Market conditions of chlor-alkali enterprises in Jiangsu

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This post was last edited by That makes sense on 2011-11-3 at 19:39. China’s chlor-alkali industry originated in 1929; after eighty years of development, it has now become the world’s leading country in terms of both production capacity and output. There are currently over **270 small chlor-alkali enterprises nationwide, with a production capacity of 25 million tons in 2009. The chlor-alkali industry in Jiangsu began in the 1950s. Through hard work and perseverance, it has grown into an economic entity of considerable scale, offering the widest range of chlor-alkali products in China and possessing strong research and development capabilities. It has made significant contributions to the economic development of Jiangsu. As of December 2009, there were 25 such enterprises in the province (two of them, Aoxie and Ulead, are potassium alkali manufacturers), with a total production capacity of 3.5 million tons per year; the actual output was 2.3 million tons, ranking the province second in the country. I. Relocation of production facilities and establishment of enterprises in industrial parks: Due to urban development plans, the production facilities of chlorine-alkali enterprises in Jiangsu have been relocated to areas along the coast and on both banks of the Yangtze River. These enterprises take advantage of the Yangtze River, the Beijing-Hangzhou Grand Canal waterways, as well as the facilities available at water transport ports to establish their factories there. Companies such as Jiangsu Suhua Group, Wuxi GreenEpp, Nantong Jiangshan, Jiangsu Yangnong, and Meilan Chemical Group have moved to the riverside areas ； Jiangsu Kuaida Agrochemical Co., Ltd. has moved to the Rudong Yangkou Chemical Industrial Park by the Yellow Sea ； Jiangsu New Century Salt Chemical Group Company has moved to Zhenjiang Dagang Development Zone ； Jiangsu Sulong Chemical Co., Ltd. has ceased operations due to various factors including relocation ； Anbang also has plans to relocate to the salt chemical industry zone south of the Northern Jiangsu Irrigation Main Canal, in the Fanji area. In addition, Jiangdong Chemical, a subsidiary of Changhua Group, has been relocated to Jintan Economic Development Zone ； Xindong Chemical has been relocated to the Jiangbian Chemical Industrial Zone and other locations. Chlor-alkali enterprises have flocked to chemical industrial parks, shifting the focus of this industry to northern Jiangsu. With the launch of the large-scale development initiative along Jiangsu’s coast, chemical industrial parks have sprung up along the province’s 1,040-kilometer coastline. Among them, Jiangsu Daha has set up operations in the Chenjiagang Chemical Industrial Park in Xiangshui ； Jiangsu Shuangling has moved to the Banqiao Salt Chemical Industrial Park in Lianyungang Development Zone ； Nanjing Jinpu Jinhu Chemical Co., Ltd. has set up operations in the Chemical Industry Park in Liuhe District, Nanjing ； Anbang plans to relocate to the Huai’an Salt Chemical Industrial Park. Furthermore, other chemical industrial parks are also scattered across the vast lands of northern Jiangsu. The main ones include the Yanzui Port Chemical Industrial Zone in Guanyun, Lianyungang; the Duigou Port Chemical Park in Guannan, Lianyungang; the Dafeng Port Coastal Chemical Park in Yancheng; and the Yangkou Chemical Park in Rudong, Nantong. There are also Guoshu in Funing, Yancheng, and Shuanggang in Xiangshui ； Fengxian County, Xuzhou; Tangdian, Xinyi ； A series of **small chemical parks**, such as those in Suqian Development Zone, are scattered everywhere. It plays a crucial role in revitalizing the chlor-alkali chemical industry in northern Jiangsu as well as in the development of the local economy. II. Mergers and reorganizations accelerate; salt companies get involved. Among the prefecture-level cities north of the Yangtze River in Jiangsu, with the exception of Suqian which has no chlor-alkali enterprises, all the others are established chlor-alkali chemical manufacturers, and mergers and reorganizations are ongoing at a rapid pace. For example, Nantong Jiangshan Pesticide and Chemical Co., Ltd. entering Sinochem International Corporation ； Anbang joins Sinochem Group ； Jiangsu Beifang Chlor-Alkali Chemical Co., Ltd. was acquired by Jiangsu Jinpu Group, a large private enterprise focused on the petrochemical industry ； This is evident from Jiangsu Suhua Group’s acquisition and restructuring of Xuzhou Xinyi Pesticide Factory and others. The salt industry has adopted a strategy of developing both salt and chemical products, acquiring and restructuring related chlor-alkali enterprises on a large scale. Among them, China National Salt Industry Corporation acquired Jiangdong Chemical and Xindong Chemical, two companies under Changhua Group ； Jiangsu Salt Industry Company acquired Wuxi 21st Century Group Company under its control, establishing Jiangsu New Century Salt Chemical Group Company. At the same time, a 300,000-ton ion exchange membrane production facility was also built in the Toujian Chemical Industry Park in Binhai County, Yancheng City ； Jiangsu Jinqiao Salt Chemical Group acquired Jiangsu Shuangling Chemical Group Co., Ltd. to expand production of 300,000 tons of ion-exchange membrane caustic soda in a new location. They all leverage their advantages in salt resources to penetrate into downstream industries such as chlor-alkali. III. Entry of enterprises from outside the industry; attention turning outward. Changshu Lihua Chemical Co., Ltd. was one of the first Hong Kong-funded companies to enter the mainland, and it built a 160,000-ton ion exchange membrane production facility in the Changshu Economic Development Zone ； Wuxi Yiduo Investment and Development Group Co., Ltd. is a group enterprise focused on the real estate sector; it established Xuzhou Tiancheng Chlor-Alkali Co., Ltd. in Longgu Town, Peixian County, Xuzhou, where a 100,000-ton caustic soda production facility was put into operation ； Shuangshi (Zhangjiagang) Fine Chemicals Co., Ltd. is another company from an unrelated industry that has entered the chlor-alkali sector, establishing a production facility for 250,000 tons of caustic soda ； Daiwa Chlor-Alkali Chemical Co., Ltd. was originally a printing and dyeing enterprise group based in Shaoxing, Zhejiang; it entered the chlor-alkali industry across different sectors, and currently has a caustic soda production facility with a capacity of 200,000 tons ； Shandong Lutai Coal Industry Co., Ltd., a company in China’s salt industry, plans to invest fully in the construction of a project in Fengxian County, Xuzhou, capable of producing 600,000 tons of caustic soda per year, along with 600,000 tons of PVC ； Jiangsu Yabang Group is also actively planning to enter the chlor-alkali industry, making use of its brand advantages accumulated over many years in industries such as dyes to expand its operations across various fields. Jiangsu Yangnong Chemical Group has invested 6 billion yuan to build 21 new projects in the Meili Industrial Zone of Zhongwei City, Ningxia. The first phase of construction includes 9 product projects such as nitrochlorobenzene and chlorobenzene ； Jiangsu Supor Group has partnered with Shaanxi Shenhua Coal Mining Group to build a facility capable of producing 500,000 tons of methanol per year, to supply raw materials for the development of a 1.2 million-ton acetic acid production project ； In order to expand its pesticide production capabilities, Jiangsu Suhua Group acquired and restructured Xinyi Pesticide Factory ； Xinpu Chemical (Taixing) is also interested in establishing a chlor-alkali production facility in Vietnam. This series of actions clearly shows that companies are gradually turning their attention outward, extending their reach further. IV. Continued capacity expansion and intensifying industry competition: Over the past year, Jiangsu’s chlor-alkali industry has seen continued increases in capacity, while production levels have failed to show any growth. As Newpu Chemical (Taixing) continues to expand its capacity, a production capacity of 750,000 tons is already in the planning stages, with the ultimate goal of reaching a production scale of 1.2 million tons ； Jiangsu Dahu Chlor-alkali Chemical’s production capacity will also reach 300,000 tons by next year, eventually reaching 600,000 tons ； Changshu Lihua Chemical Industry plans to build a 300,000-ton ion exchange membrane facility in the Ryugou Chemical Park in Rudong, Nantong ； Sinochem Group Jiangsu Anbang is expanding its production capacity of ion-exchange membrane caustic from the existing 150,000 tons to 300,000 tons; the first phase of this expansion, involving 120,000 tons, will be able to operate at full capacity by the middle of this year. In addition, Jiangsu Yangnong, Meilan Chemical, Nantong Jiangshan, and others are also planning to expand their production capacities. Chlor-alkali enterprises in provinces and cities surrounding Jiangsu, such as Shandong, Anhui, Zhejiang, and Shanghai, all plan to expand their production capacity. For example, Shandong Hengtong Chemical plans to install another 400,000-ton ion-exchange membrane caustic soda production facility; Shandong Zaozhuang Zhongke Chemical Co., Ltd. intends to expand its caustic soda production capacity by 300,000 tons; and Shandong Dadi Salt Chemical Group Company is set to launch a 600,000-ton ion-exchange membrane project ； Guangxin Agrochemical Co., Ltd. in Dongzhi County, Anhui Province is building a new plant for producing 300,000 tons of caustic soda ； Companies such as Sino Salt Hongsi Fang (Anhui Chlor-Alkali Chemical Group) and Zhejiang Jiahua Group are considering expanding their production capacity, and there are also reports that Huaibei in Anhui plans to build a large-scale chlor-alkali plant with an annual production capacity of millions of tons. And so on, creating a semi-encirclement of Jiangsu. At present, aside from Kumho Group’s Northern Chlor-Alkali plant, which still operates an old 10,000-ton capacity 30% ion-exchange membrane facility for production, all newly installed projects are 32% ion-exchange membrane caustic soda plants. In 2009, as companies expanded in an uncontrolled manner, demand from downstream markets weakened or even declined, leading to a significant reduction in price fluctuations and intensified competition within the industry. Affected by this, the operating rate of chlor-alkali plants is severely low; aside from the two existing diaphragm caustic soda plants operated normally by Jiangsu Supor Group and Jiangsu Anbang, more than 400,000 tons worth of diaphragm caustic soda production capacity across Jiangsu Province has been halted ； The operating rate of the PVC plant is less than 60%. This has led to negative production growth in some enterprises, an increase in shut-down facilities, severe losses for these companies, and even difficulties in continuing operations. For example, Jiangsu Shuangling Chemical’s 30,000-ton diaphragm production facility was able to hold on until the end of 2009, but eventually could not continue operating and was forced to shut down ； Rudong Kuaida Agrochemicals and Wuxi Zhongli Chemical both have diaphragm caustic production facilities with a capacity of less than 30,000 tons, and their operation performance is not satisfactory ； Small chlor-alkali plants such as Xinyi Jiatai Chemical and Lianyungang Fuyu Chlor-Alkali have already ceased production, and it is estimated that it will be very difficult for them to resume operations. V. **Strong support to encourage enterprises to take proactive action.** We are pleased to see that, with the strong push from ** and relevant departments, mergers and acquisitions by large enterprise groups such as Sinochem Group, China National Chemical Corporation, and China National Salt Industry Corporation are in full swing, and these enterprises are making greater efforts in transformation and innovation. Regions in the central and western parts of our country, which make full use of their abundant local resources by implementing an integrated approach of \"coal – electricity – salt – chemicals,\" serve as a good example of this. On June 10, 2009, the State Council approved in principle the \"Development Plan for the Coastal Areas of Jiangsu,\" elevating the development of these coastal regions to a **strategic priority and creating significant opportunities for the growth of the oil and chemical industries there. The construction of port terminals, logistics and warehousing facilities, new coastal cities, and chemical industrial parks has laid a solid foundation along a coastline of about 1,000 kilometers, stretching from Zewang Town in Ganyu County, Lianyungang in the north to Yinyang Town in Qidong, Nantong in the south. At the same time, it has left valuable space for the protection of the rich ecological resources along Jiangsu’s coast. The extensive seawater salt pans also provide convenient conditions for the environmentally friendly and energy-efficient salt production method that has been adopted in recent years – namely, salt production through solar evaporation of brine – thereby facilitating the rapid development of the chemical industrial parks in northern Jiangsu. Jiangsu and its surrounding areas have well-developed industries such as pesticides, pharmaceuticals, printing and dyeing, plastics, textiles, electronics, and fine chemicals, resulting in a strong demand for intermediates and various additives; many of these products are related to chlor-alkali enterprises. Companies closely follow project development and select products that suit their needs specifically. In particular, the plastic processing industry in the Yangtze River Delta region is highly developed. Preliminary investigations show that the plastic processing capacity in Jiangsu alone amounts to 800,000–900,000 tons per year. With the phasing out of PVC production via the calcium carbide method in Jiangsu, the region’s strong capabilities in VCM monomer polymerization have become more prominent. Following the foreign principle of \"centralized large-scale production of VCM, and decentralized production of PVC near markets.\" Xinpu Chemical (Taixing) is expanding its VCM production capacity and establishing close cooperative relationships with PVC manufacturers in the southern Jiangsu region, aiming to develop Jiangsu’s PVC industry together – an approach that holds great market prospects. VI. Seeking Development Paths and Forming Strategic Alliances: In 2009, the expansion of the chlor-alkali industry in Jiangsu did not slow down despite the economic crisis; production capacity continued to increase, leading to fierce competition within the industry. With declining demand downstream, it is difficult to see an increase in production. According to the relevant reports from the Jiangsu Chlor-Alkali Industry Association, the increase in caustic soda production has been much smaller than in previous years; downstream demand has not reached the expected levels, resulting in a reduced fluctuation in market prices. Each manufacturing enterprise adjusts the current in a timely manner according to demand, controls production reasonably, and overall maintains a balance between market supply and demand. Faced with numerous adverse factors, enterprises are forced to seek new ways out in difficult circumstances in order to maintain the long-term operation of the facilities. Over the next 3 to 5 years, the chlor-alkali industry in Jiangsu will face both opportunities and challenges. From the perspective of normal market cycles, the period of industry consolidation accelerates with the arrival of economic crises. Due to corporate expansion, there is already an oversupply of products in the industry. **The increase in electricity prices raises the direct production costs for enterprises, which in turn provides a certain upward pressure on the selling prices of chlor-alkali products. However, the overall profitability of the chlor-alkali industry has declined, putting enterprises in a difficult situation. The rapid development landscape forces chlor-alkali enterprises to develop their own core product lines, create distinctive product portfolios, and leverage complementary strengths. They also actively explore new ways to develop strategic cooperation mechanisms among enterprises, in order to minimize harmful competition among them, swiftly build their own core competitiveness, and ensure that Jiangsu’s chlor-alkali industry maintains its leading position in East China and across the country. As exports of caustic soda continue to grow, and particularly due to the shutdown of some caustic soda production facilities abroad, demand for caustic soda in China has increased, which represents an opportunity for caustic soda manufacturers in Jiangsu as well. The consolidation in the chlor-alkali industry will also enter a relatively harsh phase. Large-scale caustic soda plants, in addition to their own direct consumption, still need to export a portion of the caustic soda in order to balance any excess production capacity. Against this backdrop, large-scale comprehensive caustic soda manufacturers such as Xinpu Chemical (Taixing), Shuangshi Chemical, and Jiangsu Meilan are seeking to address practical issues such as coordinated pricing, joint exports, shared warehousing, and integration of manufacturing and trading, in order to form effective strategic alliances. In summary, more than ten chlor-alkali enterprises have emerged along the Yangtze River in Jiangsu at present, resembling bright pearls embedded on both banks of the river. The author believes that in the next few years, five large chlor-alkali plants with a capacity of over 500,000 tons will be established. At the same time, along the coast of Jiangsu, more than five chlor-alkali plants with a production capacity of 300,000 tons each will successively reach full operational capacity. Looking to the future, Jiangsu’s chlor-alkali industry must thoroughly implement the scientific development concept, transform its mode of development, accelerate structural adjustment, and encourage technological innovation. Fully leverage the functions and roles of the chlor-alkali industry association, give thorough consideration and evaluation to aspects such as the location selection of new chlor-alkali enterprises, entry requirements, safety and environmental protection, energy conservation and emission reduction, as well as social responsibility; control the addition of production capacity to ensure overall balance, and make its due positive contribution to the rapid and sound development of the national economy and a harmonious society.