PVC Gross Profit Climbed

By Peter Zong

China has nearly 150 PVC (polyvinyl chloride) manufacturers
operated in 2006. Here seventeen publicly listed companies are
discussed, representing 25% of the national total output (8.23
million tons). The national top two PVC manufacturers - Tianjin
Dagu Chemical Company Ltd. (582 thousand tons) and Sinopec Qilu
Petrochemical Company Ltd. (575 thousand tons) are not included
here. Compared with the 2005 performance, the gross profit for
PVC business was significantly improved. The arithmetic average
number of gross profit rate was 10% for the thirteen companies
those reported their PVC index, compared with 6% in 2005. Most
of the seventeen companies increased the sales of PVC.
Oversupply is more and more serious. PVC manufacturers are
complaining the oversupply while they are trying to expand its
own supply capacity.  China's export amount in April 2007 is
approximately equal to the import amount for PVC in primary forms.
It is forecasted that China will become a net exporter of PVC
in the second half of 2007.
    Qilu Petrochemical Company Ltd. and Beijing Huaer, two
subsidiaries of Sinopec, de-listed from stock market. Both
Cangzhou Chemical Industrial Company Ltd. (SH: 600722) and Hebei
Baoshuo Company Ltd. (SH: 600155) suffered a huge loss because
involved in a large financial case. Cangzhou Chemical Industrial
Company Ltd. has poor competitive edge because it uses EDC as
raw material. These two companies, both located in Hebei
province, are possibly de-listed, according to the guess.
Shandong Haihua (SZ: 000822) has not disclosed its PVC
performance in its fiscal report. Xinjiang Tianye (SH: 600075)
increased its PVC output by 54%, ranked the second among the
seventeen companies.
    Shanghai Chlor-Alkali Chemical Company Ltd. (SH: 600618),
the third largest PVC manufacturer nationwide, reported a poor
performance with a loss of RMB196 million. Its PVC output
remained unchanged compared with that in 2005, while its sales
from PVC decreased by 21.6%. The company attributed the loss to
the oversupply and increased raw materials - ethylene price, and
projected more serious competition in the near future. It was
beaten out by those small producers using calcium carbide as raw
materials.
     Sichuan Jinlu Group Company Ltd. (SZ: 000510) has faced a
consecutive drop of profit since 2004. The company remained a
high operation rate while working hard in reducing cost.
    Shenyang Chemical Industry Company Ltd. (SZ: 000698),
controlled by ChemChina, is China's largest PVC paste resin
producer. Its subsidiary is constructing a 250 000 t/a ethylene
unit, which will expand its product portfolio.
    The new 200 000 t/a PVC production line that put into
commercial operation in 2006 helped Ningxia YingLiTe (SZ: 000635)
to increase its sales of PVC by 146.9%. The company reported an
average PVC price drop of RMB277.3 per ton in 2006.
    Nantong Jiangshan Agrochemical & Chemicals Company Ltd. (SH:
600389) is a company majored in pesticide business. The
expansion on its caustic soda unit was completed in 2005 and
helped the company increase the total sales by RMB80 million in
2006.
    Hubei Yihua Chemical Company Ltd. (SZ: 000422), located in
Hubei province of Central China, continues to widen its
portfolio on the back of subsidiaries. It is expanding
chlor-alkali project. A 100 000 t/a PVC production line is under
construction in a subsidiary of Hubei Yihua and is expected to
startup in October 2007. Hubei Xiangxi Chemical Company, in
which Hubei Yihua controls 45% equity, is constructing a 200 000
t/a calcium carbide unit that will be completed in October this
year too. The 600 000 t/a soda ash project, the third one to be
put on stream in October this year, is being constructed by
Chongqing Yihua Chemical Company, in which Hubei Yihua
indirectly controls 45% equity.
    Nanning Chemical Industry Company Ltd. (SH: 600301) mainly
manufactures caustic soda and chlorine derivatives. PVC
business supplied the company with nearly half of its total sales
revenue. It plans to produce 130 000 tons of PVC in 2007.   
    The 150 000 t/a PVC unit in Taiyuan Chemical Industry Company
Ltd. (SH: 600281) was renovated, resulting in an 11.6% increase
of output. Majored in basic chemical sectors, the company is
expanding and renovating its synthetic ammonia unit, compound
fertilizers unit, nanometer calcium carbonate unit, magnesium
oxide unit, 80 000 t/a PVC unit and coking sector.
    Tangshan Sanyou Chemical Company Ltd. (SH: 600409) uses
calcium carbide to make PVC in its existing 100 000 t/a unit.
Another 100 000 t/a PVC project is under construction and will
be completed in 2007. So the planned output this year is 170 000
tons.
    Yunnan Salt & Chemical Company Ltd. (SZ: 002053) is a small
company publicly listed in the second board of Shenzhen Stock.
It is operating a 100 000 t/a PVC unit at a rate of 70%.
    Jinhua Group Chlor-Alkali Company Ltd. (SZ: 000818) mainly
get profit from selling caustic soda and ethylene trichloride.
The biggest business segments for Jinhua are propylene oxide and
polyether.
　　Weifang Yaxing Chemical Company Ltd. (SH: 600319) continued
to increase the sales of chlorinated polyethylene, caustic soda
and chlorine by 47.8%, 31.5% and 37.3% respectively while
remained unchanged in PVC business.
　　
2006 Performance of Publicly Listed PVC Companies in China
Company
   Total sales    Growth over    Net profit    EPS
   (RMB MN)        2005  (%)    (RMB MN)    (RMB/share)
Shandong Haihua
    8338.08     20.41     295.27     0.4
Shenyang Chemical
     4144.56     20.27     85.62     0.203
Shanghai Chlor-Alkali
    3735.77     -9.33     -196.25     -0.17
Xinjiang Tianye
     3021.60     -0.80     210.79     0.48
Hubei Yihua
    2986.80     29.54     215.14     0.3967
Shenma Industry
     2844.90     45.80     21.65     0.049
Jinhua Group
    2609.53     -11.62     40.61     0.1194
Tangshan Sanyou
    2578.76     20.28     139.33     0.2552
Sichuan Jinlu
    2522.73     9.76     69.90     0.1147
Jiangshan Agrochemical
    2240.89     6.28     51.79     0.2616
Taiyuan Ch