[Haichuan Project Updates] Fuhua Group launches 500,000 tons/year caustic soda plant with an investment of 1.3 billion yuan

Southeast Electrochemical Company is a key enterprise in China’s chlor-alkali industry. This technical upgrade and expansion project will build upon the company’s existing 120,000 tons per year caustic soda production capacity by adding another 300,000 tons per year of production capacity. It will also take over the 80,000 tons per year production capacity from Meizhou Bay Chlor-Alkali Company, resulting in an overall caustic soda production capacity of 500,000 tons per year. Once the project is completed and put into operation, it will be able to supply chlorine as a raw material for Wanhua Fujian Company’s expansion of its TDI production facility and the construction of a new MDI plant. The hydrogen chloride produced as a by-product can be supplied to companies in the industrial park such as Fushi New Materials and Kelin Environmental Protection. Additionally, it will connect with large-scale coal gasification projects upstream, thereby improving the industrial chains for coal chemistry and salt chemistry.

Current global supply and demand situation for caustic soda: In recent years, there has been little overall change in the production capacity of the global caustic soda industry, with new capacity additions mainly occurring in developing countries such as China and India. In 2018, there were over 500 chlor-alkali producers worldwide. Asia is the region with the highest capacity for producing caustic soda, accounting for nearly 60% of the global total. China has the largest capacity for caustic soda production in the world, with 45% of the global total. In 2018, the total value of international trade in liquid caustic soda reached $5.19 billion, with the average global export price of liquid caustic soda increasing by 54.6% on a year-on-year basis. In terms of imports: In 2018, the world’s imports of liquid caustic soda came mainly from countries and regions such as Belgium, the Netherlands, and Sweden. Among them, Belgium is the largest importer, with its annual imports accounting for about 14.8% of the total global imports. In terms of exports: In 2018, the main sources of liquid caustic soda exports worldwide were countries and regions such as the United States, the Netherlands, and Japan. Of these, the United States’ annual exports account for about 37.6% of global trade volume. In 2018, the total value of international trade in solid caustic soda reached $1.13 billion, with the average global export price of solid caustic soda rising by 36.3% on a year-on-year basis. In terms of imports: In 2018, the world’s imports of caustic soda came mainly from countries and regions such as Nigeria, Indonesia, and the United Kingdom. Nigeria is the largest importer, with total annual imports amounting to 73,000 tons, accounting for about 5.4% of the global total. In terms of exports: In 2018, the main sources of solid caustic soda exports worldwide were the Chinese mainland, India, and Taiwan Province of China. Of this, the Chinese mainland exported 624,000 tons of solid caustic soda throughout the year, accounting for about 44.5% of the total global trade volume.

Once the project is completed and put into operation, it will be able to supply chlorine as a raw material for Wanhua Fujian Company’s expansion of its TDI production facility and the construction of a new MDI plant. The hydrogen chloride produced as a by-product can be supplied to companies in the industrial park such as Fushi New Materials and Kelin Environmental Protection. Additionally, it will connect with large-scale coal gasification projects upstream, thereby improving the industrial chains for coal chemistry and salt chemistry. Kou Guangwu, president of Wanhua Group, said that after the technical upgrades and expansions to this caustic soda production facility, it will play a crucial role as a link connecting different segments of the chemical industry chain in the Jiangyin industrial park. The cooperation between Wanhua Group, Fueneng, and Fuhua Group will substantially transform the development pattern of Fujian’s petrochemical industry, one of its three key industries, and will also greatly improve the quality of development of Fujian’s chemical industry.

Current Situation and Forecast of Caustic Soda Supply and Demand in China: In 2019, China’s caustic soda production capacity increased by 4.7% on a year-on-year basis； Production increased by 1.3% year-on-year. In 2019, the average operating rate of the domestic caustic soda industry was 80.5%. Some units have also withdrawn from the market, but overall, there has been little change in the layout of caustic soda production facilities. Shandong, Jiangsu, and Inner Mongolia rank among the top three regions in terms of total caustic soda production capacity in the country. In 2019, North China had the highest caustic soda production capacity, followed by the Northwest region, while there were relatively minor changes in production capacity in the Eastern and Southern regions. China is a net exporter of caustic soda, and its import and export trade has remained relatively stable in recent years. From 2012 to 2014, export volumes remained above 2 million tons ； From 2015 to 2019, the export volume was below 2 million tons and decreased year by year. In 2019, China’s export volume of caustic soda decreased by 22.2% on a year-on-year basis. The main mode of export trade is general trade. Looking at the export destinations of liquid caustic soda and solid caustic soda, the main export markets for liquid caustic soda are countries and regions such as Australia, Taiwan Province of China, the United States, and Vietnam. The top five export destinations account for over 60% of the total exports, indicating a high degree of export concentration ； As for solid alkalis, exports are primarily directed to developing regions such as Africa and Southeast Asia; the top eight export destinations account for less than 50% of the total exports, indicating a relatively scattered distribution. With the rapid development of China’s economy, consumption of caustic soda in the country has also shown steady growth, with an average annual increase of 6.8% from 2009 to 2019. As of 2019, the main downstream consumers of caustic soda in China were industries such as alumina production, the chemical industry, and papermaking and printing. Among these, alumina production accounted for 34% of the total caustic soda consumption. In terms of production capacity, it is expected that China’s caustic soda production capacity will continue to increase in the coming years, but due to environmental regulations, the rate of growth in capacity will remain modest. On the demand side, focus is mainly on the domestic consumption and exports of caustic soda. The strong demand in the downstream alumina industry in the short term is unlikely to sustain ； Furthermore, key downstream industries such as printing and dyeing, chemical fibers, and papermaking will face increasing environmental pressure due to severe pollution, so these industries will find it difficult to sustain the demand for caustic soda in the long term.