Shandong Haihua: Leader of the Marine Chemical Industry

Shandong Haihua Company Ltd. (SZ: 000822) is located on the south of the Bohai Bay in the northwest of Shandong province with Korea opposite the sea to the east China. It became a listed company of Shenzhen Securities Exchange in May 1998.    The company is mainly engaged in the production of chemical products such as soda ash, calcium chloride, bromine, melamine, nitric salts, caustic soda and PVC. Since its listing in the stock market, the company has fully used the capital market and employed its unique advantage in resources to introduce and develop marine chemical technologies. A capacity of 2.0 million t/a soda ash, 220 000 t/a calcium chloride, 72 000 t/a melamine, 15 000 t/a bromine, 160 000 t/a sodium nitrate and sodium nitrite, 100 000 t/a caustic soda and 100 000 t/a PVC has been formed today. The capacity of soda ash, sodium nitrate and sodium nitrite holds the first place in the world. The capacity of calcium chloride and melamine holds the first place in Asia. The capacity of bromine and bromides holds the first place in China. The company has become one of the largest marine chemical production and export bases in China.

Rich resources and unique advantage

Shandong Haihua is located at the Laizhou Bay, a large sea salt production base in China. Dajiawa on the south of the Laizhou Bay is well known for rich bittern resources. The net bittern reserves in the area are close to 6.0 billion m3 and the average bittern concentration is 2 - 6 times the sea water concentration. The burial depth is usually less than 50 meters and the development cost is therefore low. The area of salt fields accounts for 20% of the national total. Shandong Haihua that has developed itself on the basis of bittern resources owns many large salt fields today. The unique advantage in resources has provided abundant raw material for the soda ash production in the company.    The technology for the soda ash production is already well developed with little possibility for process innovation. The low-cost production in the company mainly comes from the efficiency of the industrial chain and the expansion of the production capacity. The sustained expansion of the soda ash capacity in recent years had led to a constant reduction of the cost. The soda ash output increased from 850 000 tons in 1999 to 1.9 million tons in 2005. The proportion of heavy soda ash has reached 70%. After the removal of bottlenecks in the production, the total soda ash capacity in the company reached 2.0 million t/a in 2005.    The soda ash output in the company will be more than 2.0 million tons in 2006. Owing to the remarkable output increase of sea salt, the price of sea salt made a sustained drop in the second half of 2005. The price of sea salt in Shandong province is not more than RMB200 per ton today and will fluctuate within RMB100 - 200 per ton in 2006, much lower than the price in 2005. The rock salt project launched by the company in Dongying will start production at the end of 2006. As the salt mine is very close to the company, the pipeline transmission of brine rather than the road transportation of solid salt will be conducted. The salt dissolution section can therefore be removed from the soda ash production and the energy consumption will be reduced. It is expected that the price of rock salt from the salt mine will be lower RMB100 per ton. The company consumes more than 3.0 million tons of raw salt a year today. The actual supply amount from salt fields is 1.7 million tons a year. More than 1.3 million tons of raw salt has to be purchased from outside sources, accounting for 43% of the total demand. After the completion of the first-phase salt mine project (1.0 million t/a) in Dongying, the amount of raw salt to be purchased from outside sources will be greatly reduced. After the completion of the second-phase salt mine project (also 1.0 million t/a), raw salt will be totally supplied by the company itself and the cost can have a drastic reduction. The cost advantage of the company in the soda ash production will be all the more prominent at that time.

Market lead and vigorous development

Leading products in Shandong Haihua are mainly used in glass manufacturing, pharmaceutical, metallurgical and construction material sectors.   Owing to the prosperity of real estate and construction material sectors in recent years, the sales in glass producers are excellent. The price rise of glass has led to a capacity expansion in the glass manufacturing sector and also a huge demand increase of soda ash.   Shandong Haihua has therefore conducted constant capacity expansion to meet the increasing market demand.   A group of major projects in the company will achieve substantive progress in 2006. The 40 000 t/a methane chloride project, the 100 000 t/a ethyl acetate project, the 50 000 t/a aniline and 100 000 t/a concentrated nitric acid project and the salt mine in Dongying will become new profit growth points. After the completion of the third-phase calcium chloride project, the capacity of calcium chloride in the company will increase by 200 000 t/a.

Policy support and cyclic economy

Shandong Haihua became one of the first-lot pilot enterprises for cyclic economy in 2005. As a matter of fact, the company has already made great efforts in recent years in the construction of a new ecological industry and played a leading role in the recycled use of sea water and bittern and the integration between soda ash production and caustic soda production.    The company will acquire a capacity of 2.0 million t/a soda ash, 100 000 t/a caustic soda, 100 000 t/a PVC, 15 000 t/a bromine, 300 000 t/a calcium chloride, 160 000 t/a sodium chloride and 40 000 t/a methane chloride at the end of 2006. On the basis of existing production units, only a 80 000 t/a TDI unit and a 15 000 t/a methyl isobutyl ketone unit need to be constructed to achieve the recycled use of limestone among calcium carbide, PVC and soda ash and the recycled use of chlorine and hydrogen between TDI and PVC. The company will reach the domestic and even the international advanced level in the resources/output rate, the unit-product resources consumption and the resources recycled use in not a distant future.