apparent demand for polyvinyl chloride was approximately 12%; if this growth rate continues in the future, the annual increase in demand in the domestic market will be around 1 million tons. However, based on our incomplete statistics of the existing and planned production capacities of 98 chlor-alkali enterprises in China, the PVC production capacity to come online in China in 2007 and 2008 will be 2.43 million tons and 1.93 million tons respectively. The excess over the annual demand growth can only be addressed through a reallocation of existing market shares. In 2006, there were 25 enterprises in China’s chlor-alkali industry whose PVC production exceeded 100,000 tons. The leading one among them was Tianjin Daguhua Chemical Plant (using the ethylene process), which produced 582,000 tons in 2006, accounting for 7.2% of the total domestic production that year. The total production of the top 25 companies in 2006 was 5.3848 million tons, accounting for 66.89% of the domestic total production. Relatively speaking, Eikos Corporation of Japan, the world’s largest PVC producer at the time, had a production capacity of over 3 million tons in 2005, accounting for 8.3% of the global market share ； Solvay, ranked fifth globally, also has a total production capacity of 900,000 tons ； Domestic manufacturers remain relatively weak. According to 2006 statistics, the concentration level in China’s PVC industry is also on the rise. The combined production capacity of the top 25 companies in 2006 was 5.878 million tons, accounting for 50.76% of the total domestic production capacity ； The top 25 companies had a capacity utilization rate of 91.61% in 2006, which is far higher than the industry average of 71%. The higher capacity utilization of leading companies in this industry indicates that those with favorable resource endowments have relatively stronger profitability from their products; moreover, their capacity expansion rates will exceed those of manufacturers with higher costs, leading to a concentration of PVC production capacity in the domestic market. Analyzing the competitive landscape in the industry, the path to integration within China’s chlor-alkali sector is likely to be relatively tortuous and lengthy. Thanks to their access to cheap coal resources, new calcium carbide production enterprises in the western region enjoy a significant cost advantage ； However, due to the long distance from the main consumer markets in the east, the shipping costs for these products are high, resulting in equilibrium competition prices that are approximately 300–800 yuan per ton higher than those of companies in the east. After accounting for the impact of shipping costs, most calcium carbide producers in the western region still enjoy a significant advantage in terms of overall costs, giving them greater leeway to use price competition to squeeze the operational space of enterprises in the eastern region. However, due to the high sunk costs in the chlor-alkali industry, the shutdown point for enterprises using the calcium carbide method in the east is only 200–500 yuan per ton lower than the production cost; as a result, even established companies cannot use price competition to force these eastern enterprises to withdraw quickly from the PVC market in the short term. In recent years, companies using the ethylene-based production process have been significantly affected by rising crude oil and ethylene prices. However, since these companies generally operate in conjunction with refining, ethylene production, and other downstream chemical products, those with secure supplies of raw materials and funding have continued to produce. Representative ethylene-based companies such as Qilu Petrochemical, which is part of Sinopec, achieved a capacity utilization rate of 95% for its PVC production facilities in 2006, while Shanghai Chlor-Alkali Chemical also started to turn a profit again in the first half of 2007. Although rising environmental protection costs and energy prices have kept the production costs in the chlor-alkali industry on an upward trend in recent years, as the industry’s production capacity shifts to low-cost areas in the west and to manufacturers with competitive advantages, the share of production capacity based on the low-cost calcium carbide method in China’s chlor-alkali industry is set to increase significantly. This will lead to a decline in the average production costs in China’s PVC market, putting downward pressure on market equilibrium prices. In the long term, due to the relatively low barriers to entry in this industry, there is a tendency for the excess profits of the leading companies in the chlor-alkali sector to be gradually leveled out.
The chlor-alkali industry uses brine as raw material and electrolyzes it to produce caustic soda, hydrochloric acid, chlorine gas, and hydrogen. The chlorine gas is often utilized on-site to manufacture various chlorine-based products such as sodium hypochlorite, polyvinyl chloride, and chlorinated methanes. At present, China produces over 200 types of chlorine-based products, with more than 70 being the most common ones. In recent years, many chlor-alkali enterprises in China have made significant efforts to develop organic chlorine products by using petrochemical products as raw materials, gradually replacing the methods that rely on coal tar and agricultural by-products. These enterprises have increased their investment in research and development to create high-tech, sophisticated chlorine-based chemicals, such as polymer compounds and chlorinated polymers (polyvinyl chloride, chlorinated rubbers, polyvinylidene chloride and its copolymers, chlorinated polyethylene, chlorinated polypropylene), epoxides (epichlorohydrin), phosgene-related products (phosgene, diphosgene, triphosgene), methane chlorides (chloromethane, dichloromethane, trichloromethane, carbon tetrachloride), and chlorine-containing intermediates (chlorobenzene and nitrochlorobenzene, chloroacetic acid, benzyl chloride, chloroacetyl chloride, thionyl chloride). In 2003, there were over 100 chlor-alkali production enterprises in China, with a total production capacity for caustic soda exceeding 10.5 million tons. In terms of scale, there were 6 enterprises with a production capacity of over 200,000 tons each; these enterprises accounted for 18.1% of the country’s total caustic soda production ； There are 18 enterprises with production capacities ranging from 100,000 to 200,000 tons, accounting for 24.2% of the total national output ； There are 42 enterprises with a production capacity of 50,000 to 100,000 tons, accounting for 31.9% of the total national output ； There are nearly 130 enterprises with a production capacity of less than 50,000 tons, accounting for 25.8% of the country’s total production. Among them, the annual production capacity of caustic soda produced by the ion-exchange membrane method accounts for over 30% of the total capacity. Due to the continuous expansion of the annual production capacity of polyvinyl chloride resin in our country in recent years, companies have also expanded their caustic soda production facilities accordingly. Most new caustic soda manufacturers in our country use the advanced ion-exchange membrane process for soda production. It is estimated that by 2005, the production capacity of this process will exceed 6 million tons, accounting for more than 35% of the total national production. The development of ion-exchange membrane caustic soda production in our country has been very rapid. Chlor-alkali enterprises in our country have introduced a number of advanced technologies from developed countries, which has led to significant improvements in China’s chlor-alkali technology. Our country has introduced advanced ion-exchange membrane caustic soda production technology from world-renowned companies, and has rapidly developed the ion-exchange membrane electrolysis process. As a result, the mercury-based caustic soda production method as well as some forms of caustic soda production using graphite anodes have been completely phased out. This has **improved and optimized the product structure of China’s chlor-alkali industry, thereby promoting the rapid development of related industries. However, there is still a gap compared to the advanced levels of developed countries in the world, and to some extent, there is a problem of \"advanced use coupled with lagging research and development.\" This is manifested in the following aspects: 1. All ion exchange membranes used are imported. Ion exchange membranes are one of the key components in the production of caustic soda using the ion membrane process. At present, all the ion exchange membranes used in China’s 3.5321 million tons per year of caustic soda production facilities based on this process are still imported, and they are expensive. At a cost of $800 per m2 (approximately 6,500 yuan per m2), and assuming that each 10,000-ton ion-exchange membrane caustic soda production plant requires around 300 m2 of ion exchange membranes, with an average replacement cycle of 2.5 years, this amounts to approximately 42,385 m2 per year (not including the 37,128 m2 required for the 3.094 million tons per year ion-exchange membrane caustic soda plant that is already under construction). The foreign currency expenditure for purchasing these membranes is around $33.908 million, which is equivalent to approximately 275.6 million yuan. This not only increases the production costs of caustic soda produced using the ion-exchange membrane method (by more than 100 yuan per ton), but also puts the company at the mercy of others. II. The continuous operating time of the units is short, and the service life of the ion exchange membranes is insufficient. In China, devices that use ion membrane electrolysis technology (whether based on imported foreign technology or domestically developed technology) have been in use for nearly 20 years. Apart from a few companies with high levels of technical and managerial expertise, very few devices are able to operate continuously for more than 3 months. The number of unplanned shutdowns per year for these devices ranges from a few times to over a dozen times, or even dozens of times. In contrast, enterprises in developed countries with advanced standards generally have only 2 or 3 instances of off-plan parking per year. With the same electrolyzer, the same membrane, and the same electrolysis process, the lifespan of membranes in China is generally only 2 to 4 years, with an average of 2.5 years, whereas in foreign countries the lifespan of such membranes can reach 3 to 6 years, or even longer. If the number of unplanned shutdowns in our country can be kept at two or three per year, the lifespan of the ion exchange membranes is expected to exceed 4 years. III. Higher energy consumption compared to international advanced levels The average electricity consumption for caustic soda production using the ion exchange membrane method in China is 2286 kW·h/t, which is 17%–43% higher than the international advanced levels. In 2000, China’s average steam consumption for producing high-purity caustic soda using the ion-exchange membrane process was 0.67 tons (equivalent to 95.7 kg of standard coal). Some manufacturers sell it at 30% liquid caustic without evaporation, while Japan’s steam consumption is only 0.343 t (equivalent to 49 kg of standard coal); the overall energy consumption in China is about 31% higher than the international average. IV. Salt consumption is higher than that of advanced foreign levels. The salt consumption in foreign countries for caustic soda production using ion exchange membrane technology is generally below 1.5 tons, while in China it is usually between 1.55 and 1.60 tons; in some factories it even reaches 1.67 to 1.76 tons, representing a difference of around 50 kg. Therefore, it is necessary to accelerate the production of chlor-alkali products and the research and development of related equipment, to develop advanced domestic ion exchange membranes, reduce energy and salt consumption, and lower costs. Chlorine-consuming fine chemical products belong to technology-intensive industries; due to their long development cycles and high research and development costs, they are also, to a certain extent, capital-intensive industries. Given the high degree of technical monopoly in fine chemical products, developing such products requires a two-pronged approach: on one hand, it is necessary to keep an eye on new technological developments abroad, while on the other hand, great emphasis must be placed on advancing one’s own technological capabilities. In order to achieve technological monopoly and leadership, major foreign fine chemical companies typically allocate 5% to 10% of their sales revenue to research and development. The technology and equipment for many fine chemical products are monopolized by a few companies around the world. Until such products enter a period of decline, these companies generally only sell the products without transferring their core technologies. For example, in the case of chlorinated polyvinyl chloride, a product with promising market prospects, its production technology is held in monopoly by companies in countries such as the United States, Japan, and Germany, who have also established complete systems for its application. Moreover, the core technologies for high-value fine chemical products such as chlorinated polypropylene and chlorinated rubber are also largely under monopoly. Taking Shandong Weifang Yaxing Group’s development of chlorinated polyethylene in domestic enterprises as an example, after seizing the opportunity to acquire the production technology for chlorinated polyethylene from foreign companies, Yaxing focused on this material and, through continuous technological innovation, developed a product portfolio based on its core technologies, thereby gaining strong competitiveness in both international and domestic markets. Although many fine chemical products can be manufactured domestically, their production volume is low, costs are high, and their performance is poor, limiting their use to low-end applications. The key issue lies in the lack of mastery over the key technologies involved in the production process, as well as insufficient investment in technological development. The chlor-alkali industry is a fundamental chemical raw materials industry that holds an important position in the national economy, and its development is closely linked to people’s lives. Current international best practices involve closely integrating the chlor-alkali industry with the petrochemical and natural gas chemical industries in terms of layout; through the development of these latter industries, the growth of the chlor-alkali industry and organic chlorine products is promoted. It also helps to save energy and reduce consumption, protect resources and the environment, improve product quality, enhance market competitiveness, ensure the sustainable development of the chlor-alkali industry, and promote the rapid growth of related industries. Therefore, it is necessary to accelerate the implementation of advanced process technologies that use petrochemical and natural gas chemical products as raw materials, and to gradually replace and upgrade the traditional and backward process technologies used in China’s chlor-alkali industry, which rely on coal and agricultural by-products as raw materials. Looking at the layout of chlor-alkali enterprises in our country, currently only a few are integrated with petrochemical facilities nationwide. In our country, the amount and proportion of petrochemical products used in organic chlorine products are far lower than those in developed countries. In 2003, China’s ethylene production was 6.1177 million tons, and the amount of ethylene consumed in PVC production was approximately 330,000 tons, accounting for 5.32% – this indicates that there is still a relatively loose connection between China’s chlor-alkali manufacturers and those involved in petroleum-based ethylene production. In fact, the chlor-alkali industry is interdependent with the oil and gas industry. Due to historical reasons and a system of separate management by various industries and departments, our country is currently faced with a situation of disconnection among these three aspects. For the chlor-alkali industry to develop organic chlorine products effectively, a sufficient and reliable supply of petrochemical raw materials such as oil and natural gas is essential; furthermore, without a balanced supply of chlorine, the sustainable development of the chlor-alkali industry will also be hindered. In developed countries, large-scale petrochemical plants are almost always accompanied by large-scale chlor-alkali production facilities. The ethylene, propylene, butadiene, benzene, toluene, xylene, and other compounds produced by these petrochemical plants react with chlorine from the chlor-alkali industry to yield a wide range of valuable organic chloride products. Thanks to the availability of abundant and inexpensive raw materials, as well as the economic scale of these facilities, the resulting products enjoy strong competitiveness. It is evident that the integration of chlor-alkali chemistry and petrochemical industry reflects the laws of market competition: chlor-alkali chemistry relies on petrochemical industry, while the development of petrochemical industry is guided by chlor-alkali chemistry. The two sectors integrate with each other and promote one another, moving toward larger-scale, centralized operations.
The petroleum and chemical industry is one of the key sectors for energy conservation and emission reduction, and the chlor-alkali industry is a major focus within this sector when it comes to such efforts. The chlor-alkali industry is a high-energy-consuming sector and one of the major consumers of electricity. The cost of electricity accounts for over 50% of the production costs for caustic soda, and 40% to 45% for polyvinyl chloride. Therefore, energy conservation and emission reduction are crucial for the survival and development of chlor-alkali enterprises. Zhang Guomin, secretary-general of the China Chlor-Alkali Industry Association, said in an interview with reporters that the chlor-alkali industry has always given top priority to energy conservation and emission reduction in its development. Currently, these efforts are being vigorously promoted across the industry, and significant results have already been achieved. Policy orientation: Since the 11th Five-Year Plan period, in order to promote energy conservation and emission reduction in the chlor-alkali industry, the China Chlor-Alkali Industry Association has, in line with the policies issued by ** and guided by those policies, actively participated in the formulation of specific policies and measures for energy conservation and emission reduction within this industry, thereby guiding and regulating such efforts. In April 2007, the \"Evaluation Index System for Clean Production of Caustic Soda/Polyvinyl Chloride\" was released and put into use. This index system sets clear regulations on various indicators related to resource and energy consumption, pollutant generation, and the comprehensive utilization of resources in the caustic soda and polyvinyl chloride industries. In December 2007, the \"Access Requirements for the Chlor-alkali (caustic soda, polyvinyl chloride) Industry\" were implemented, which set clear threshold values for energy consumption and environmental protection, requiring new as well as expanded and renovated facilities to have a minimum scale. In June 2008, the **mandatory energy consumption standard, namely the ‘Limits on Energy Consumption per Unit of Caustic Soda’, was implemented as a complement to the Energy Conservation Law of the People’s Republic of China. This standard specifies the scope of calculation, basic requirements, calculation methods, and management requirements for the energy consumption limit per unit of caustic soda produced by electrolytic methods (diaphragm method, ion-exchange membrane method). The introduction of a series of industry-specific policies on energy conservation and emission reduction has effectively accelerated the progress of such efforts in the chlor-alkali industry. Structural adjustment: Outdated production capacity is a major cause of waste of resources and energy as well as environmental pollution, and structural adjustment is the main way to achieve goals related to energy conservation and emission reduction. In the caustic soda industry, the focus of industrial structure adjustment is the upgrading of production processes. There are significant differences in energy consumption among various production methods; for example, the comprehensive energy consumption per ton for caustic soda produced by the ion exchange membrane method is one-third lower than that of the diaphragm method. Moreover, the energy-saving diaphragm method can save 100–140 kilowatt-hours of electricity compared to the conventional metal-anode diaphragm method. “ During the 11th Five-Year Plan period, the chlor-alkali industry actively promoted advanced ion-exchange membrane processes for caustic soda production; it prohibited the use of conventional metal-anode electrolyzers in new installations, and upgraded conventional diaphragm process plants by employing technologies such as expanded anodes, active cathodes, reduced pole spacing, and modified diaphragms. The production process of caustic soda has been significantly optimized, resulting in a substantial reduction in the overall energy consumption of the chlor-alkali industry. In 2007, the production capacity of caustic soda produced by the ion-exchange membrane method in our country exceeded that of the diaphragm method, accounting for over 55%. It is expected that in 2008, as membrane-based caustic soda production facilities are phased out, the share of caustic soda produced using ion-exchange membrane technology will rise to over 60%. As the proportion of caustic soda produced by the ion-exchange membrane process increased, the share of caustic soda produced using the energy-saving diaphragm process also rose significantly, going from one-third to over one-half. The optimization of production processes has laid a solid foundation for the caustic soda industry to achieve energy conservation and emission reduction goals. Technology promotion: Advanced technologies are powerful tools for energy conservation and emission reduction. In recent years, the China Chlor-Alkali Industry Association has actively promoted advanced energy-saving and emission-reduction technologies across the industry through various means, achieving good results. In dry acetylene technology, slightly more water than the theoretical amount is sprayed in mist form onto calcium carbide powder to cause its decomposition; the resulting calcium carbide residue is dry lime powder with a water content of 4% to 10%, the hydrolysis rate of calcium carbide exceeds 99%, and water savings of around 90% can be achieved. The calcium carbide slag produced by the traditional wet process still contains 30% moisture after filtration, and a large amount of steam is required to remove this moisture before it can be used as a raw material for cement. Low-mercury catalyst technology represents a significant breakthrough in emission reduction within the chlor-alkali industry. Through collaboration, 4 companies have managed to reduce the mercury content in these catalysts from over 10% to less than 6%, resulting in a substantial decrease in both the consumption and emissions of the heavy metal pollutant mercury. What is particularly surprising is that mercury-free catalysts have also been developed, and their industrialization will be achieved in the next step. Furthermore, the exhaust gas recovery technology for hydrochloric acid synthesis plants can use the heat from the exhaust gases to produce steam ； The technology for the secondary utilization of chlorine resources allows the hydrogen chloride generated in the production of chlorine-based products such as diphenylmethane diisocyanate, toluene diisocyanate, and trichloroethylene to be reused in the production of polyvinyl chloride ； The oxygen cathode technology under development replaces the hydrogen evolution reduction reaction with an oxygen electrode reduction reaction, thereby **reducing** the cell voltage of conventional cathodes and enabling energy savings of around 35%. Through a series of technological innovations, energy consumption and pollutant emissions in the chlor-alkali industry have been significantly reduced, facilitating its sustained and stable development.
Currently, chlor-alkali companies are facing operational difficulties of a kind not seen in decades, with six or seven out of ten shutting down. However, **the local authorities** have not introduced any specific preferential policies for chlor-alkali enterprises; therefore, these companies must rely on their own efforts to survive. Faced with the same economic environment, some chlor-alkali enterprises were hit much less severely; their production and business activities continued as usual, and in some cases the workload even increased. They all share one common key to success: extending the industrial chain in the right direction and continuously adjusting the product structure according to market demands. Under the current circumstances, it can certainly be said that a good industrial chain is the lifeblood of an enterprise. Firstly, a complete industrial chain and a wide range of products enable chlor-alkali enterprises to have more options when competing in the market. Market changes are relentless; to survive, businesses must study the market and adapt to it. New products launched by enterprises must meet market demands, and their price limits should be taken into account when prices rise, to avoid blind optimism. Therefore, to keep pace with and harmonize with the market, it is necessary to have a complete industrial chain and a diverse range of products. There is more choice available in the market, which in turn expands one’s own space for survival. On the contrary, if a company offers a single product and lacks scale advantages, its ability to withstand risks will inevitably be weak. The facts confirm this exactly: it is mainly the enterprises with a product structure consisting solely of caustic soda and polyvinyl chloride that are currently shut down. Secondly, a complete industrial chain can help mitigate the risk of declining profitability for chlor-alkali enterprises. The chlor-alkali industry is a capital-intensive basic chemical industry; its primary products such as caustic soda and liquid chlorine have little technical complexity, which results in low added value. It’s difficult these days to make big money with such ordinary products, and it likely won’t be easy in the future either. A general principle of economics is that raw materials are less profitable than processed products; primary products are less profitable than those that have undergone further processing; and high-tech products have an even higher added value than ordinary highly processed products. Following this order of value addition, the development direction for chlor-alkali enterprises should be clear: to extend the industrial chain downward and seek profitability from high-end products. Under the current circumstances, low-end products mostly fail to generate profits, while high-end products can still yield earnings. Secondly, the extension of the industrial chain upstream will lay a solid foundation for corporate profitability. Chlor-alkali enterprises consume large amounts of energy and resources in production; those with lower costs for energy and raw materials have lower expenses, and thus a greater competitive advantage. Having its own power plant and coal mine, as well as forming partnerships with upstream enterprises, are all good options.
“The era of high costs poses new challenges to China’s chlor-alkali industry. In a sense, the pressure of high costs will act as a driving force that compels the chlor-alkali industry to accelerate its integration efforts, increase investment in technological innovation, and raise the level of energy conservation and emission reduction. The chlor-alkali industry will use this to upgrade its competitive model and move away from low-level price competition. This will help enhance the international competitiveness and sustainable development of China’s chlor-alkali industry. ”The president of the China Chlor-Alkali Industry Association made the above remarks at the recently concluded 2008 China Chlor-Alkali Forum held in Qingdao. Production has entered an era of high costs. It must be said that China’s chlor-alkali industry has now entered an era of high costs. The high costs are first and foremost due to the continuous rise in oil prices. The average price of crude oil for the whole of 2007 was 72.2 dollars per barrel, while it reached 115 dollars per barrel from January to August this year. Secondly, domestic coal prices have a significant impact on the chlor-alkali industry. This year, raw materials for the chlor-alkali industry have seen a general increase in prices. First, salt prices have risen; the price of raw salt was 380 yuan per ton in May, while it rose to 550 yuan per ton in July, an increase of 45% ； The salt consumption per ton of caustic soda is 1.55 tons, resulting in an increase in cost of 263 yuan per ton. Second is the increase in electricity prices; starting from July 1 this year, electricity rates have been adjusted across the country, with an average increase of 0.03 yuan per kilowatt-hour for the chlor-alkali industry in the eastern region. The power consumption per unit of calcium carbide is 3,250 kilowatt-hours, while the amount of calcium carbide required per unit of PVC is 1.42 tons. As a result, the cost of PVC produced by the calcium carbide method increases by 138 yuan per ton ； The power consumption per unit of caustic soda is 2,400 kWh, resulting in an increase in cost of 72 yuan per ton. In addition, transportation costs have also increased significantly. Rising costs will affect the competitive landscape of the domestic chlor-alkali market, leading to changes in the overall structure of the chlor-alkali industry. The industry layout is changing gradually. The overdevelopment of the chlor-alkali industry in recent years has led to increasingly fierce market competition. First, the utilization rate is on a downward trend. From 2000 to 2003, the average annual growth rate of caustic soda production was 14%, which was 4 percentage points higher than the growth rate of production capacity ； Between 2004 and 2007, the average increase in production rose to 18%, but it was 7 percentage points lower than the increase in capacity. Before 2005, the caustic soda industry maintained a high operating rate, but it showed a downward trend starting in 2006. The same situation exists in the PVC industry as well. From 2000 to 2003, PVC production grew at an average annual rate of 17%, which was only 1 percentage point lower than the increase in production capacity ； From 2004 to 2007, output grew by an average of 18% per year, but this was 10 percentage points lower than the increase in production capacity. The operating rate of the PVC industry began to decline in 2004, and it is set to fall below 60% this year. Secondly, the calcium carbide process for PVC is dominant; its share rose gradually from around 50% in 2000 to 72% in 2007, and this trend is set to continue. The development speed of the chlor-alkali industry in the central and western regions was far higher than that in other areas; from 2000 to 2007, the average annual growth rate of this industry in the northwestern region reached 56%. In the coming years, the central and western regions will continue to maintain a high growth rate; if the planned projects are completed on schedule, their total volume will exceed that of North China and East China. Due to factors such as rising transportation costs, calcium carbide-based PVC still holds a certain cost advantage in the central and western regions, as it is located near the raw material production areas ； Meanwhile, the East has almost lost its advantage due to rising raw material and logistics costs. As a result, two trends have emerged in the construction of the chlor-alkali industry: building plants in areas rich in raw materials (sea salt, coal mines, calcium carbide) and building plants near downstream industries (aluminum, petroleum, paper). Third, the development of the chlor-alkali industry is slowing down. A major reason for the rapid development of the chlor-alkali industry in recent years has been the support provided by downstream industries. However, the industry is currently showing signs of slowing down in its development. Compared to 2007, caustic soda production capacity increased by 20.5% in 2008, with output reaching 9.89 million tons in the first half of the year, an increase of 12.8%. Meanwhile, the production growth rates of the major alkali-consuming industries all declined significantly in the first half of 2008. The growth rate of alumina production declined from 47.7% in 2007 to 19.1% in the first half of 2008; pulp saw a decline from 16.1% to 2.8%, paper from 18.1% to 14.5%, and synthetic detergents from 11.7% to 4.8%. This results in the production capacity of caustic soda not being effectively utilized. The same is true for PVC. Compared to 2007, PVC production capacity increased by 32% in 2008, yet downstream demand did not provide strong support for such high growth. Apart from profiles and pipes, which continued to show some growth, the growth rates of all other industries slowed down significantly. The growth rate of films declined from 12.4% in 2007 to 2.5% in the first half of 2008; plastic woven bags saw a decline from 31.5% to 24.5%, artificial leather from 18% to 9.1%, household plastic products from 16.1% to 8.3%, and packaging containers from 8.3% to -16%. Due to the slowdown in demand downstream, the oversupply issue of PVC has become more pronounced. Strive for industrial upgrading. In light of the current situation facing the chlor-alkali industry, the following measures are proposed: Seize the opportunities arising from adjustments in the international market to expand exports. Currently, the international price of caustic soda is at a historical high, with strong growth in exports; processing under contract has become a new approach being explored. But it is necessary to guard against trade disputes and frictions. Reduce energy consumption and emissions to achieve sustainable development. The implementation of policies such as energy conservation and emission reduction, as well as differential electricity pricing, will drive structural changes in the chlor-alkali industry. The entry barriers for this industry are likely to increase, and the process of survival of the fittest within the industry will accelerate. Industry consolidation to promote the optimization of the industrial chain. Through mergers and reorganizations, outdated production capacity is gradually phased out, the industrial structure is optimized, and scaled and intensive development of the industry is achieved
Since June 2008, the profitability of PVC has declined significantly; in less than 3 months, it shifted from a profit of nearly 1,000 yuan per ton to a loss of over 1,000 yuan per ton； At the same time, liquid chlorine is in severe oversupply, forcing many companies to reduce production or shut down, putting the chlor-alkali industry in an unprecedentedly difficult situation. There are various reasons for this. ①The situation of supply exceeding demand is becoming increasingly severe. Since 2002, with the rapid growth of the domestic economy, there has been strong demand for chlor-alkali products as basic chemical raw materials. Driven by high profits, chlor-alkali companies expanded their production on a large scale, and many new enterprises entered this industry as well; as a result, the production capacity in this sector increased very rapidly. By the end of 2007, there were over 200 chlor-alkali production enterprises in China, with a caustic soda production capacity of 21.81 million tons per year and a PVC production capacity of 14.93 million tons per year. Among them, there are 6 enterprises with a caustic soda production capacity of ≥400,000 tons per year, and 7 enterprises with a PVC production capacity of ≥400,000 tons per year). The sharp increase in production capacity has led to changes in the supply and demand balance. According to market survey results, the actual production of chlor-alkali products has exceeded the apparent demand. Moreover, the potential production capacity resulting from the large-scale investments in the chlor-alkali industry in previous years is still being released at a rapid pace. ②The prices of coal, electricity, oil, and transportation fees are rising rapidly. Especially since May 2008, the prices of key raw materials such as salt, coal, and calcium carbide have risen sharply; in June, oil prices were increased again, and electricity prices were raised in July, all of which led to a significant increase in the production costs of chlor-alkali products. ③After reaching a high level, international crude oil prices dropped rapidly since July 2008, by a significant margin. While the prices of coal and calcium carbide also declined, they remained at relatively high levels. As a result, PVC produced using the oil-based method has a greater cost advantage over that produced using the calcium carbide method. ④Previously, relevant policies such as those on the \"circular economy\" and \"energy conservation and emission reduction\" were introduced; preferential electricity prices for the chlor-alkali industry were abolished, the entry barriers for this industry were raised, and a range of restrictions were imposed on industries that are highly energy-intensive and polluting. ⑤The cancellation of export tax rebates for caustic soda and the reduction of export tax rebates for PVC. In order to understand the future landscape and development trends of the chlor-alkali industry, it is essential to conduct a comprehensive analysis of this industry by examining the 9 key factors that influence its development: resources, energy, scale, market, industrial supporting facilities, technical equipment level, management level, talent, and location. 1 Factors affecting the development of the chlor-alkali industry 1.1 Resources The chlor-alkali industry falls under the category of basic chemicals; it is a resource-intensive industry, with the main raw materials including crude salt, calcium carbide, coal, and electricity. Below, the impacts of crude salt and calcium carbide are analyzed separately. The impacts of coal and electricity will be discussed in the energy section. 1.1.1 Raw salt: Raw salt is a key raw material required for the chlor-alkali industry. Theoretically, 1.462 t of salt is consumed per ton of caustic soda produced, while in actual production the consumption is between 1.5 and 1.7 t. Raw salt accounts for 15%-20% of the total cost of caustic soda. In 2007, the chlor-alkali industry consumed over 26 million tons of raw salt. Sea salt, underground salt, and lake salt are the types of raw salt classified by their source. In our country, sea salt has always been the main source of salt production, followed by well-mined salt and lake salt. Since the production of sea salt is greatly influenced by climate, and sea salt production sites are mostly located in the eastern coastal areas, in order to achieve a more balanced distribution of salt production, the production of well-water and mineral salts as well as lake salts in the inland regions has seen rapid development over the past decade or so; as a result, the proportion of sea salt in total salt production has decreased. In 2006, China’s raw salt production was 55.12 million tons, of which 30.94 million tons were sea salt (accounting for 56%), 19.31 million tons were well and mine salt (accounting for 35%), and 4.87 million tons were lake salt (accounting for 9%). Our country is rich in salt resources, with proven reserves exceeding 400 billion tons. The distribution pattern is as follows: sea salt in the east, well-mined salt in the center, and lake salt in the west. Provinces and regions that produce sea salt include Liaoning Province, Tianjin Municipality, Hebei Province, Shandong Province, Jiangsu Province, Zhejiang Province, Fujian Province, Guangdong Province, Guangxi Zhuang Autonomous Region, Hainan Province, and Taiwan Province ； The main regions that produce lake salt include Inner Mongolia Autonomous Region, Shanxi Province, Qinghai Province, Xinjiang Uygur Autonomous Region, Tibet Autonomous Region, and others ； Provinces that produce mineral salts from production wells include Jiangsu, Jiangxi, Hunan, Hubei, Sichuan, Yunnan, and others. Although China is rich in salt mineral resources, due to uneven development between the eastern and western regions, transportation limitations, the rapid growth of the salt chemical industry, and the relatively slow increase in raw salt production capacity, the market situation in which sellers dominate the raw salt market has remained unchanged for several years. Especially since 2008, the newly added chlor-alkali production capacity has been released at a rapid pace, leading to a sharp increase in the demand for raw salt and a significant rise in its price as well. The impact of crude salt on the production cost of caustic soda will continue to increase. 1.1.2 Calcium carbide is the main product for balancing chlorine, and it is the primary raw material used in the production of PVC. Theoretically, 1.272 calcium carbide units are required to produce 1 ton of PVC. Last edited by liam on 2009-3-13 09:07.]