Jiangshan: Marching towards Comprehensive Chemical Corporation

1. Leading pesticide producer in the stage of business shifting

Nantong Jiangshan Agrochemical & Chemical Limited Liability Co.
(JSAC) (SH: 600389) grew out of Nantong Pesticide Plant
established in 1958. It became a limited liability company in
July 1997. Products manufactured by the company include 5 major
categories of pesticide, PVC (polyvinyl chloride), chlor-alkali,
fine chemicals and co-generation with more than 70 varieties.
The capacity of pesticides is 40 000 t/a (counting on 100%
pesticide) and the total sales has held the first place in China’
s pesticide manufacturing sector for 3 consecutive years. The
capacity of trichlofon, monocrotophos, butachlor and glyphosate
holds a leading position in China. With the capacity expansion
of caustic soda and PVC, the company has gradually shifted from
a leading pesticide producer to a comprehensive chemical
corporation based on the pesticide business. The company has
already owned a capacity of 160 000 t/a PVC, 150 000 t/a caustic
soda (counting on 100%), 80 000 t/a chlorine and 219 100 t/a fine
chemicals and basic chemicals (including 12 000 t/a trimethyl
phosphite).
   The company produced 92 000 tons of caustic soda (100%) and
122 000 tons of PVC and sold 33 000 tons of pesticides (100%)
in 2005. Statistical data show that both the output and the sales
of pesticides in the company in 2005 still held the first place
in China. In the main-business revenue and the main-business
profit, the pesticide business, the chemical business and the
PVC business are already in the equal position. The profit
contribution of the chemical business is higher than other
businesses.
   In the 5 years since its listing in the stock market, the
main-business revenue had increased from RMB589 million to
RMB2.109 billion. Due to the inherent limitation in the
development of the pesticide sector and the oil price rise in
the international market, the gross profit once made some
reduction.

2. Increasing competitive edge in pesticide business

Pesticides technical and formulations have always been leading
products in the company. With greater production initiative and
higher income of farmers in recent years, the demand of
pesticides drastically increases.
   Insecticides have held a leading position in China for long
years. Products share in Chinese market is also the problem of
product portfolio in Jiangshan. Insecticides have always held
a leading position in pesticide products in the company. The
proportion of dichlorvos, trichlofon and monocrotophos has
always been high. The output of glyphosate increases only in
recent years and its proportion is getting higher today.
Pesticides with high toxicity have made way to pesticides with
high effect and low toxicity. The company has conducted
readjustments to the product portfolio. It is also defined in
the Eleventh Five-year program (2006-2010) of the company to
replace high toxicity pesticides with high effect "green"
pesticides, low toxicity, low residue and environment
friendliness and new pesticide formulations in conformity with
the requirements on pesticide development and environmental
protection in the world. A 30 000 t/a glyphosate project will
also been launched in the new plant area in 2006. After the
completion of the project, the capacity of glyphosate in the
company will reach 42 000 t/a.

3. Forthcoming growth in chlor-alkali and PVC business

The chlor-alkali industry is a basic raw material industry with
an important position in the national economy. Major products
such as caustic soda, chlorine and hydrogen are extensively used
in light industry, textile sectors, etc. Another important
product PVC has excellent chemical property and convenient
molding. PVC preparations are extensively used in industrial,
agricultural, construction sectors, etc. The major consumption
sector for caustic soda in China is the light industry.
Papermaking in the light industry is the most important consumer
of caustic soda. The consumption of caustic soda in the light
industry, chemical and textile sectors accounts for around 80%
of the total.
   The 60 000 t/a ion-membrane caustic soda unit in the new plant
area of the company was already completed in the second half of
2005. Trial production is being conducted today. The capacity
of caustic soda in the company has reached 150 000 t/a. The PVC
production in the company uses the VCM (vinyl chloride monomer)
process. Raw material VCM is partially produced by the company
itself and partially imported from abroad. After the technical
renovation to the VCM/PVC unit completed in 2004, the capacity
of VCM has already reached 60 000 t/a and the capacity of PVC
has already reached 140 000 t/a. Despite the importation of
partial raw material, the chlor-alkali unit has acquired a large
scale and the production cost reduces with the increase of
self-produced VCM. After the completion of the caustic soda
project in the new plant area, the output of chlorine is also
increased and a possibility has been created for the further
expansion of the chlor-alkali business and the self-supply of
PVC raw material. During the Eleventh Five-year Plan period,
Jiangshan will also make business extension to resin in-depth
processing, complete the development and commercialization of
new products such as paste PVC resin and special resin and
further enlarge the profit of the chlor-alkali and PVC business.