Concentrated Nitric Acid Demand Increases Steadily

By Jiang Linglu   

Rapid growth in output

There are around 40 concentrated nitric acid producers in China today with a total capacity of around 1.6 million t/a. The output reached 1.5695 million tons in 2005, an increase of 24.1% over the previous year and the growth was much higher than previous years. It is expected that the capacity of concentrated nitric acid in China will still increase at an annual rate of 10% in the next 3 - 5 years and will be more than 2.7 million tons in 2008.     Shandong province in the east coastal areas of China has the largest output of concentrated nitric acid. The output of concentrated nitric acid in the province was 455.2 thousand tons in 2005, accounting for 29% of the national total and still holding the first place in China. The output in Anhui province was 325.2 thousand tons, accounting for 21% of the national total and still holding the second place.    Concentrated nitric acid has high transportation and storage cost and very small import and export amount. The import amount was 2 thousand tons and the export amount was 9.9 thousand tons in 2005. Overseas concentrated nitric acid units and import/export trade therefore produce no meaningful impact on the domestic market.    Some producers in China have conducted renovation to their units with the advanced double-pressurizing process introduced from abroad in recent years. The technical level in the sector has therefore been upgraded and the market competitive edge has been enhanced.

Drastic increase in downstream consumption

With the rapid development of the chemical industry and related industries, the consumption of concentrated nitric acid in China has increased stably. The apparent consumption of concentrated nitric acid reached 1.5616 million tons in 2005, an increase of 24.5% over 2004.    There are more than a dozen downstream products of nitric acid. Besides chemical fertilizers, products with a great consumption proportion include nitrochlorobenzene, aniline, dyestuffs and TDI (toluene diisocyanate).    Prominent changes in the downstream consumption distribution of concentrated nitric acid in recent years include the following: (a) Owing to the rapid development of the emerging MDI (diphenylmethyl diisocyanate) sector, the consumption proportion of concentrated nitric acid in the sector is becoming greater. (b) Nitro-products whose consumption of nitric acid only accounted for 1.8% of the total in 1998 have become the biggest downstream market today. (c) The dyestuff and intermediate sector is being shifted from advanced countries to developing countries and a brisk demand of nitric acid has been promoted. For example, since Zhejiang province developed itself into a world-class dyestuff production region, it has also become a consumption center of concentrated nitric acid. Its consumption of concentrated nitric acid holds the second place in China, only next to Jiangsu province.   It is expected that the demand of nitric acid in nitrochlorobenzene and dyestuffs will basically maintain a stable growth in 2006. The capacity of aniline and TDI will have a drastic expansion and the demand of nitric acid will still display a trend of brisk growth in 2006.

Remarkable difference in transportation cost

Railway transportation: The freight for railway transportation is lower than that for highway transportation. Due to restrictions in railway station and railway line plans, especially during the spring transportation peak and when there are major events and transportation tasks of the state, transportation plans made by companies are often squeezed out.     Highway transportation: Nitric acid producers in Shandong province mostly use highway transportation. Most outstanding features of highway transportation include flexible delivery, no restrictions in railway station and railway line plans and spring transportation peak and great flexibility in time and space. The freight for highway transportation is however higher than railway transportation and waterway transportation. (a) Fuel oil cost pressure: With the constant oil price rise, the transportation cost will get higher and higher. (b) Environmental protection pressure: With the greater attention paid to safety and environmental protection, there will be more and more control on highway transportation. (c) Safety pressure: The check conducted by the state on overloading has made small-tonnage nitric acid tank cars hard to gain a foothold in the transportation market. Transportation organizations have to put huge amounts of funds in purchasing large-tonnage tank cars. The cost will surely be transferred to nitric acid users.    Waterway transportation: The freight for waterway transportation is low, being only around 30% of the freight for highway transportation. Based on the nitric acid transportation cost, the freight for transportation by truck is 30% - 40% higher than the freight for transportation by rail. The freight for transportation by rail is 30% - 40% higher than the freight for transportation by ship. Nitric acid producers with the greatest advantage in waterway transportation include Jiangsu Hongze Yinzhu Chemical Group Co., Ltd. and Anhui Huatai Chemical Industry Co., Ltd. Nevertheless, waterway transportation has many restrictions. Both suppliers and buyers have to be close to waters with waterway transportation conditions. There are also lean water periods with different durations each year. With the growing awareness in environmental protection and safety, pressures in the waterway transportation of hazardous chemicals including nitric acid will by no means be smaller than highway transportation.   Due to the constant price rise of gasoline, the advantage of highway transportation is weakened, giving chances to railway transportation that has favorable conditions. In the nitric acid market today the corporation with the greatest advantage in railway transportation is Anhui Huaihua Group Co., Ltd.

Fierce competition in market

The capacity of concentrated nitric acid in China will have a rapid growth in 2006. The newly added capacity in the first half of 2006 alone will be more than 500 thousand t/a, including 100 thousand t/a in Anhui Huaihua Group Co., Ltd., 150 thousand t/a in CNPC Lanzhou Petrochemical Company Ltd., 100 000 t/a in Shandong Jinan Chemical Fertilizer Plant Co., Ltd., 100 thousand t/a in Anhui Huatai Chemical Industry Co., Ltd. and 50 thousand t/a in Jiangsu Hongze Yinzhu Chemical Group Co., Ltd. As the output of nitric acid is unduly high and the growth of downstream sectors lags far behind, the overall concentrated nitric acid market in China will have oversupply in 2006 and the average ex-factory price will fluctuate within RMB1 400 - 1 500 per ton.     The supply amount of concentrated nitric acid in China will increase at an annual rate of over 10% in the next 2 - 3 years. The output of concentrated nitric acid will at least reach 2.70 million tons in 2008, much higher than the growth of downstream sectors. There will be serious oversupply and fierce market competition in the domestic nitric acid market. Producers with small scale and outdated technology will be eliminated.

Major Concentrated Nitric Acid Producers                    in China in 2005           (thousand tons)Producer                                &